Japanese bank deposits top $9.5tn
Swelling balances reflect the sluggish economy, with nowhere for money to go
KOJI OKUDA, Nikkei staff writer
TOKYO -- The balance of deposits at financial institutions in Japan is swelling, leaving capital that could be used as the primary source for bank loans piled up as dead money.
As of the end of March, the balance of deposits at Japan's banks and credit unions came to a record 1,053 trillion yen ($9.55 trillion). Elderly customers have continued to deposit their retirement allowances and pensions, though their deposits bear practically no interest due to the Bank of Japan's negative interest rate policy.
An executive of a major Japanese bank said the institution is not trying to collect deposits. Interest on ordinary deposits at megabanks is just 0.001%, meaning that a deposit of one million yen will only bear interest of only 10 yen a year, excluding tax. Paying ATM fees for after-hours use even a single time would wipe out that amount.
The BOJ's negative interest rate policy, which was launched last year, was expected to lower loan interest rates and prompt the money to head for the market. However, it turned out that half of retail customers' financial assets of 1,800 trillion yen are going into deposits.
Most of them are assets deposited by the elderly. They are saving retirement allowances and pensions as deposits for when they get older. Institutional investors are also boosting their deposits because it is becoming increasingly difficult for them to find places to park their money.
Yasuhiro Sato, President and CEO of Mizuho Financial Group, said banks are handling more money than they can manage.
Collected deposits are provided to customers as loans, but they are beyond banks' lending ability. The loan-deposit ratio of domestic banks, which reached 137% at its peak in 1988, is around 70%, indicating a high level of the deposit balance.
The remaining deposits will be headed for the BOJ's current deposits. As of the end of March, current deposits deposited by city banks and regional banks at the BOJ stood at 208 trillion yen, up nearly 30% from a year earlier.
Banks also want to cut the deposit balance, if they can. If collecting deposits becomes unnecessary, it will do away with the need to increase the number of branches and ATMs. Changes are beginning to happen such as keeping retail shops with limited operations.
If the deposit balance becomes too much to handle, banks could ask their customers to pay for holding certain amounts of money. In Europe, where negative interest rates were adopted ahead of Japan, some financial institutions passed on higher costs to corporate customers. Some Japanese trust banks have called on pension funds that put their surplus funds to current deposits to pay for negative interest rates.