Risk of fluctuations in interest rates, share prices, exchange rates and bond prices

「Domestic long-term interest rates remained on an upward trend and at times rose to around 2.4%, a level not seen for approximately 27 years, since 1999. USD/JPY fluctuated significantly, at times rising to the ¥160 range.」

「Rebalancing the portfolio in preparation for further interest-rate increases」

「The Nikkei 225, which temporarily suffered its largest-ever decline after the July rate hike, recovered to just below ¥40,000, while long-term interest rates remained slightly below 1%. … USD/JPY moved toward yen appreciation, reaching the ¥140 range.」

「Following comments on rate cuts by senior US FRB officials, Chair Powell disclosed at the press conference after the December FOMC that rate cuts had been discussed. Expectations for an early rate cut in 2024 then emerged in the market, and long-term interest rates fell temporarily to below 4%.」

「The Nikkei 225 rose due to a combination of factors, including differences between Japan's monetary policy and that of major economies, the reopening of the economy following the downgrading of COVID-19 under the Infectious Diseases Control Law to Category 5, and the Tokyo Stock Exchange's stated intention to seek improvements from companies trading below a P/B ratio of 1x. It reached a post-bubble recovery high, at times reaching the ¥33,700 range in mid-June. Thereafter, however, its gains narrowed as concerns about US rate hikes resurfaced, and it moved sideways.」

「In financial markets, major economies implemented substantial rate hikes in response to accelerating inflation, resulting in highly volatile trading. US equities fell, led by technology stocks, and although the NY Dow fell below $30,000 toward the end of September, it recovered toward December as expectations grew that the FRB would slow the pace of rate hikes. The Nikkei 225 fluctuated in the upper ¥20,000 range, weighed down by concerns over the global economic outlook but supported by expectations for export companies' earnings due to the weakening yen. US long-term interest rates peaked in the 4.2% range in late October as expectations for FRB rate hikes increased, but subsequently stabilized and moved within a lower range. Japanese long-term interest rates remained around 0.25%, the upper limit of the Bank of Japan's long-term interest rate control range, but rose into the 0.4% range after the range was expanded to ±0.50% at the December Monetary Policy Meeting. USD/JPY rose against a backdrop of the widening Japan-US interest rate differential and other factors, reaching the ¥150 range in October for the first time in approximately 32 years. Toward the end of December, however, it fell rapidly to around ¥130 as expectations grew that the Bank of Japan would revise its monetary policy.」

「In financial markets, major economies implemented rapid rate hikes in response to accelerating inflation, resulting in highly volatile trading. US equities fell, led by technology stocks, and the NY Dow declined to its lowest level since 2020. The Nikkei 225 remained relatively firm compared with US equities and at times recovered to the ¥29,000 range in August, but subsequently weakened and fell below the ¥26,000 range at the end of September. US long-term interest rates rose as the FRB indicated that it expected to raise rates into the upper 4% range next year, at times reaching the 4% range at the end of September.」

「In financial markets, concerns about an economic downturn grew as caution over monetary tightening in major economies due to accelerating inflation persisted, resulting in highly volatile trading. US equities fell sharply, with all three major indices declining substantially, including the tech-heavy Nasdaq Composite, which fell by more than 20%.」

「US long-term interest rates rose to the 1.7% range in October, reaching their highest level since March of the previous year, amid rising commodity prices and concerns over an early Fed rate hike. US short- and medium-term interest rates also entered a one-directional uptrend from October as expectations for a rate hike were brought forward. Dollar-yen reached the ¥115 range toward year-end, its highest level since 2017, as commodity prices and US interest rates rose.」

「The Nikkei Stock Average remained under pressure due to delays in COVID-19 vaccinations and prolonged states of emergency, but surged in September amid policy expectations, reaching a 31-year high. US long-term interest rates declined as expectations that the rise in inflation would be temporary became widespread and expected inflation peaked, but the decline narrowed toward the end of September as the Federal Reserve adopted a more hawkish stance, including signaling a reduction in quantitative easing within the year. Dollar-yen fell from the ¥110 range to the ¥107 range in April, but then briefly reached the ¥112 range in September as US interest rates and commodity prices rose.」

