BoJ slaps negative rates on 9pc of reserves in Feb

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.