MNI POLICY: BOJ Looks At Two Tiers For Required Reserves

The BOJ is considering adopting a two-tier system for required reserves, in an increasingly likely move away from negative rates at its March 18-19 meeting, MNI understands.

The BOJ’s current tiering system, introduced in January 2016 together with negative rate policy, charges -0.1% on excess reserves, as well as paying zero and a positive rate on the other two tiers. Under a new arrangement, financial institutions, mainly banks, will receive a positive rate on excess reserves but only at certain times during the maintenance period, with the BOJ able to adjust these times. (See MNI INTERVIEW: BOJ Eyes Tiering Options Ahead Of Rates Move)

However, officials are concerned that paying interest rates on some required reserves would be unfair for financial institutions such as investment trusts and insurance firms which do not have such reserves, and are considering measures to compensate them.