Loan growth slowed to the weakest pace in three years in March, signaling the central bank's introduction of negative interest rates has yet to spur credit in the world's third-largest economy.

Loans, excluding trusts, rose 2 percent from a year earlier, slowing from 2.2 percent in February, the Bank of Japan said Tuesday. Deposits increased 3 percent, easing from 3.1 percent in February. The figures are the first for a full month after the BOJ began charging lenders 0.1 percent interest on some of their reserves on Feb. 16.

The policy has put pressure on lenders' profitability because they are being forced to lower interest rates on loans more than those on deposits. Bank shares are the worst performers on the Topix index this year amid speculation that the central bank will cut rates further to stem an 11 percent gain in the yen against the dollar, which threatens to undermine recovery.

"Putting aside deciding whether the policy is a failure after just one month, we were quite skeptical as to whether negative rates would boost loan demand," said Takashi Miura, a Tokyo-based analyst at Credit Suisse Group AG. "Home lending will come back if rates settle and demand grows, but we'll need to see an increase in corporate loans to get back to the 2.5 percent levels we've seen lately," he said, referring to overall loan growth.

BOJ Gov. Haruhiko Kuroda told lawmakers on March 16 that it would be "theoretically possible" to reduce rates to as low as minus 0.5 percent. Standard & Poor's estimated in February that negative rates will erode the profitability of regional lenders by 15 percent and major banks by 8 percent.

The average rate on all new loans at the nation's banks plunged to a record-low 0.793 percent in February, central bank figures show. Banks, including Mitsubishi UFJ Financial Group Inc., have cut rates on ordinary yen deposits to just 0.001 percent. That would pay the equivalent of just $10 in annual interest on a $1 million balance.

While banks have resisted passing on the costs of negative rates to most depositors, a few have indicated they will charge some institutional customers. Sumitomo Mitsui Financial Group Inc. is planning to impose fees on foreign banks for some of their cash held in yen-denominated accounts. Trust banks are considering fees on trust accounts of some institutional investors.