Mitsubishi UFJ Financial Group Inc.'s main lending unit has urged the Bank of Japan to consider the side effects of negative interest rates at next week's meeting, saying the policy will continue to squeeze lending income.

"When it comes to margins, because of negative rates and the competitive environment, they continue to be compressed," said Takashi Oyamada, president and chief executive officer of Bank of Tokyo-Mitsubishi UFJ Ltd., referring to net interest margin, a measure of a bank's loan profitability.

"So overall net interest income is not likely to grow — it's very difficult to see it increasing," he said.