Financial market instability, a stronger yen, lower share prices and negative interest rates

「In financial markets, the yield on 10-year Japanese government bonds, a benchmark for domestic long-term interest rates, continued to rise against the backdrop of progress in the Bank of Japan's monetary policy normalization, reaching the 2.3% range in March 2026. The dollar-yen exchange rate remained on a weaker-yen and stronger-dollar trend due to interest-rate trends in Japan and the United States, heightened tensions in the Middle East and other factors, reaching the ¥159 range against the dollar at the end of March 2026.」

「In financial markets, while the Bank of Japan kept its policy rate, a benchmark for short-term interest rates, at 0.5%, the yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, rose to the 1.6% range at the end of September amid expectations of additional rate hikes reflecting higher prices and other factors. The yen generally remained on a stronger-yen and weaker-dollar trend through April against the backdrop of expectations for Federal Reserve monetary easing, but shifted toward a weaker yen and stronger dollar as the US economy remained firm and the Bank of Japan kept its monetary policy unchanged, reaching the ¥147 range against the dollar at the end of September. The Nikkei Stock Average rose in line with the weaker yen and higher US share prices, reaching an all-time high in September.」

「In financial markets, the Bank of Japan raised interest rates in July 2024 and January 2025, bringing the policy rate to 0.5%. As a result, the yield on 10-year Japanese government bonds, a benchmark for domestic long-term interest rates, rose to the 1.5% range in March 2025. The dollar-yen exchange rate fluctuated in line with interest-rate trends in Japan and the United States, reaching the ¥149 range against the dollar at the end of March 2025.」

「In financial markets, the Bank of Japan raised interest rates further in July after ending its negative interest-rate policy in March, bringing the policy rate, a benchmark for short-term interest rates, to 0.25%. The yield on 10-year Japanese government bonds, a benchmark for domestic long-term interest rates, temporarily exceeded 1% but had declined to the mid-0.8% range by the end of September. The dollar-yen exchange rate reached the ¥160 range during the period as the yen weakened against the backdrop of the interest-rate differential between Japan and the United States, but shifted toward a stronger yen and weaker dollar after the rate hike, reaching the low ¥140 range at the end of September. The Nikkei Stock Average rose on the weaker yen against the dollar, reaching an all-time high in the ¥42,000 range in July, but subsequently struggled amid concerns over a global economic slowdown and the impact of rate hikes, standing slightly below ¥38,000 at the end of September.」

「In financial markets, following the Bank of Japan's further revision of short- and long-term interest-rate control (yield curve control) in October, the 10-year government bond yield rose to the 0.9% range. The yen weakened to the ¥151 range against the dollar in October, but stood around ¥141 at the end of December as the interest-rate differential between Japan and the United States narrowed. The Nikkei Stock Average temporarily reached the ¥33,800 range in November against the backdrop of strong corporate earnings and other factors, setting a new high for the first time in approximately 33 years.」

「In financial markets, following the Bank of Japan's more flexible operation of short- and long-term interest-rate control (yield curve control, YCC), the yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, rose to the upper ¥0.7% range at the end of September. After the July revision to YCC, the yen temporarily strengthened against the dollar, but subsequently continued to weaken against the dollar as US interest rates rose, reaching the ¥149 range against the dollar at the end of September. The Nikkei Stock Average reached its highest level since March 1990 in July and remained firm thereafter.」

「In financial markets, the yen temporarily weakened to the ¥145 range against the dollar against the backdrop of the Bank of Japan's continued monetary easing. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained around 0.4%. The Nikkei Stock Average recovered to the ¥33,000 range for the first time in approximately 33 years, since the bubble era.」

「In financial markets, global inflation accelerated following Russia's invasion of Ukraine, and volatility emerged both in Japan and overseas as the United States, Europe and the Bank of Japan reviewed their monetary policies.」

「At its December Monetary Policy Meeting, the Bank of Japan partially revised its existing monetary easing measures and decided to widen the permitted fluctuation range for long-term interest rates under yield curve control. Following this decision, the 10-year government bond yield rose from the 0.2% range to the 0.4% range, while the yen strengthened to the ¥130 range against the dollar as the interest-rate differential between Japan and the United States narrowed. The Nikkei Stock Average rose to the ¥28,300 range on a closing-price basis in November, but fell to the ¥26,000 range at the end of December in response to higher interest rates and the stronger yen.」

「In financial markets, as the US dollar rose against many currencies amid Federal Reserve monetary tightening, the yen weakened to the ¥144 range against the dollar in September. The Nikkei Stock Average recovered to the ¥29,000 range in mid-August, but fell below ¥26,000 at the end of September amid concerns over global monetary tightening and other factors. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained capped at approximately 0.25% as the Bank of Japan maintained its monetary easing policy.」

