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The
government has been asking lenders about the possibility of
submitting tender offers with negative rates at the ministry's
short-term special accounts borrowing program auctions.
But Japan's big banks have said it would be difficult to submit
tender offers with negative rates in the auctions, which
prompted the government to instead ask the banks to agree to a
"zero floor" on interest rates, said the official, who did not
want to be identified due to the sensitivity of the issue.
The floor on the tender offer rate is now set at 0.001 percent.
The government's approach to lenders comes after the Bank of
Japan's aggressive monetary easing drove yields below zero for
most of the Japanese government bonds traded in the market.
In addition to issuing bonds to fund the official state budget,
the ministry raises trillions of yen every year through direct
borrowing from banks for short-term financing for special
accounts that subsidize programs such as municipal spending,
energy projects and state-owned forest projects. Banks,
brokerages and insurance companies participate in such tenders.
Since the BOJ introduced its negative interest rate policy in
February, the commercial banking industry has resisted lending
to private-sector borrowers at negative rates, even after the
BOJ started imposing negative rates on the excess reserves
lenders park with the central bank.
(Reporting by Sumio Ito, Writing by Leika Kihara; Editing by
Jacqueline Wong)
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