A Background of Ample Funds

Japanese financial institutions, such as banks and life insurance companies, are acquiring foreign companies and making substantial investments. The scale of investment funds this year is staggering, far beyond ordinary levels.

From January to September of this year (2008), the total value of acquisitions and investments in foreign companies reached 5.8 trillion yen. This figure, according to a reputable private research institution, represents a fivefold increase from last year and is the first time such a surge has been recorded since data collection began.
Some major banks have spent between several hundred billion and 800 billion yen to acquire or invest in foreign companies. American companies are particularly prominent, accounting for 62% of the total.
Given that Japan is also facing economic recession, with issues like lending reluctance and loan stripping, this abundance of funds within our banks is quite telling. But why?

The Reality of Banks Operating with Near-Zero Procurement Costs

One decisive reason that cannot be overlooked is the prolonged period of ultra-low interest rates, near zero, which has lasted for over 12 years.
Deposit interest rates remain in the 0% range even now. The interest rate for ordinary savings accounts is around 0.1%, and for fixed-term deposits, it's about 0.2% or 0.3%.
An interest rate of 0.1% means that for 100,000 yen deposited in an ordinary savings account for one year, the interest earned is a mere 100 yen.
With a 20% tax on interest, the take-home amount is only 80 yen. That's not even enough to buy something at a 100-yen shop. Compared to the several percent interest rates in other developed countries, this is not just excessive; it's clearly abnormal.

The government's monetary policy has been consistent: the view is that if lending rates are kept low, businesses and individuals will actively pursue capital investment, and individuals will be motivated to build homes by taking advantage of low mortgage rates. To achieve this, the interest rates on deposits, which serve as the source of funds, must be kept overwhelmingly low, essentially near zero. What needs to be clearly understood here is that deposits represent the procurement cost for banks.
It's a system where funds are procured at virtually no cost and then sold with a markup (which, for banks, is lending). Anyone would profit from such a scheme.
Financial institutions are engaged in a similar practice, and they are doing so with the government's official endorsement. It's only natural that banks accumulate vast sums of money. The fact that every financial institution has a magnificent headquarters building in a prime location and offers salaries and bonuses higher than other companies is enough to understand this, requiring no further explanation.

Strong Interest in Monetary Policy, and the Public Nature of Financial Institutions

It is true that executives and employees are working together with dedication towards business operations, and I offer my respect for their efforts. However, it is only natural that criticism arises regarding a system where funds are procured at virtually no cost, marked up for profit, and then lent out, and that this system cannot continue indefinitely. I believe the Japanese people will not be satisfied unless deposit interest rates are raised to at least the level seen in other developed nations.
The acquisition of foreign companies and massive investments are arguably made at the expense of ordinary citizens like us. Each individual should take a keen interest in this matter, perhaps even to the extent of applying pressure on the government's monetary policy.