「In financial markets, US equities remained firm, with the S&P 500 and Nasdaq Composite reaching new highs, while the Nikkei Stock Average came under pressure after rising above ¥30,000 in April. US long-term interest rates declined as expectations that the rise in inflation would be temporary became widespread and expected inflation peaked. Dollar-yen fell from the ¥110 range to the ¥107 range in April as US long-term interest rates declined, but then recovered to the ¥110 range by June as yen selling intensified alongside higher oil prices.」

「The Nikkei Stock Average reached a post-bubble high and at one point broke above the ¥30,000 milestone. The Dow Jones Industrial Average also reached a record high, rising to the $33,000 range in March.」

「Equity markets continued to rise from April through early June, with the Nikkei Stock Average and the Dow Jones Industrial Average briefly recovering to the ¥23,000 and $27,000 ranges, respectively. US long-term interest rates also briefly rose to the 0.9% range in early June, but generally remained in a narrow range around 0.6%-0.8%. Dollar-yen remained directionless within a ¥106-¥110 range.」

「Markets declined sharply toward the end of the fiscal year, with the Nikkei Stock Average briefly falling into the ¥16,000 range and the Dow Jones Industrial Average into the $18,000 range. Dollar-yen generally remained in a narrow range, but volatility rose sharply toward the end of the fiscal year, resulting in wide fluctuations between the ¥101 and ¥112 ranges.」

「Japanese equities declined to around ¥20,000 for the Nikkei Stock Average in August, but then entered an uptrend and briefly recovered to the ¥24,000 range in December for the first time since October 2018. US equities reached new record highs, supported in part by the Federal Reserve's three rate cuts totaling 0.75% through October, and the Dow Jones Industrial Average reached the $28,000 range. US long-term interest rates entered a downtrend following the Fed's rate cuts, but after rate cuts paused in November they remained stable, generally in a 1.7%-1.9% range. Japanese long-term interest rates approached -0.3% in August amid expectations of additional monetary easing, but rose to around 0% as those expectations receded and the Bank of Japan expressed concern over excessive declines in interest rates. The yen appreciated to the ¥104 range at one point in August, but dollar-yen recovered to the ¥109 range toward year-end.」

「Financial markets were influenced by developments surrounding US trade policy. Japanese equities remained broadly within a ¥20,000-¥22,000 range for the Nikkei Stock Average and traded near their highs toward the end of the period. US long-term interest rates remained on a downtrend amid expectations of a Fed rate cut, falling to the 1.4% range at the end of August, their lowest level since 2016, before recovering slightly. Japanese long-term interest rates declined in line with US rates and approached -0.3% in August, but the decline then subsided. Dollar-yen moved toward yen appreciation through June as US rates declined, then remained in a relatively narrow ¥105-¥108 range during the July-September quarter.」

「In financial markets, share prices in both Japan and the US declined toward the end of May amid concerns over US trade policy, but recovered as expectations of a rate cut by the Federal Reserve increased, with the Dow Jones Industrial Average approaching a record high in late June. Meanwhile, the recovery in Japanese equities was limited compared with US equities. US long-term interest rates remained on a downtrend against a backdrop of expectations of a Fed rate cut and briefly fell below 2% at the end of June. Japanese long-term interest rates declined in line with US rates and remained in negative territory throughout the period. Dollar-yen moved toward yen appreciation, reflecting the narrowing US-Japan interest rate differential as US interest rates declined.」

「The Nikkei Stock Average reached the ¥24,000 range in October, but as uncertainty over the global economic outlook emerged toward year-end, market volatility rose sharply and the index briefly fell below ¥20,000. US long-term interest rates rose to the 3.2% range at one point as the Federal Reserve continued its gradual rate hikes, but declined to the 2.3% range in March.」

