Bank of Tokyo-Mitsubishi has said it will slash the interest rate on ordinary deposits to a uniform 0.001 percent per annum, a record low for a Japanese city bank.

The bank said Wednesday it will do so to ease the cost increase from massive inflows of depositor funds to its ordinary deposit accounts amid the imminent abolition of the government’s full protection on time deposits.

The new rate, effective April 1, is equivalent to one-twentieth the rate of 0.02 percent that the top commercial bank now pays on ordinary deposits.

The new rate means depositing 1 million yen in the bank’s ordinary deposit account generates interest of 10 yen a year.

Some other major commercial banks are eyeing similar cuts, industry sources said. Shizuoka Bank, a major regional bank with the highest Moody’s Investors Services financial strength rating, has cut its corresponding rate to 0.001 percent.

Many depositors at other banks canceled their time deposits and put their money into the ordinary deposit accounts of BTM and whatever banks they perceive as having stronger financial health than their old banks, banking sources said.

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