＜prologue＞
I started a blog called “The Baby Boomer Generation’s Miscellaneous Blog”（Dankai-sedai no garakutatyou:団塊世代の我楽多（がらくた）帳） in July 2018, about a year before I fully retired. More than six years have passed since then, and the number of articles has increased considerably.
So, in order to make them accessible to people who don’t understand Japanese, I decided to translate my past articles into English and publish them.
It may sound a bit exaggerated, but I would like to make this my life’s work.
It should be noted that haiku and waka （Japanese short fixed form poems） are quite difficult to translate into English, so some parts are written in Japanese.
If you are interested in haiku or waka and would like to know more, please read introductory or specialized books on haiku or waka written in English.
I also write many articles about the Japanese language. I would be happy if these inspire more people to want to learn Japanese.
my blog’s URL:団塊世代の我楽多（がらくた）帳 | 団塊世代が雑学や面白い話を発信しています
my X’s URL:団塊世代の我楽多帳（@historia49) on X
<Added March 19, 2024> The Bank of Japan Finally Ends Negative Interest Rate Policy
At its Monetary Policy Meeting on March 19, the Bank of Japan decided to end its negative interest rate policy, a pillar of its massive monetary easing program.
This marks the first interest rate hike in 17 years, since 2007. Yield control, which was intended to keep long-term interest rates low, will also be eliminated, effectively moving to a zero interest rate policy. New purchases of exchange-traded funds (ETFs) will also be discontinued.
The Bank of Japan has determined that the average wage increase rate in this spring’s labor negotiations was high, creating a virtuous cycle in the economy where wages and prices rise in unison. This marks a historic turning point in monetary policy, as it begins normalizing its massive easing policy, which has continued for approximately 11 years.
However, I believe the Bank of Japan’s decision comes too late.
Mizuho Bank announced that, starting in January 2021, it will charge a 1,100 yen “passbook issuance fee” for new deposits from people under the age of 70. Currently, the annual stamp duty burden on the passbooks issued is said to be 5 billion yen. I think other banks will soon follow suit.
While this may encourage a shift to online bankbooks (digital bankbooks), I believe it also reflects the fact that financial institutions are being forced to focus on fee-based businesses due to the negligible profits from their core business (total interest margins) resulting from the negative interest rate policy.
1. The Curse of the “Inflation Target”
At the Bank of Japan Policy Meeting, chaired by Governor Haruhiko Kuroda, the Bank of Japan has decided to continue the negative interest rate policy, despite recognizing its adverse effects.
I believe this is due to the curse of the “inflation target” of 2% inflation.
2. The Curse of the Negative Interest Rate Policy
The adverse effects of the negative interest rate policy include the following:
(1) Deteriorating Financial Institutions’ Profitability
Many banks, especially regional banks, are in the red. Major banks are also suffering from chronically low profitability. This is an abnormal situation, and the Bank of Japan must face this reality and make a decision to change its policy.
According to a survey by Tokyo Shoko Research, the median interest spread on total borrowings for 110 domestic banks for the interim period ending September 2019 was 0.15%, a figure that has been declining since the September 2010 interim period of 0.25%.
Since the Bank of Japan introduced negative interest rates in February 2016, financial institutions have been unable to escape from the slump in lending rates, and lending yields, which form the core of interest income, have continued to decline.
Bank profits announced in May 2020 were down 630 billion yen compared to the previous year, and this trend is expected to worsen due to the COVID-19 pandemic.
(2) The suffering of the majority of depositors due to low interest rates
3. Interest rate hikes will lead to economic recovery
The greatest beneficiary of the current “negative interest rate policy” is “Japan (the Japanese government),” which has the largest debt (national debt). In other words, the ultimate effect of negative interest rates is “fiscal relief.”
While borrowing companies and individuals with mortgages and other loans also benefit, the majority of Japanese citizens bear the brunt of the burden.
I once heard a dreamlike story: “In the early Showa era, it was said that if you put 20,000 yen in a bank trust, you could live off the interest for the rest of your life, as long as you didn’t live extravagantly.” It seems that the prewar era was a time when you could live off interest, which is quite enviable.
If deposit interest rates rise to around 3%-5%, it will have the effect of stimulating consumption even without a consumption tax cut.
Furthermore, if financial institutions’ total interest margins increase, their business conditions are expected to improve, which will also help prevent fee increases. Above all, it will help avoid a financial crisis.
I would like the Bank of Japan to urgently review its negative interest rate policy.