MUFG Bank said on Wednesday (Nov 1) it would raise interest rates on 10-year yen deposits for the first time since 2011, showing that Japan’s top lender is reckoning with an inflection point as the economy approaches policy normalisation.

The main banking arm of Mitsubishi UFJ Financial Group will lift the rate from 0.002 per cent now to 0.20 per cent, becoming the first large bank to announce such rate increases.

Interest rates on five-year yen deposits will also be raised to 0.07 per cent from 0.002 per cent.

The moves come the day after the Bank of Japan took another small step away from its decade-long commitment to ultra-easy stimulus by changing the 1 per cent ceiling for the 10-year Japanese government bond (JGB) yield to a reference point rather than a hard cap.

Signs of the central bank’s greater tolerance of rising yields briefly sent the 10-year JGB yield to 0.970 per cent on Wednesday, for a level last seen in May 2013.

Higher bond yields have sparked hopes of a windfall for lenders after years of being squeezed by rock-bottom rates, as investors anticipate that the spread between deposits and loans will widen and make deposits a source of revenue.

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Major banks say they would see a meaningful earnings impact only when the BOJ ends its negative rate policy, where the central bank applies a -0.1 per cent interest rate on a small pool of excess reserves parked with it by financial institutions. REUTERS