Japanese Major Banks Raise Deposit Interest Rates 100-Fold... End of Zero Interest Rate Era?

Interest Rate Increase Up to 0.2%
Long-Term Rates Surge Due to YCC Adjustment
Other Banks Expected to Follow with Rate Hikes

As the 10-year government bond yields soar following the Bank of Japan's (BOJ) monetary policy adjustments, major banks have raised fixed deposit interest rates by 100 times. With fixed deposit rates, which had been maintained at the 0% level, being adjusted upward, changes are occurring in Japan's financial market, which had been operating based on zero interest rates.

According to the Nihon Keizai Shimbun on the 2nd, Mitsubishi UFJ Bank decided to raise interest rates on fixed deposits with maturities of 5 years or more starting from the 6th, reflecting the upward trend in long-term interest rates.

Until now, Mitsubishi UFJ Bank had fixed the interest rate for fixed deposits with maturities of 5 to 10 years at 0.002%. However, from the 6th, the interest rates for 5- and 6-year fixed deposits will be raised to 0.07%, for 7-, 8-, and 9-year maturities to 0.1%, and the 10-year fixed deposit interest rate will be increased to 0.2%, a 100-fold increase. However, fixed deposit rates for maturities under 5 years will remain at 0.002% as before.

The reason Mitsubishi UFJ Bank raised deposit rates is largely due to the long-term interest rates approaching 1% since the BOJ partially revised its Yield Curve Control (YCC) policy in July. The YCC policy refers to the unlimited purchase of government bonds to maintain interest rates at a certain level. In July, the BOJ revised the YCC policy to maintain the 10-year bond yield cap at 0.5% but allowed yields to rise up to 1% depending on market conditions. On the 31st, the BOJ announced it would tolerate interest rate increases beyond 1%. As a result, the 10-year government bond yield jumped to 0.921% as of the 2nd, nearing 1%.

As long-term interest rates continue to soar, more banks are expected to follow suit in raising interest rates. Nihon Keizai Shimbun forecasted that following Mitsubishi UFJ, other major banks among the top three?Mitsui Sumitomo and Mizuho Bank?may also raise their rates in the future.

Japan's public broadcaster NHK stated, "Banks are expected to secure deposits in anticipation of a full-scale rise in interest rates," and added that since one of the three major banks has raised fixed deposit rates, this movement could spread to other banks as well.