Japan's big banks seen cutting rates


Banks are set to cut rates on ordinary deposits at the end of this week, the Nihon Keizai reports

TOKYO, Japan -- Japan's big four banking groups will cut interest rates on ordinary deposits to a record low when full government protection of time deposits ends on March 31, the Nihon Keizai Shimbun business daily reported Monday.

The big four -- Mitsubishi Tokyo Financial Group, Mizuho Holdings, Sumitomo Mitsui Banking Corp and UFJ Holdings -- are expected to cut annual rates to 0.01 percent or less, from the current 0.02 percent, the newspaper said, quoting financial sources.

Bank stocks opened higher Monday, with Mizuho and SMBC both up more than 2 percent. The overall market was slightly lower.

The rate reduction is aimed at preventing depositors from shifting their money from time to ordinary deposit accounts, which will enjoy full protection throughout the fiscal year starting in April, the newspaper said.

From April, banks will pay lower premiums for time deposits, on which government protection will end, to the government-affiliated Deposit Insurance Corp

Reuters news agency reported that no one at the four banks could be reached for immediate comment.

BOJ left policy unchanged

The rate cuts would be the first since March 2001, as well as the first that does not accompany a shift in the Bank of Japan's monetary policy, the Nihon Keizai said.

At the end of the BOJ's Policy Board meeting last Wednesday, the central bank decided to leave its current easing stance unchanged, as expected.

The Nihon Keizai said Mitsubishi Tokyo Financial Group would cut first, with Mizuho, UFJ Bank and SMBC expected to follow suit. Rates at some banks could fall to as low as 0.001-0.005 percent, it said.

On Friday, shares in the big banks ended the day sharply lower on fresh fears about the Japanese government's commitment to reform.

Top lender Mizuho fell 4.5 percent to 297,000 yen and second-largest SMBC fell 6.52 percent to 516 yen. UFJ closed down 5.77 percent to 294,000 yen and Mitsubishi Tokyo Financial Group lost 3.11 percent to 811,000 yen.

The Bank of Japan said Friday that the Japanese economy continued to deteriorate, but it upgraded its overall view of economic conditions for the first time since July 2000, citing better exports and inventories.

'Little evidence' of pickup

Economists said the BOJ would probably not alter its already super-loose monetary policy for a while, given the rosier outlook, although they still questioned whether recent signs of a cyclical upturn would be sustainable, Reuters reported.

IFR Asia Pacific chief economist George Worthington said in his weekly commentary that despite the Japanese government and the BOJ lifting their assessments of the economy in recent days, there was "little evidence that things are turning up".

Worthington said Japanese retail sales data for February, due to be released Thursday, would be "dismal", as would unemployment and housing starts data on Friday.