BOJ widens negative rates net

The Yomiuri Shimbun The Bank of Japan has begun applying negative interest rates on money that overseas central banks and international organizations deposit in the BOJ, it has been learned.

Although it had set the annual interest rate at zero until May, the BOJ decided to cut the rate from June to reflect the actual situation of the market for short-term interest rates, where rates are hovering around below zero.

In the aftermath of the BOJ’s introduction of a negative interest rate policy in February 2016, the BOJ could be seen as charging a commission from overseas banks that deposit money in the BOJ. This could affect cooperation among the world’s central banks.

The central banks of each country put their money in the central banks of others so they can smoothly implement such measures as lending money to financial institutions in their own country in case an economic crisis hits their country and institutions have trouble procuring foreign currencies.

The BOJ, which holds about ¥13 trillion in deposits from about 90 central banks and international bodies around the world, decided to adopt negative interest rates on the portion of deposit balances over a certain level. The targeted organizations have not been disclosed, but the main targets are presumed to include the People’s Bank of China and the European Central Bank, which are believed to deposit a lot of money into the BOJ.

The negative interest rate for central banks has been set at “0.05 percent lower” than the actual market figures of short-term interest rates. As short-term interest rates recently changed from between minus 0.05 percent and minus 0.1 percent, the rates applied on overseas central banks appear to be from minus 0.1 percent to minus 0.15 percent.

As a part of its monetary easing policy, the BOJ has applied since February 2016 a minus 0.1 percent interest rate to part of the money it has received from private financial institutions. Since the ECB, which has also introduced a negative interest rate policy, applies negative interest on deposits by the central banks of each country, the BOJ decided to follow suit.Speech

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