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Economy

Negative rates push Japan's savings from banks to mattresses

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Safe sales are surging as consumers pull cash from banks.   © Kyodo

TOKYO -- Japan's cash in circulation is growing at the fastest rate in 13 years as ripples from the Bank of Japan's negative interest rates push consumers' money out of savings accounts and into safes and other at-home repositories.

     Japan had 6.7% more currency in circulation in February than a year earlier, the BOJ reported. That increase is the largest since February 2003, when consumers withdrew cash following changes to Japan's deposit insurance system. Particularly popular now are 10,000-yen ($88.25) bills, with circulating stock surging nearly 7%, the central bank said. The 5,000-yen and 1,000-yen bills have seen upticks of less than 2%.

Banks not worth trouble

Consumers increasingly find that keeping money in the bank is simply not worth the trouble. Large banks are paying a mere 0.001% interest on deposits -- 10 yen per year for an account holding 1 million yen. ATM fees and other charges would put many savers at a loss.

     Instead, many are looking to safes to protect their money at home.

     "Safes have really taken off since the negative-rate policy was announced," a worker at a major Tokyo home electronics retailer said. Fireproof models selling for around 50,000 yen are especially popular. Shimachu, a home goods chain based in Saitama Prefecture, reported twice as many safe sales now as a year ago. Commercial security provider Kumahira noted growing interest in safes from businesses as well.

     Keeping cash in the home entails a higher risk of burglary. Sohgo Security Services said that requests for information on home security systems have risen 10-20% since the BOJ's negative interest rates took effect in mid-February, though the company admitted the cause of the increase is unclear.

Side effects

Japan's new tax and social security identifier system, known as "My Number," also may be stoking demand for cash, Hideo Kumano of the Dai-ichi Life Research Institute said. Growth in circulating currency began accelerating around spring 2015, when the government began aggressively publicizing the program. Consumers could have begun withdrawing cash from banks then, fearing the government would gain access to their financial information. Negative interest rates would have stirred further withdrawals.

     The central bank's negative rates are intended to push funds into consumption and investment -- not safes and mattresses, where they do nothing to stimulate the economy. Switzerland, a pioneer of negative-rate policy, apparently experienced similar unintended consequences: printing of 1,000-franc ($1,003) bills, the largest available, surged when rates dipped below zero.

     Consumers' affinity for cash could grow even stronger if the BOJ cuts the rate it applies to some deposits below the current minus 0.1%. The negative-rate policy could hit its limits sooner rather than later, Goldman Sachs said.

(Nikkei)

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