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Japan's savers won't play ball as BOJ turns negative

Tue 2nd February, 2016 11:00pm
* BOJ set negative interest rates on Friday 
    * Lending banks already starting to cut deposit rates 
    * Japan has much higher savings rate than U.S. or euro zone 
    * Analysts and savers say unlikely to change 
    * Savers already receive very low returns on savings 
 
    By Minami Funakoshi and Taiga Uranaka 
    TOKYO, Feb 3 (Reuters) - The Bank of Japan (BOJ) hopes that 
cutting interest rates below zero will boost spending and 
investment, but fear, inertia and years of paltry returns mean 
the nation's army of savers is unlikely to march to the central 
bank's tune. 
    After the BOJ made its move on Friday to charge banks for 
holding their reserves from Feb. 16, some retail banks are 
already cutting their deposit rates, and the rest are expected 
to follow suit. urn:newsml:reuters.com:*:nL3N15D1N2 
    Bank of Yokohama Ltd  8332.T , one of Japan's biggest 
regional lenders, cut its one-year rate to 0.02 percent from 
0.025 percent, and Resona Bank, a unit of fourth-largest lender 
Resona Holdings  8308.T , halved its rate to 0.025 percent on 
five-year deposits. 
    Central bank governor Haruhiko Kuroda aims to break the 
deflationary mindset that has blighted Japan for decades and get 
the economy moving, but his compatriots are compulsive savers. 
More than half of the $14 trillion in Japanese households' 
financial assets are either bank deposits or cash, compared with 
only 13.7 percent for the United States and 34.4 percent for the 
euro zone. 
    Ryoji Yoshizawa, director at Standard & Poor's Ratings 
Japan, doesn't think the cuts will change that. 
    "Interest rates are already very low, so further cuts are 
not likely to have much impact on depositors." 
    Tokyo pensioner Kozo Nishimura remembers getting 8 percent 
on his savings at Kyowa Bank, which later became Resona, 320 
times what the bank pays now on five-year deposits, but he has 
long since become used to getting scornfully low returns. 
    "A change of 0.01 points is such a microscopic thing," said 
Nishimura, 70, who used to own an electronics shop. "For now, 
I'll just wait and see." 
    Noriko Ainoya, 71, who runs a shop selling handbags in 
Sugamo, a Tokyo shopping district popular with the older 
generation, is equally dismissive of the "dimes and pennies" she 
gets on her savings. 
    But the alternatives are too risky. 
    "I'm scared to keep money under the mattress," she said.   
"But I don't know about investing, either, since there's no 
knowing how stocks will move." 
    Ultimately, Japanese investors value security, said a sales 
official at a major brokerage firm. 
    "Even if interest rates on time deposits fall from 0.02 
percent to 0.01 percent, depositors are not losing money. Many 
people are likely to keep deposits even if interest rates go 
down to zero." 
    Banks are unlikely, however, to follow Kuroda into negative 
territory. It would be too unpopular to charge savers, 
especially the elderly, for holding their money, finance 
professionals say. 
    "There have been attempts in the past by banks to introduce 
charges on deposits, but they failed due to the backlash from 
retail and corporate clients," said Yoshinobu Yamada, banking 
analyst at Deutsche Securities in a note to clients. 
    Some are already at or near the tipping point. 
    "There's no point in depositing money," said Kiyoshi Ishii, 
72, the worried owner of a shop selling rice crackers in Sugamo. 
"There's no other way than to keep money under the mattress," he 
said. 
    That could be music to the ears of companies making 
something a little more secure than the mattress. 
    "At this point, the outlook for future sales is unclear," 
said Akira Kondo, who works at Eiko Kogyo Co, the top maker of 
safes in Japan. But "there is a chance the sale of safes would 
rise following TV reports", he added. 
 ($1 = 121.3300 yen) 
 
 (Additional reporting by Emi Emoto and Junko Fujita; Editing by 
Will Waterman) 
 ((minami.funakoshi@thomsonreuters.com; +81-3-6441-1386; Reuters 
Messaging: minami.funakoshi.reuters.com@reuters.net)) 
 
Keywords: JAPAN ECONOMY/SAVERS
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