Mizuho Bank said it will raise bank transfer fees using ATM machines by as much as double the amount currently charged beginning in March 2020, to "enhance its service to customers."
The move comes amid heightening market expectations that the Bank of Japan could ease monetary policy as early as this month possibly by deepening negative interest rates - a move that will further strain financial institutions' profits.
As years of ultra-low rates squeeze profits from core lending operations, Japan's banking regulator is also warming to the idea of allowing commercial banks to charge depositors maintenance fees for their bank accounts, sources familiar with the matter say.
"Banking is a service industry. It's natural to charge fees for providing services such as maintaining bank accounts," an official at the Financial Service Agency (FSA) said.
While the additional revenue is attractive, many banks are cautious of charging fees for fear of angering depositors and prodding them to flee to their rivals - or shift to cash, the sources say.
"Depositors are accustomed to holding bank accounts free of charge," an official at a regional bank said. "Just announcing plans of a fee would face heavy resistance."
The debate could affect the BOJ's decision on how quickly to ease and whether to deepen negative rates if it were to act.
The BOJ has signaled its readiness to ramp up stimulus to fend off shocks to the economy. But it has also stressed it would be mindful of any side-effects such an action could have, including the impact on financial institutions.
Commercial banks in Japan, unlike those in many countries, do not charge maintenance fees for bank accounts and have flatly denied the possibility of applying negative rates to deposits.
Given strong public resistance to being charged bank fees, the topic is politically sensitive, particularly after household were hit by a increase in a sales tax hike this month.
"We may have no choice but to do so if the BOJ deepens negative rates," an official at another regional bank said.
Under a policy dubbed yield curve control, the BOJ guides short-term rates at -0.1pc and long-term rates around 0pc.