Japanese banks are increasingly raising fees on transactions such as transfers and currency exchange due to a plunge in revenues caused by ultralow interest rates and other factors.
The shrinking revenues, which are affecting both major and regional banks, have been making it harder for the institutions to keep offering services with no or low handling fees.
However, with banks' collection of fees such as account maintenance charges being somewhat half-hearted, a drastic improvement in their revenue streams driven by a rise in fees seems a long way off.
In April, The Bank of Tokyo-Mitsubishi UFJ will start collecting fees on currency exchange transactions at its counters from the first banknote or coin -- having previously waived fees for up to 50 banknotes or coins. The minimum fee will also rise from 324 yen to 540 yen, though Bank of Tokyo-Mitsubishi UFJ account holders will be exempt from fees for up to 10 banknotes or coins.
As for currency exchange transactions at machines, the current waiver of fees for up to 500 banknotes or coins will only be applied up to 10 banknotes or coins from April onward.
Sumitomo Mitsui Banking Corp. and Mizuho Bank similarly increased fees on currency exchange transactions at their counters in May 2017 and January 2018, respectively. Both banks raised their fees from zero (up to a fixed number of banknotes or coins) to 324 yen starting from the very first banknote or coin, with account holders being exempt from fees for up to 30 banknotes or coins.
Japan's three major banks are also considering raising fees for ATM transactions and bank transfers. Among regional banks, The Iyo Bank and The Bank of Iwate raised fees on bank transfers in January.
A key factor behind this trend is dwindling revenues caused by low interest income, stemming from measures such as the Bank of Japan's ultralow interest rate policy.
According to interim consolidated financial statements for the period ending in September 2017, operating profits for Japan's five major banking groups was about 30 percent lower than during the same period in 2016. Regional banks saw a corresponding drop of about 60 percent.
Nevertheless, banks are reluctant about introducing account maintenance fees -- which would increase the burden on depositors -- as a possible means of improving revenues.
In the case of American and European banks, account maintenance fees are a key way of gaining revenue.
"Telling customers in Japan 'to pay more fees simply because of the bad interest situation' without improving services or adding more value is not enough," says the head of one major Japanese bank.
Furthermore, as one source points out, there was talk of bringing in account maintenance fees around 1994, after the collapse of the bubble economy, and around 1999, but the idea was rejected due to fears of a customer backlash.