BoJ slaps neg­a­tive rates on 9pc of re­serves in Feb

The Pak Banker - - COMPANIES/BOSS -

The Bank of Ja­pan said on Wed­nes­day that neg­a­tive in­ter­est rates were charged on roughly 9 per­cent of the to­tal re­serves that fi­nan­cial in­sti­tu­tions parked with it in Fe­bru­ary.

The BoJ stunned mar­kets by de­cid­ing in late Jan­uary to charge a 0.1 per­cent in­ter­est to a por­tion of ex­cess re­serves at the cen­tral bank. It be­gan ap­ply­ing the new rule from Fe­bru­ary.

The BoJ ap­plied the neg­a­tive rate to roughly 23 tril­lion yen ($203 bil­lion) of the to­tal 254 tril­lion yen in re­serves parked with the cen­tral bank last month.

Un­der a three- tier sys­tem aimed at mit­i­gat­ing the pain of neg­a­tive rates on fi­nan­cial in­sti­tu­tions' prof­its, the cen­tral bank paid 0.1 per­cent in­ter­est on 209 tril­lion yen in re­serves and zero in­ter­est on the re­main­ing 22 tril­lion yen.

BoJ of­fi­cials have said they will aim to keep the amount of re­serves for which the 0.1 per­cent neg­a­tive in­ter­est ap­plies in a range of 10-30 tril­lion yen.

Trust funds were hit hard­est with neg­a­tive rates im­posed on nearly 10 tril­lion yen of their re­serves. Do­mes­tic com­mer­cial banks, in­clud­ing mega­banks and re­gional banks, had less than 1 tril­lion yen com­bined slapped with neg­a­tive rates.

Trust funds un­der­take money-re­serve funds (MRFs), a low-risk prod­uct bro­ker­ages of­fer in­vestors to tem­po­rar­ily park their cash while they pre­pare for stock pur­chases.

The data sug­gests in­vestors, strug­gling to find low-risk fi­nan­cial prod­ucts that of­fer any yield, are shift­ing cash into trust bank de­posits, some an­a­lysts say. The BoJ de­cided to ex­empt $90 bil­lion MRFs from neg­a­tive rates on Tues­day af­ter the se­cu­ri­ties in­dus­try warned it could curb in­vest­ment in the stock mar­ket.

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