「The Nikkei Stock Average reached the ¥24,000 range but fell along with US equities, briefly dropping below ¥19,000 at year-end. US long-term interest rates rose to the 3.2% range from October to November as the Federal Reserve continued its gradual rate hikes, but then declined amid uncertainty over the global economy, falling to the 2.6% range at the end of December. Dollar-yen remained in a relatively narrow range, generally between ¥106 and ¥114.」

「In financial markets, major US indices including the Dow Jones Industrial Average rose moderately and reached new record highs, reflecting strong corporate earnings and macroeconomic indicators. The Nikkei Stock Average also rose to the ¥24,000 range toward the end of September, reaching a post-bubble high despite lagging the rise in US equities. US long-term interest rates rose to around 3.1% in late September as strong economic indicators such as wages raised expectations of higher inflation and an accelerated pace of Fed rate hikes. Dollar-yen rose to the upper ¥113 range as the Federal Reserve continued its gradual rate hikes. Japanese long-term interest rates rose to the low 0.1% range after the Bank of Japan added wording at its July monetary policy meeting indicating that the target for long-term interest rates could fluctuate to some extent in either direction.」

「US long-term interest rates rose to the 3.1% range at one point as improving fundamentals lifted expected inflation, but declined amid concerns over US-China trade friction and remained in the 2.8% range toward the end of June. Dollar-yen moved toward yen depreciation, reflecting the rise in US interest rates and the US-Japan interest rate differential.」

「As market volatility increased, political risks surrounding trade heightened, and markets showed increasingly pronounced signs of correction toward the end of the fiscal year. US long-term interest rates rose from the beginning of the year against a backdrop of concerns over deteriorating fiscal conditions and inflation associated with US tax reform, briefly approaching 3.0%. Dollar-yen fell as the dollar weakened, and yen appreciation accelerated toward the end of the fiscal year as political risks also came into focus.」

「Japanese equities also rose on the strength of global equities and policy expectations, with the Nikkei Stock Average briefly reaching ¥23,000. US long-term interest rates and dollar-yen were influenced by expectations of a US rate hike and political developments and remained directionless. US long-term interest rates moved from the 2.0% range to the 2.4% range, while dollar-yen moved from the ¥107 range to the ¥114 range. Japanese long-term interest rates generally remained in a 0.00-0.10% range under the Bank of Japan's quantitative and qualitative monetary easing with yield curve control.」

「In financial markets, US equities performed firmly against a backdrop of solid economic conditions and expectations for tax reform. Japanese equities also rose on strong corporate earnings and policy expectations, with the Nikkei Stock Average recovering to the ¥20,000 range. US long-term interest rates and dollar-yen were directionless, influenced by expectations of a US rate hike and political developments. US long-term interest rates moved from the 2.0% range to the 2.4% range, while dollar-yen moved from the ¥107 range to the ¥114 range. Japanese long-term interest rates generally remained in a 0.00-0.10% range under the Bank of Japan's quantitative and qualitative monetary easing with yield curve control.」

「In financial markets, the yen appreciated through mid-April amid heightened geopolitical risks related to North Korea, Syria and other factors, while share prices fell and interest rates declined in major countries.」

「Against a backdrop of rising US interest rates, dollar-yen rose to the ¥118 range, the Nikkei Stock Average to the ¥19,000 range, and the yield on 10-year Japanese government bonds from negative territory into positive territory, reaching +0.1% at one point.」

「The yen's appreciation and the decline in share prices following the UK's June referendum subsided, and dollar-yen rose to around ¥107, but the yen again appreciated in August, briefly falling below ¥100 per dollar. The Nikkei Stock Average also recovered to the ¥17,000 range, but declined to the mid-¥16,000 range toward the end of September against a backdrop of lower oil prices and weaker US equities.」

「Following the majority vote for leaving the EU in the UK referendum on EU membership, the yen appreciated and share prices fell. The exchange rate temporarily declined to ¥99 per US dollar, and the Nikkei Stock Average fell below ¥15,000.」

「The Group's results of operations and financial position may be adversely affected by fluctuations in market interest rates, foreign exchange rates, share prices, bond prices and other factors.」