「In financial markets, the yen weakened to the ¥137 range against the dollar as the interest-rate differential between Japan and the United States widened due to the differing monetary policy stances of the Federal Reserve, which prioritized curbing inflation through monetary tightening, and the Bank of Japan, which maintained monetary easing. The Nikkei Stock Average remained weak amid concerns over an economic slowdown caused by rate hikes in Europe, the United States and elsewhere, falling below ¥26,000 at the end of June. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained within a range centered on 0.20% to 0.25% as the Bank of Japan maintained its monetary easing policy.」

「In financial markets, the yen weakened to the ¥115 range against the dollar as the US Federal Reserve began normalizing monetary policy. The Nikkei Stock Average fell to the ¥27,000 range amid concerns over the spread of the Omicron variant and other factors, but recovered to the ¥29,000 range in late December. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained in the 0% range amid expectations that the Bank of Japan's monetary easing policy would continue for an extended period.」

「In financial markets, the yen continued to move around ¥110 to the dollar, but shifted toward a stronger dollar from mid-September. The Nikkei Stock Average recovered to the ¥30,000 range in September amid expectations of fewer new COVID-19 cases and the economic measures of the new administration. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained in the 0% range amid expectations that the Bank of Japan's monetary easing policy would continue for an extended period.」

「In financial markets, the yen temporarily weakened to the ¥107 range against the dollar in April as the rise in US interest rates that had continued since the second half of the previous fiscal year paused, but subsequently remained on a stronger-dollar trend and reached the ¥111 range in June. The Nikkei Stock Average fell to the ¥27,000 range in May but recovered to the ¥29,000 range in June. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained around 0% amid expectations that the Bank of Japan's easing policy would continue for an extended period.」

「Despite adverse factors including the spread of COVID-19 and the stronger yen, the Nikkei Stock Average rose sharply on positive sentiment toward monetary easing and fiscal stimulus in various countries, recovering to the ¥30,000 range for the first time in approximately 30 years.」

「In financial markets, the yen temporarily weakened to the ¥107 range against the dollar in April as the rise in US interest rates that had continued since the second half of the previous fiscal year paused, but subsequently remained on a weaker-dollar trend and reached the ¥111 range in June. The Nikkei Stock Average fell to the ¥27,000 range in May but recovered to the ¥29,000 range in June. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained around 0% as prolonged monetary easing by the Bank of Japan was anticipated.」

「In financial markets, the yen generally remained on a stronger-yen and weaker-dollar trend, primarily due to lower interest rates resulting from US monetary easing. The Nikkei Stock Average recovered to the ¥23,000 range in August amid expectations for the normalization of economic activity and the development of vaccines for COVID-19. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained in the 0% range against the backdrop of the Bank of Japan's continued quantitative and qualitative monetary easing with yield curve control.」

「The Nikkei Stock Average continued to recover after the lifting of the state of emergency, supported by expectations surrounding the gradual reopening of economic activity, and recovered to the ¥22,000 range in June. Against the backdrop of the Bank of Japan's decision to maintain quantitative and qualitative monetary easing with yield curve control, the yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained around 0%.」

「Amid the spread of COVID-19 and a sharp decline in crude oil prices, the yen fluctuated between the ¥102 and ¥111 ranges against the dollar in March, while the Nikkei Stock Average fell into the ¥16,000 range, its lowest level in three years and four months.」

「In financial markets, the yen fluctuated in response to developments in US-China trade friction and the UK's withdrawal from the EU, but generally remained on a weaker-yen and stronger-dollar trend. The Nikkei Stock Average also generally rose as US-China tensions eased and concerns over a no-deal UK withdrawal from the EU receded, reaching the ¥24,000 range in December, its highest level in one year and two months. Long-term interest rates generally rose, and the yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, temporarily entered positive territory for the first time in nine months amid expectations of a global economic recovery driven by progress in US-China trade talks.」

「In financial markets, the yen temporarily strengthened against the dollar amid concerns over US-China trade friction and a US economic recession, but subsequently moved back toward a weaker yen and stronger dollar as tensions between the United States and China eased. The Nikkei Stock Average also temporarily fell to the ¥20,000 range amid concerns over intensifying US-China trade friction, but rose in September against the backdrop of a temporary easing of US-China tensions and moves toward monetary easing in Europe and the United States. Long-term interest rates continued to decline, with the yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, affected by increased buying pressure for Japanese government bonds amid the global trend toward lower interest rates.」

「In financial markets, the yen continued to strengthen against the dollar as concerns that trade issues between the United States and other countries would be prolonged, together with expectations of US rate cuts and other factors, drove risk aversion. The Nikkei Stock Average temporarily fell below ¥21,000 as US-China trade friction intensified, but rebounded toward the end of June amid expectations that US-China trade talks would resume alongside the G20 summit. Long-term interest rates continued to decline, with the yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, affected by the clarification of the policy-rate forward guidance at the Bank of Japan's April Monetary Policy Meeting.」

