Japan trust banks to start imposing negative rates on clients: sources

[TOKYO] Some Japanese trust banks will start to put negative interest rates, or charges, on institutional clients such as asset management firms, passing on the cost of the central bank's negative rates, sources with knowledge of the matter said.

Mitsubishi UFJ Trust and Banking, a trust bank arm of MUFG, and Sumitomo Mitsui Trust Bank, the main bank of Sumitomo Mitsui Trust Holdings, are among those that have notified their customers of plans to impose charges on investors' savings trust contracts.

Sumitomo Mitsui will charge a fee of minus 0.1 per cent on so-called "no interest money trusts". Other trust banks told clients negative returns will be passed on to investors' savings.

A spokesman for Sumitomo Mitsui said the bank has started to explain to their customers about a plan to "reflect the cost of managing trusts". Mitsubishi UFJ was not immediately available for comment.

Many institutional investors have shifted their short-term funds to those trust accounts after the Bank of Japan's negative interest rates policy drove down interest rates on call money - their traditional investment tool - to slightly below zero.

Negative charges on money trusts are a new headache for institutional investors such as asset management firms and pension funds, which are facing a dwindling pool of low-risk investment instruments that offer positive returns.

The move is also a major step for Japanese financial institutions, which remain reluctant to pass on negative rates to their customers for fear of upsetting them.

Banks have so far steered clear of introducing negative interest rates on deposit accounts, although some analysts expect banks to eventually pass on the cost of negative rates to some big corporate customers.

REUTERS