October 15, 2019 / 3:30 PM / a month ago

BOJ should tread carefully when deliberating deeper cuts, Mizuho Bank head says

TOKYO (Reuters) - The Bank of Japan (BOJ) needs to be careful when deciding whether to deepen negative rates, the head of Mizuho Bank said, adding the contentious issue of charging account maintenance fees should be seen as separate from monetary policy.

Like its rivals, the main unit of Mizuho Financial Group (8411.T), Japan’s third-largest lender by assets, has struggled with years of near-zero rates, a dwindling population and a dearth of corporate fund demand.

“I want the BOJ to be wary when deciding whether it will deepen negative interest rates,” Koji Fujiwara, Mizuho Bank’s president, told Reuters in an interview last week that was embargoed for release on Wednesday.

Such a move could ultimately be damaging to Japan’s “economic lifeblood” if it hinders financial firms, he said.

The central bank will hold next policy meeting on Oct. 30-31. On Tuesday, BOJ Governor Haruhiko Kuroda said the central bank would not hesitate to take additional easing steps if risks to the economy grow and threaten momentum towards its 2% inflation target. There has been speculation that Japan’s banks might start charging fees for account holders if the central bank deepens negative interest rates and puts more pressure on banks’ profits. Fujiwara, however, said that the idea should not be directly linked with monetary policy.

While nothing had been decided about the fees, he said, the bank was as a stage where it should develop its pricing strategy “as a whole”. That comes after the bank recently said it would raise transfer fees from March 2020 for customers using ATMs and telephone.

As the domestic market is expected to shrink, Mizuho’s bigger competitors such as Mitsubishi UFJ Financial Group (8306.T) and Sumitomo Mitsui Financial Group (8316.T) have aggressively tapped into Asia by investing in local commercial banks.

While Mizuho looks at the growing market, it will possibly consider another approach: business tie-ups with non-financial firms. Earlier this year, Mizuho agreed with Japanese messaging app operator Line Corp (3938.T) to establish a new bank, aiming to take in Line’s vast platform which has more than 80 million monthly active users.

“When it comes to expanding business into Asia, it has often meant acquiring a financial firm. But in the future, a business partnership with non-financial company will be one of our options,” said Fujiwara.

Reporting by Takashi Umekawa and Takaya Yamaguchi; Editing by David Dolan and Chizu Nomiyama

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