(Bloomberg) -- Japan’s biggest banks fell in Tokyo trading after the central bank kept its main policy setting unchanged, damping investors’ expectations for an early end to negative interest rates. 

A Topix index of bank stocks dropped as much as 3.8%, the biggest intraday decline since July, before erasing most of the loss as investors digested the decision. The Bank of Japan pushed back against intense speculation for a policy change, saying it would continue large-scale bond buying and increase it on a flexible basis if needed. 

Long battered by ultra-low rates, Japanese banks suddenly became a favorite for investors last month after the BOJ allowed 10-year government bond yields to rise to around 0.5% — a move widely seen as a precursor for a broader policy shift. Rising rates allow lenders to charge more for loans while deposit rates tend to increase slowly, widening the spread they can pocket.

Banks were the only industry group to decline in Tokyo stock trading after the decision. The Topix Banks Index is still up about 16% since December’s surprise move, and analysts expect speculation for an eventual policy shift to continue.  

The pattern of banks rising will continue eventually as expectations for further revisions to the BOJ’s policy emerge, said Makoto Furukawa, chief portfolio strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo.

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Shares of Japan’s largest lender Mitsubishi UFJ Financial Group Inc. dropped as much as 5.1% and were down 1.3% as of 2:41 p.m. in Tokyo. Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. slid more than 4% before recouping most of the losses.

In contrast with investors, bank executives have been pessimistic about any drastic shift in the central bank’s policy, saying it’s unlikely to scrap negative rates in the near future and their earnings won’t get much of a boost without that happening.

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