BOJ staff trace how Japan's megabanks are building foreign-currency deposits
Serguey Asael Shinder2 min readStaff in the Bank of Japan's Financial System and Bank Examination Department have published an analysis of the foreign currency deposits held by Japan's globally systemic banks. The paper, Bank of Japan Review 2026-E-12, appeared in English this week and is a translation of a Japanese original published in July; the views are the authors', not necessarily the Bank's.
The starting point is a long-standing gap. Japanese megabanks have expanded their overseas lending in foreign currencies for years, but their foreign currency deposits consistently fall short of it, partly because it is hard for them to build a stable retail deposit base abroad. The gap is filled with more stable but more expensive funding: foreign-currency corporate bonds, and medium- to long-term FX and currency swaps funded from surplus yen in Japan. The authors assess current funding as generally stable, but note that the yen available for swaps may grow less as competition for domestic deposits intensifies with the change in Japan's interest-rate environment, and that bond funding depends on global markets. That is why the banks are now pushing to gather foreign currency deposits, especially from corporate customers.
The study uses granular, transaction-level data collected by the Bank and the Financial Services Agency from the banks, covering currency, amounts, rates, maturities, deposit type and depositor characteristics. Its findings are threefold: recent deposit growth has been driven by existing non-Japanese depositors adding to their balances rather than by new customers; offering transaction banking services - cash management, funding arrangements, international remittances - reduces depositor attrition and lengthens tenure; and those services also lower the spread the banks must pay to acquire deposits.
What it means
The link to the yen runs through the swap market. When Japanese banks fund dollar lending by swapping yen, they draw on the domestic deposit base; if rising yen rates make those deposits more contested, the cheapest balancing item becomes scarcer. Foreign-currency deposits reduce that dependence, which is why the supervisor is watching how sticky they are.
The finding about transaction banking is the practical one. Deposits that customers use to run their daily operations tend to stay, even when rates elsewhere move, while deposits placed purely for yield leave when a better rate appears. For a bank funding long-dated overseas loans, the difference is the difference between stable and flighty money. The authors say they will use the results in further discussions with the banks and foreign authorities.