05-08-2025
BOJ Faces Costs From Deposit Facility as Market Eyes Rate Hike
As speculation mounts that the Bank of Japan will raise interest rates later this year, there's a growing risk that required payments to its deposit facility could put added strain on the bank's finances.
Introduced 17 years ago by then-Governor Masaaki Shirakawa, the deposit facility pays interest on excess reserves deposited by financial institutions. The framework allows institutions to either park funds in excess of reserve requirements with the BOJ or lend them out in the market, thereby guiding short-term interest rates toward the facility's rate through arbitrage.
