The Bank of Japan's move to reduce the key interest rate will eventually see banks lower interest rates on deposits and housing loans, but observers say its impact on most households likely will be minimal because rates have long been low.
Major banks already have announced they will cut interest rates on savings account from 0.2 per cent per year to 0.12 per cent per year.
Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp both will reduce interest rates from Tuesday and Mizuho Bank from November 17.
Interest rates on loans, including housing loans, also will be reduced over time, which will relieve the burden on household budgets.
The timing of interest rate reviews on loans is left to financial institutions. Johnan Shinkin Bank will reduce its interest rate on lending by 0.2 per cent from Tuesday.
According to an estimate by Yasuhide Yajima, senior economist at NLI Research Institute, when interest rates are reduced by 0.2 per cent, interest on national household savings falls by 2.53 trillion yen (US$25.63 billion) per year.
This figure represents more than triple the reduced burden of 770 billion yen households will save due to reductions on loans, such as on mortgages, leading to speculation that the central bank's interest rate decision may reduce personal spending.
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