Allera Capital Japan Analysis on Japanese Negative Rate Policy

Singapore, March 1, 2016 (Newswire.com) - ​According to Allera Capital’s Chief Economic Strategist, the controversial negative interest rate policy deployed by the Bank of Japan will benefit the Japanese economy over the long-term as commercial banks incur changes for depositing reserves with the central banks.  

Allera Capital, the Japanese provider of global asset management solutions believes that the implementation of the Bank of Japan’s negative interest rate policy, which will be introduced under a three-tiered system to reduce the initial impact felt by commercial banking firms, will help to overcome imminent deflation whilst unlocking economic benefits over the long-term.

Further cuts from major lenders such as Sumitomo Mitsui Banking Corp and Mizuho Bank have, some might say, been forced to lower their lending rates for housing loans with the expectation that the trend will filter into the corporate lending markets very soon.

Miles Ruddles, Chief Economist Strategist

Speaking on behalf of Allera Capital, Chief Economic Strategist Miles Ruddles provided his insight into how the negative rate policy will likely shape the Japanese economy during the short and into the long-term.

“The average profit of Japanese commercial banks declined by 16% in the fourth quarter of 2015 in commission to the same period 12 months earlier causing a decline on the base rate of interest on private and commercial loans. We also note that interest paid on deposits are in decline creating caution within financial institutions as they are generally becoming less committed towards offering the public low risk investments.”

“If we consider how banks have performed since the negative policy was announced, we can see through an analysis of the Nikkei Bank Index that profits have declined by around 30%. Further cuts from major lenders such as Sumitomo Mitsui Banking Corp and Mizuho Bank have, some might say, been forced to lower their lending rates for housing loans with the expectation that the trend will filter into the corporate lending markets very soon,” continued Mr. Ruddles.

As the share price of other leading financial institutions throughout Japan continue to  take a hit as a result of the policy announcement, global attention remains on the Japanese economy as investors await the impact of negative interest rates.