BOJ’s Negative Interest Rate Expected to have Major Influence on Japan’s Banks
Banks in Japan will probably bear the impact of the negative interest rates move taken recently by the Bank of Japan (BOJ). However, the analysts have different views regarding the amount of influence of this move on the banks.
Under pressure to revitalize economic growth in the third-largest economy of the world, the BOJ in January, blindsided global financial markets, adopting a negative interest rate. It's the very first time that the country's central bank has taken such a step.
The central bank's action is aimed at motivating the banks in Japan to provide lower lending rates and increase the lending amounts. However, charging banks for holding their reserves with the central bank will eat into the banks profits if they can profitably lend out the funds. According to some analyst's, the banks of Japan are slated to take a big hit.
Last week, Citigroup downgraded shares of Mitsubishi UFJ, Sumitomo Mitsui Financial and Mizuho, the three megabanks f the country to 'sell' rating and at that time said it expected "heavy pressure on earnings." Citigroup had also said that this action taken by the BOJ is likely to push down yields on the domestic loans and bonds which amount to key portion balance sheets for the banks.
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