"50s Benefit More Than 40s, Two-Person Households Gain 141,000 Won" Analysis of Japan's Rate Hike Effects

Advantages and Disadvantages Vary by Proportion of Assets Held in Deposits

There is an analysis suggesting that the Bank of Japan's policy rate hike will have different impacts depending on the generation.

Bank of Japan. Photo by Reuters and Yonhap News Agency

On December 20, the Yomiuri Shimbun reported, citing a study by the private think tank Mizuho Research & Technologies, that the recent policy rate increase by the Bank of Japan would have varying effects on Japanese households. According to the report, this rate hike is estimated to generate a net annual gain of about 800 billion yen (approximately 7.5 trillion won) for all Japanese households combined.

For households with two or more members, the analysis expects a positive effect of around 15,000 yen (about 141,000 won) per household per year on average.

However, the impact is expected to differ significantly by age group. Older generations in their 50s and above, who tend to have a higher proportion of savings assets, are likely to benefit, whereas younger generations in their 40s and below, who bear a heavier burden of mortgage repayments, are expected to be relatively disadvantaged.

Specifically, households in their 50s are projected to gain 8,000 yen (about 75,000 won) per year, those in their 60s will benefit by 33,000 yen (about 310,000 won), and those aged 70 and above will see gains of 41,000 yen (about 386,000 won) annually. In contrast, households in their 40s are expected to face an increased burden of 14,000 yen (about 132,000 won) per year, while those in their 30s will see their burden rise by approximately 27,000 yen (about 254,000 won).

As a result of the policy rate hike, market interest rates in Japan are already on the rise. The yield on Japan's 10-year government bonds climbed to 2.02% the previous day, marking the highest level in 26 years and 4 months since August 1999.

Commercial banks are also raising deposit rates. Mitsubishi UFJ Bank and Sumitomo Mitsui Banking Corporation announced they will increase their ordinary deposit interest rates from the current 0.2% per annum to 0.3% per annum starting in February next year. This is the highest level in about 33 years.

Previously, the Bank of Japan decided to raise its short-term policy rate, which serves as the benchmark rate, by 0.25 percentage points from around 0.5% to approximately 0.75%. As a result, Japan's policy rate is now at its highest level in about 30 years since 1995.