(BOJ Review) Granular Insights into Depositor Dynamics and Deposit Spreads in Japanese G-SIBs
The Bank of Japan examines how Japanese banks attract and retain foreign currency deposits to fund overseas lending, highlighting trends among non-Japanese depositors and the role of transaction banking services.
The Bank of Japan’s review analyzes granular data on foreign currency deposits at major Japanese banks, focusing on depositor behavior and deposit spreads. The study decomposes recent deposit growth patterns, distinguishing between existing and new depositors. Findings indicate that growth is primarily driven by existing non-Japanese depositors increasing their balances rather than new account openings.
The report identifies transaction banking services as a key factor in reducing depositor attrition and extending deposit tenure. These services, which facilitate regular transactions, help banks maintain stable funding sources by retaining depositors for longer periods. The analysis underscores the importance of such services in managing deposit acquisition costs.
Deposit spreads, which measure the cost of acquiring deposits, are examined to assess their determinants. The study suggests that expanding transaction banking services contributes to lowering these spreads, thereby improving funding efficiency for banks engaged in overseas lending.
The Bank of Japan emphasizes the need for further engagement with major banks and foreign authorities to enhance monitoring methods and ensure stability in foreign currency funding. The findings aim to inform discussions on deposit dynamics and funding strategies, with the report published as part of the Bank’s Review Series.