BOJ Roils Japan’s $1.4 Trillion Money Market Industry as Nomura Suspends

By Masaki Kondo & Kevin Buckland at Yahoo

Nomura Asset Management Co. stopped accepting investments into some money-market funds as the $1.4 trillion dollar industry grapples with the negative interest rates introduced by the Bank of Japan last week.

The brokerage said Friday it will suspend orders for its Money Management Fund and Free Financial Fund from Feb. 9 following the BOJ decision to set the rate on some excess reserves held by financial institutions at the central bank at minus 0.1 percent. Daiwa Asset Management Co. and Mitsubishi UFJ Financial Group Inc. made similar announcements on Monday.

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“Although the negative rate is applicable only to a part of current accounts that financial institutions hold at the Bank of Japan, yields are falling in the domestic short-term market, which is the main investment of the funds,” Nomura said in a statement.

The BOJ joined monetary authorities around Europe on Jan. 29 in betting setting rates below zero will reduce borrowing costs for companies and households, drive demand for loans and encourage investment in higher-yielding assets. Yields on Japanese government bonds with maturities as long as eight years have turned negative, while the level for the benchmark 10-year security dropped to a record 0.035 percent on Friday in Tokyo. The Ministry of Finance this week scrapped a sale of 10-year fixed-rate notes aimed at individual investors.

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Assets held by money-market funds dropped to a record 164.3 trillion yen ($1.4 trillion) in December, down 4.3 percent from November, according to data from the Investment Trusts Association of Japan. The Nomura Money Management Fund has 474.5 billion yen in assets and Free Financial Fund holds 560 billion yen, figures on Nomura’s website show.

Source: BOJ Roils $1.4 Trillion Money Market Industry as Nomura Suspends – Yahoo