Japan banks' profits hit by BoJ's negative rate policy

The BOJ in December unveiled a plan to examine more effective ways to achieve its 2% inflation target.

TOKYO: Japanese banks' profits have deteriorated due to a decline in interest rates under the Bank of Japan's (BOJ) negative rate policy, the head of a business lobby group said on Thursday.

The comment by Kanetsugu Mike, chairman of the Japanese Bankers Association, comes as banks in Japan soak up the impact of the COVID-19 pandemic with the prolonged low-rate environment adding to long-term uncertainty.

"The profits environment for financial institutions has clearly been in a deteriorating trend," said Mike, who is also the head of Mitsubishi UFJ Financial Group Inc's (MUFG) banking unit.

While the BOJ's policy helped the economy out of deflation, Mike said at an online press briefing, lending interest rates have drastically fallen and the loan-deposit rate margin - the difference between interest earned from loans and paid for deposits - has shrunk since the central bank introduced negative rate policy in fiscal 2015.

The combined net interest income of Japan's big three banks - MUFG, Sumitomo Mitsui Financial Group Inc and Mizuho Financial Group Inc - dropped 14% in fiscal 2019 from fiscal 2015, according to Reuters calculation based on the banks' earnings data.

The BOJ in December unveiled a plan to examine more effective ways to achieve its 2% inflation target, and said it would announce the findings of the review in March. - Reuters

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