Japan banks battle to secure deposits as savers chase market highs
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TOKYO, May 28 : Japanese banks are, in a historic shift, competing to shore up their deposit base as lending opportunities grow and consumers, seeking to beat inflation, shift their savings into a booming stock market.
While banks had been able to count on ample deposits for decades, growing prospects domestically are pushing them to get creative or risk having to put a brake on lending.
Interest on deposits is rising as the Bank of Japan gradually raises rates, but consumers are also seeing inflation eating into their savings after decades of deflation.
The government has been encouraging savers to make household cash more productive, including through the "NISA" tax-free stock investment programme, which was expanded in 2024.
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"Investing through NISA is seen as safe, it's considered a part of savings," said Yohei Fujiwara, 30, who works for an airline and has invested in infrastructure and electric-related companies in Japan.
The amount invested through NISA accounts more than doubled over the two years to the end of 2025 to reach 71 trillion yen ($445 billion).
Japan's benchmark index has hit record highs, supported by an AI-driven investment boom and governance reforms that have helped the market shed its reputation as a value trap where companies care little about shareholder returns.
"I'm interested in some more adventurous stocks like AI-related companies, but would only invest in a few years' time once I get a promotion and have more money to spare," Fujiwara said.
Junya Oki, a 28-year-old hairdresser, said he started investing about a year ago to save for retirement and has put money into the S&P 500 and global index funds.
"Since I got a raise I have money to spare so I want to put it to use," he said, near Shimbashi station in central Tokyo.
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The ratio of loans to deposits at Japanese banks rose to 65.7 per cent at the end of September 2025, the highest since March 2020, according to calculations by Tokyo Shoko Research.
Rising rates and corporate investment in areas such as semiconductors, data centres and decarbonisation are creating growing opportunities for banks to lend domestically.
"We had a surplus of deposits so our approach had been to lend more and more when there was demand," said Sumitomo Mitsui Financial Group CEO Toru Nakashima.
"Going forward, we will have to be a bit more selective about lending than we had been in the past," he said.
To secure deposits, SMFG is rolling out "Olive" retail accounts that integrate securities and payments functions.
Mitsubishi UFJ Financial Group has similarly launched its "Emut" service.
SMFG is also establishing a company with U.S. asset manager Neuberger Berman to invest in domestic leveraged buyout debt, aiming to disperse risk by attracting funds rather than holding loans on its books.
In April, Mizuho Financial Group issued dollar-denominated straight bonds to secure funding.
Banks are also focusing on transaction banking, offering services such as payments and cash management to capture companies' daily cash flow.
While household assets were previously left untouched, a virtuous cycle of wages and prices has emerged and the investment mindset of individuals has started to change, said Mizuho CEO Masahiro Kihara.
With the productivity improvement from AI and progress in industrial restructuring, "a very good opportunity has arrived to enhance the competitiveness of Japanese industry," he said.
($1 = 159.5400 yen)
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