By Leika Kihara and Kaori Kaneko

TOKYO (Reuters) – Prime Minister Yoshihide Suga is making life tougher for the Bank of Japan as carriers respond to his calls to cut cellphone charges, a move seen as adding deflationary pressure on the country’s already weak economy.

Suga has publicly said he believes Japan’s cellphone fees are too high and that carriers are a monopoly, a message seen as resonating with younger voters.

Nodding to the pressure, major Japanese carriers NTT Docomo, KDDI and Softbank announced plans to cut charges by up to 20% from as early as March.

That could push down the core consumer price index, which fell 0.6% in January from a year earlier to mark the sixth straight month of falls, by as much as half a percentage point, analysts say.

The move highlights how deflation remains the BOJ’s primary headache, even as its U.S. and European peers face communication challenges posed by recent rises in inflation.

It also shows how in Japan, even seemingly straightforward government decisions can have vast ramifications for the BOJ, given the spectre of deflation.

“Unlike in the United States, government policies work to push down inflation in Japan,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Japan is a country where companies struggle to raise prices because consumers are so sensitive to price hikes,” she added.

(Graphic: Japan is facing rising deflationary risks, https://graphics.reuters.com/JAPAN-ECONOMY/DEFLATION/jznpnolgjvl/chart.png)

(For an interactive graphic on Japan’s core consumer price index, click here https://tmsnrt.rs/3qAtiXc)

Cellphone fees have a big influence on Japan’s price gauge because they have the fourth highest weighting among the 523 components making up the core consumer price index (CPI).

The resulting fall in core CPI would mostly offset an expected boost from a recent rise in energy costs and the base effect of last year’s pandemic-induced sharp declines, analysts say.

Excluding any impact from cellphone fee cuts, analysts expect core consumer prices to start creeping up by mid-year but rise only modestly thereafter.

“Bottom line, Japan’s trend inflation is quite weak because demand is sluggish,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

To be sure, lower fees would give households money to spend on other items. Fees for a 20-gigabyte plan in Tokyo are highest among the world’s six major cities and triple the sum in London, according to a Japanese government survey last year.

But data so far paints a bleak consumption outlook.

Bank deposits jumped a record 15.5% in January from a year earlier to 827 trillion yen ($7.83 trillion), 1.5 times the size of Japan’s economy, as households save rather than spend.

Real wages fell 1.2% last year, the fastest pace of drop since 2014. Nearly three quarters of firms have no plan to offer blanket base pay hikes at this year’s labour talks, a recent Reuters poll showed.

Takumi Harada, a 27-year-old engineer, says he would consider switching plans to reduce the 6,000 yen in smartphone fees his family pays each month.

But he has no intention of spending the extra money on other items. “I think I’ll just save,” he said.

($1 = 105.5800 yen)

(Reporting by Leika Kihara and Kaori Kaneko, additional reporting by Kentaro Sugiyama; Editing by Raju Gopalakrishnan)

By Yoshifumi Takemoto

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Thursday he explained to Prime Minister Yoshihide Suga the central bank’s plan to conduct a review of its policy tools in March.

“I explained how the global economy was picking up, and how the BOJ needed to conduct the review to continue its ultra-loose monetary policy,” Kuroda told reporters after meeting with Suga.

Kuroda said Suga did not have any particular comment on the BOJ’s March review and the two did not discuss the Tokyo Olympic Games.

The BOJ governor and the prime minister hold meetings once every few months as a regular practice to exchange views on the economy and policy.

The BOJ unveiled a plan to review its policy tools in March to make them “more sustainable and effective,” as the hit to growth from the coronavirus pandemic forces the central bank to maintain its massive stimulus programme for a prolonged period.

(Reporting by Yoshifumi Takemoto, Writing by Leika Kihara; Editing by Jacqueline Wong)

By Andrew Stevens, Principal, Banking and Financial Services at Quadient

Over two million customers are now using products powered by Open Banking. Thanks to PSD2 and the Open Banking regulations, financial providers can now use customer data to provide services such as multi-account visibility, debt management, and microtransaction investment. However, many argue that Open Banking still isn’t living up to its initial hype. When first introduced, Open Banking was tipped to revolutionise the customer experience, improve customers’ control of their data and force huge industry-wide change. Many argued it would displace industry incumbents and pave the way for a future led by digital challengers – a problem many consumers didn’t even know they had. Perhaps it’s time to move beyond the grandiose claims of the industry commentary and go back to the original wording of the Open Banking rules: the intention was simply to level the playing field of the financial industry.

Bemoaning the regulations and claiming they haven’t lived up to the hype is an understandable argument. However, Open Banking has delivered by enabling digital challengers to make some great strides; roundup accounts and the exact products offered by micro-investment apps like MoneyBox wouldn’t have existed without it. While traditional banks have naturally seen less need for Open Banking, with the Big 4 still managing over 75% of UK current accounts, there is an opportunity to learn from how challengers have harnessed their new access to data to personalise the customer experience – something that 80% of organisations say is important to their customer strategy. However, a cultural shift is just as crucial to improving customer experience as any technological advancements or regulatory changes.

Lessons to be learned

Open Banking regulations alone have not created the services that have propelled customer experience forward. However, they have democratised customer data, which has led to huge advancements in the back-end of applications. This in turn has helped create new functionality like intuitive microtransactions, one-click top-up payments between different accounts, and the ability to deliver investing or concierge services through challenger banking apps.

There are lessons to be learned here for traditional banks – Open Banking can be used to give consumers what they want. But what actually is that? Statistics show that 40% of consumers want personalised guidance to help them manage their money better, and 82% of people who use Open Banking-enabled apps have seen improved money management. So why are traditional banks still lagging slightly behind in delivering these types of services to their customers?

New technology is not enough

Perhaps because major banks continue to focus efforts on fighting for a larger share of the customer’s wallet. Despite industry experts affirming that the UK Big 4 still reign supreme, there is high industry anxiety around digital challengers. Banks instead need to learn to coexist with these newer banks, and see how their services can complement each other. Banks could integrate their offering, delivering useful advice or tips on budgeting based on data from Monzo or Revolut, or provide investment options for customers with a hefty lump sum in their MoneyBox account.

However, using new technology to do this isn’t enough. It’s also important to abandon the idea of ‘the mass market customer’. By embracing the fact that each customer has a different set of needs, traditional banks can truly tailor the customer experience and orchestrate it at the individual level. This is far more likely to please customers, 90% of whom now expect businesses to anticipate their needs and act accordingly. Banks could harness Open Banking to see a customer’s whole financial picture, using that as a basis to predict which additional services could be offered that will suit their specific habits.

The great differentiator

Whether you’re a traditional or a challenger bank, delivering the best possible customer experience is a key priority. Today’s customer wants their life and financial position to be enhanced by their bank. While Open Banking alone cannot deliver this, the regulations have certainly enabled challenger banks to provide the new services that consumers want. It’s important for traditional banks to not only learn from this, but embrace the fact that customers have multiple different accounts with other providers. This mindset shift will enable traditional banks to begin building and offering more personalised services to their customers, and compete in the rapidly changing financial market.