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Effects of the BOJ’s negative rate policy spread

JIJI

The effects on the everyday lives of people from the Bank of Japan’s decision late last month to introduce negative interest rates are spreading.

Commercial banks are lowering their deposit rates due to falling market interest rates, while the Finance Ministry has suspended the sale of government bonds targeting retail investors.

The country’s top three commercial banks, Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank, will lower time deposit rates on Monday.

Sony Bank has already reduced the interest rate on ordinary deposits to 0.001 percent.

An increasing number of asset management companies have halted the sale of money management funds due to difficulty securing investment returns amid falling government bond yields.

The ministry has canceled a plan that would have sold 10-year government bonds to retail investors in lots of ¥50,000 starting last Friday due to possible low demand.

On Friday, the benchmark 10-year government bond yield hit a record low of 0.020 percent. Additional reductions in deposit rates and further reviews of financial services are possible as the bond yield is likely to fall further.

Lower interest rates have positive aspects as well.

Shinsei Bank has cut the interest rate on 10-year fixed-rate housing loan products to a record low of 1.15 percent.

Banks could also lower interest rates on loans extended to corporate borrowers for capital spending and other purposes.

The BOJ will apply an interest rate of minus 0.1 percent to some current account deposits that commercial banks hold with it starting on Feb. 16.

BOJ Gov. Haruhiko Kuroda has said that negative interest rates will not be applied to the deposits of individuals.

But commercial banks, squeezed by negative interest rates, could collect fees from corporate deposit accounts and raise fees on services such as the use of automated teller machines in the future.