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▼ Japanese Banks Raising Savings Account Interest Rates; Financial Institutions Seek New Ways to Lure Clients
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Japanese banks are now raising the interest rates on their savings accounts in an increasingly heated competition for business. Interest rates on one-year fixed-term deposits have crossed the 1% line one after another, and rates on ordinary deposits continue rising.
Nearly a year has passed since the Bank of Japan ended its negative interest rate policy, and “a world with interest rates” has begun to take root.
Thus, commercial banks’ battles to lure more savings account clients have been increasingly fierce.
The rate-raising race is being led mainly by internet-based banks.
“If we don’t raise interest rates, we’ll start bleeding deposits,” said Hidenori Tsunehisa, deputy president of Tokyo Kiraboshi Financial Group Inc. He made the remark at a press conference to announce business results on Jan. 31.
UI Bank, a company under the Tokyo Kiraboshi umbrella that specializes in internet banking services, raised its savings interest rate for one-year fixed-term deposits from 0.55% to 1.0% on Jan. 24.
If a person opens a new savings account with UI Bank, the rate further rises to 1.1% for a limited term.
ORIX Bank Corp. has also raised interest rates for its internet-exclusive e-Direct banking service. Those who open new accounts with the service will now receive interest of 1.0% on one-year fixed-term deposits.
Some local banks are enthusiastically making similar moves.
Until the end of March, the Bank of Yokohama is running a campaign in which it will offer interest rates of 1.0% on one-year fixed-term deposits. This high rate is available to people who newly transfer or deposit at least ¥3 million into accounts with the bank.
By contrast, megabanks set their interest rates for one-year fixed-term deposits at 0.125%. It seems that these megabanks, rather than making any snap decisions, have kept their fixed-term deposit rates low because they already have enough money to lend and their earning power is high.
Internet-based banks do not have to pay the costs of maintaining large-scale networks of brick-and-mortar locations. By presenting much higher interest rates than those of megabanks, internet-based banks aim to lure clients to deposit money with them.
In March last year, the Bank of Japan made the bold decision to discontinue its negative interest rate policy and raise interest rates for the first time in 17 years.
They decided to raise rates again in July last year and January this year. The Bank of Japan’s current policy rate is around 0.5%.
Private-sector financial institutions’ short-term interest rates are tied to the policy rate.
Interest rates on fixed-term deposits differ depending on term length. But a comprehensive judgment, taking into account the upward trend of short-term interest rates, indicates that interest rates on one-year fixed-term deposits are becoming the main battlefield in the competition for depositors.
To that extent, potential profit margins on loaned money can be said to be improving.
At a meeting of the House of Representatives Budget Committee on Jan. 31, Bank of Japan Gov. Kazuo Ueda said, “If [the Bank of Japan’s] forecasts about the economy and price levels come true, I will continue raising the policy rate.”
As long as the Bank of Japan continues raising the rate, it is very likely that private financial institutions will also continue competing to raise their own interest rates.
However, there is a large gap in earning power between major banks, which make money from lending and investments, and other institutions such as internet-based banks.
Hiroyuki Kubota, a financial analyst, offered the view that “This competition will probably eventually become just a test of strength.”
Nearly a year has passed since the Bank of Japan ended its negative interest rate policy, and “a world with interest rates” has begun to take root.
Thus, commercial banks’ battles to lure more savings account clients have been increasingly fierce.
The rate-raising race is being led mainly by internet-based banks.
“If we don’t raise interest rates, we’ll start bleeding deposits,” said Hidenori Tsunehisa, deputy president of Tokyo Kiraboshi Financial Group Inc. He made the remark at a press conference to announce business results on Jan. 31.
UI Bank, a company under the Tokyo Kiraboshi umbrella that specializes in internet banking services, raised its savings interest rate for one-year fixed-term deposits from 0.55% to 1.0% on Jan. 24.
If a person opens a new savings account with UI Bank, the rate further rises to 1.1% for a limited term.
ORIX Bank Corp. has also raised interest rates for its internet-exclusive e-Direct banking service. Those who open new accounts with the service will now receive interest of 1.0% on one-year fixed-term deposits.
Some local banks are enthusiastically making similar moves.
Until the end of March, the Bank of Yokohama is running a campaign in which it will offer interest rates of 1.0% on one-year fixed-term deposits. This high rate is available to people who newly transfer or deposit at least ¥3 million into accounts with the bank.
By contrast, megabanks set their interest rates for one-year fixed-term deposits at 0.125%. It seems that these megabanks, rather than making any snap decisions, have kept their fixed-term deposit rates low because they already have enough money to lend and their earning power is high.
Internet-based banks do not have to pay the costs of maintaining large-scale networks of brick-and-mortar locations. By presenting much higher interest rates than those of megabanks, internet-based banks aim to lure clients to deposit money with them.
In March last year, the Bank of Japan made the bold decision to discontinue its negative interest rate policy and raise interest rates for the first time in 17 years.
They decided to raise rates again in July last year and January this year. The Bank of Japan’s current policy rate is around 0.5%.
Private-sector financial institutions’ short-term interest rates are tied to the policy rate.
Interest rates on fixed-term deposits differ depending on term length. But a comprehensive judgment, taking into account the upward trend of short-term interest rates, indicates that interest rates on one-year fixed-term deposits are becoming the main battlefield in the competition for depositors.
To that extent, potential profit margins on loaned money can be said to be improving.
At a meeting of the House of Representatives Budget Committee on Jan. 31, Bank of Japan Gov. Kazuo Ueda said, “If [the Bank of Japan’s] forecasts about the economy and price levels come true, I will continue raising the policy rate.”
As long as the Bank of Japan continues raising the rate, it is very likely that private financial institutions will also continue competing to raise their own interest rates.
However, there is a large gap in earning power between major banks, which make money from lending and investments, and other institutions such as internet-based banks.
Hiroyuki Kubota, a financial analyst, offered the view that “This competition will probably eventually become just a test of strength.”
- 24/2 21:20
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