The Bank of Japan’s interest rate hike Friday will likely increase interest income by about 420 billion yen, and the wealthy and elderly will benefit the most, according to a private think tank.

Hideo Kumano, chief economist at Dai-ichi Life Research Institute, estimates combined Japanese households’ interest income will total 556.7 billion yen per year with the July rate hike on the premise that ordinary deposit rates will be raised to 0.1 percent from 0.001 percent and time-deposit rates will be pulled up by an average 0.08 percentage point.

On the other hand, loan repayments by households probably will increase by 134.6 billion yen, Kumano said.

“As a result, the rate hike likely will bring 422 billion yen in net income to households, or about 9,000 yen for each household,” he said.

That appears to be good news for depositors, but Kumano warned that people over 50 years old will reap most of the benefits.

“The elderly are usually free of loans and can enjoy the increase in interest income, while the younger generation, centering on people in their 30s, will have to pay more on their mortgages than the interest income they receive,” he said.

Kumano cautioned that the figure of 9,000 yen was an average for the 49.53 million households in Japan, while more than half of the 728 trillion yen in savings and deposits in Japan are held by 12 percent of the households — those in the category of more than 14 million yen in savings.

“It means that in terms of the benefits from the rate hike, there is a gap between the haves and have-nots.”

With the 0.25 point hike in the overnight call rate made Friday, major banks are expected to raise the ordinary deposit rate to 0.1 percent from 0.001 percent.

Banks and other financial institutions have already been raising time-deposit rates following the termination of the quantitative monetary easing framework in March. They are expected to continue to raise the rates now that the “zero-interest-rate” policy has been lifted.

Bank deposit rates up

The major banks said Friday they will raise their ordinary deposit rates from a record low 0.001 percent for the first hike in six years.

Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp., Mizuho Bank, Resona Bank and Chuo Mitsui Trust & Banking Co. will increase their ordinary deposit rate to 0.1 percent. Sumitomo Trust & Banking Co. will raise its rate to 0.2 percent.

The announcement follows on the heels of the Bank of Japan’s decision earlier in the day to scrap its “zero-interest-rate” policy and up the overnight call rate to 0.25 percent.

The new rates will take effect next Tuesday, except for Mizuho. It will raise the rate Wednesday.

The banks also plan to raise their rates on time deposits with short-term maturities and are expected to boost their prime lending rates, which serve as benchmark rates for loans of less than one year.

The big banks last raised their ordinary deposit rates in August 2000, to 0.1 percent from 0.05 percent, and then gradually lowered them to 0.001 percent in April 2002.

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