In addition, if a negative interest rate is imposed on customers’ deposit, this would prompt their customers to withdraw cash from bank accounts and hoard cash in vaults. In fact, financial institutions’ retail deposit interest rates have never turned negative even in European countries where the central bank has cut its deposit rate to as low as minus 1 percent.
On the other hand, banks’ interest income will decrease reflecting the decline in JGB yields. Moreover, lending rates on housing and corporate loans will decline to some extent. As a result, banks’ earnings will be negatively affected.