---
title: "One year since the end of negative interest rates by the Bank of Japan: Banks are making a fortune, but the people's wallets are empty?"
description: "The Bank of Japan ended its negative interest rate policy in March last year, leading to substantial profits for financial institutions, but ordinary households and small to medium-sized enterprises a"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/232030225.md"
published_at: "2025-03-17T05:46:59.000Z"
---

# One year since the end of negative interest rates by the Bank of Japan: Banks are making a fortune, but the people's wallets are empty?

> The Bank of Japan ended its negative interest rate policy in March last year, leading to substantial profits for financial institutions, but ordinary households and small to medium-sized enterprises are facing the challenges of inflation and rising borrowing costs. According to a report by Sumitomo Mitsui Financial Group, banks gained an additional interest income of 90 billion yen due to interest rate hikes, and the bank stock index rose by 29%. However, the decline in real wages and rising food prices have squeezed household spending, putting greater pressure on businesses

According to Zhitong Finance APP, last March, Bank of Japan Governor Kazuo Ueda pressed the button to end the global era of negative interest rates, initiating the most controversial monetary policy shift in Japan's financial history. A year later, this experiment is presenting a starkly contrasting economic picture—financial institutions are reaping substantial profits, while ordinary households and small to medium-sized enterprises are struggling to survive amid inflation and rising borrowing costs.

The latest financial report from Sumitomo Mitsui Financial Group serves as a clear reflection of the direct beneficiaries of the Bank of Japan's interest rate hike policy. Data shows that as of this fiscal year (March 2024), the bank has gained an additional JPY 90 billion (approximately USD 605 million) in interest income solely due to the central bank's rate hikes.

Even more noteworthy is its "windfall formula": for every 25 basis points increase in interest rates, an incremental annual gain of JPY 100 billion will continue to be generated. This logic also applies to the two major giants, Mitsubishi UFJ and Mizuho Financial Group, with the three major banks collectively holding half of Japan's total bank assets, indicating a significant surge in their profits.

Figure 1

The capital market is showcasing a more intuitive wealth game. Over the past 12 months, the Japanese bank stock index has surged 29% against the trend, while the Tokyo Stock Exchange index has remained flat overall. Behind this unusual strength is the market's frenzied pursuit of the "interest rate spread dividend."

While the central bank maintains a savings interest rate of 0.2%, the three major banks have shifted funding costs to businesses and individuals through floating rate loans (which account for over 75%), creating a spread of up to 3 percentage points.

However, the financial frenzy is accompanied by a chill in the real economy. The account of 50-year-old Tokyo employee Masashi Fujii is highly representative: "Food prices have risen by 15%, but wage growth is less than 5%, and the increase in mortgage rates has added JPY 20,000 to my monthly payments." This "wage-price" gap is tearing apart the foundation of consumption, with January data showing real wages shrinking by 1.8% year-on-year, and the April food price surge further compressing household spending.

Businesses are also facing increased pressure. Shigeru Nozawa, president of a metal processing factory in Saitama Prefecture, candidly stated: "Companies without loans do not benefit from interest rate dividends but must bear the dual pressure of cost transfers." In 2024, the number of corporate bankruptcies in Japan is expected to exceed 5,000, reaching a ten-year high, with nearly 40% being small and medium-sized enterprises with debts exceeding JPY 1 billion.

Even more severe is the fact that the central bank's interest rate hikes have pushed the yield on 10-year government bonds to 1.7%, exacerbating the snowball effect of government debt—over the next four years, interest payments alone are expected to surge by 25%, consuming nearly USD 230 billion of the fiscal budget.

Figure 2

Figure 3 compares the inflation rate trends of Japan, the United States, and the European Union from March 2023 to December 2025, revealing that Japan's inflation rate has significantly risen during the central bank's interest rate hike cycle, consistently operating at a high level after breaking through 7% in the second half of 2023, ultimately surpassing other major economies to become the inflation benchmark among G-7 countries.

Figure 3

In the face of public pain, former Bank of Japan executive director Momotaka Ichiro bluntly stated, "Raising interest rates is like rubbing salt in the wounds of low-income groups." This division is turning into political pressure, causing the approval rating of the Kishida cabinet to plummet by 8 percentage points to 36%. In the upcoming summer House of Councillors election, if the ruling party cannot demonstrate effective measures for people's livelihoods, it may repeat the defeat of last year's House of Representatives election.

Monetary policy is also facing a dilemma. Although economists generally expect another interest rate hike in July, Kazuo Ueda must weigh the "ghost of the bubble economy"—the historical lesson that five consecutive interest rate hikes in 1989 directly burst the asset bubble is still fresh in memory.

More subtly, the yen exchange rate has rebounded below the 150 mark due to risk-averse sentiment, weakening the last justification for monetary easing.

This interest rate revolution that began at the central bank building is reshaping the genetic sequence of the Japanese economy. While financial capital revels in the interest rate differential game, the real economy struggles in the chain of cost transfer. This imbalance will ultimately test the wisdom of Japanese policymakers: can they find a third way between controlling inflation and maintaining people's livelihoods? The answer may lie in the policy direction this summer

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.