「In financial markets, the yen continued to move toward a weaker yen and stronger dollar overall as a succession of solid US economic indicators was released, but toward the end of the period risk aversion intensified following a sharp fall in US share prices and other factors, and the yen strengthened to the ¥109 range. The Nikkei Stock Average temporarily recovered to the ¥24,000 range as concerns over US-China trade friction eased, but fell toward the end of the period to below ¥20,000 amid growing concerns over an economic slowdown in the United States and China. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, rose above 0.1% following the forward guidance introduced at the Bank of Japan's July Monetary Policy Meeting, but subsequently declined toward the end of the period and at times entered negative territory, remaining at low levels around 0%.」

「In financial markets, the yen temporarily strengthened against the dollar amid worsening US-China trade friction, risk aversion toward emerging markets and other factors, but overall moved toward a weaker yen and stronger dollar as a succession of solid US economic indicators was released. The Nikkei Stock Average remained under pressure from the first half of the fiscal year as concerns over US-China trade friction increased, but recovered to the ¥24,000 range toward the second half as concerns over trade friction eased and the weaker yen supported share prices. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained above 0.1% toward the end of the fiscal year following the forward guidance introduced at the Bank of Japan's July Monetary Policy Meeting.」

「In financial markets, the yen temporarily strengthened against the dollar amid US protectionist policies, the situation on the Korean Peninsula and other factors, but overall moved toward a weaker yen and stronger dollar after indications of solid US economic indicators and an acceleration in the pace of rate hikes. The Nikkei Stock Average temporarily recovered to the ¥23,000 range on firm US share prices and other factors, but toward the second half of June it remained under pressure as concerns over US-China trade friction increased. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained within the narrow range of 0.02% to 0.06% against the backdrop of the Bank of Japan's yield curve control.」

「Risk aversion intensified from the beginning of the year against the backdrop of protectionist policies in the United States, and the yen reached the ¥106 range against the dollar at the end of the fiscal year. The Nikkei Stock Average temporarily rose to the ¥24,000 range for the first time in 26 years on higher US share prices and expectations for strong corporate earnings, but share prices fell toward the end of the fiscal year as expectations for higher US interest rates grew, bringing the index into the ¥21,000 range.」

「In financial markets, the yen fluctuated generally between the ¥108 and ¥114 ranges against the dollar as factors favoring a stronger yen, such as political risks in Europe, turmoil in the Trump administration and policy uncertainty, were intermingled with factors favoring a weaker yen, including US rate hikes and expectations of economic expansion resulting from tax reform. The Nikkei Stock Average remained around ¥20,000 during the first half of the fiscal year, but rose for 16 consecutive days in October for the first time in its history, against the backdrop of continued large-scale monetary easing and expectations for strong corporate earnings, reaching a 26-year high.」

「Although the Nikkei Stock Average fell at times as tensions increased on the Korean Peninsula, it rose above the ¥20,000 mark and reached a year-to-date high on expectations for a weaker yen against the dollar, driven by higher US long-term interest rates, and expectations for a general election following the dissolution of the House of Representatives.」

「In financial markets, the yen temporarily weakened to the ¥114 range against the dollar as expectations for US rate hikes strengthened and concerns over political risks in Europe receded following the French presidential election. It subsequently strengthened as political uncertainty in the United States increased. The Nikkei Stock Average remained weak in April as tensions rose over the situation on the Korean Peninsula, but recovered to the ¥20,000 range for the first time in approximately one and a half years on firm US share prices and other factors. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, declined at the beginning of the fiscal year amid risk aversion driven by heightened geopolitical risks and lower long-term interest rates in the United States, but subsequently rose gradually. Toward the end of June, domestic interest rates came under upward pressure as long-term interest rates in Europe and the United States rose.」

「Following the UK's withdrawal from the EU, the yen temporarily strengthened sharply and share prices fell, with the yen reaching around ¥100 to the dollar and the Nikkei Stock Average falling below ¥15,000. Against the backdrop of higher US share prices and a weaker yen as expectations grew for the economic policies of the new US administration, the Nikkei Stock Average rose and remained generally in the ¥19,000 range through the end of the fiscal year, while the yen rose above ¥110 to the dollar.」

「In financial markets, the yen strengthened against the dollar from the beginning of the fiscal year, but after the US presidential election in November, it weakened to the ¥118 range against the dollar as US interest rates rose amid expectations for the incoming US president's economic policies. The Nikkei Stock Average temporarily fell below ¥15,000 following the UK's withdrawal from the EU, but rose sharply to the ¥19,000 range on higher US share prices and a weaker yen. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained negative under the Bank of Japan's negative interest-rate policy, but rose to around 0.05% under the influence of higher US interest rates.」

「In financial markets, the yen strengthened to below ¥100 to the dollar at one point, partly because US economic indicators fell short of market expectations. It subsequently moved in both directions against the dollar amid speculation regarding a possible US rate hike. The Nikkei Stock Average declined against the backdrop of the UK's withdrawal from the EU in June and other factors, but later recovered as expectations grew for large-scale government economic measures, temporarily returning to the ¥17,000 range for the first time in approximately three months. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, temporarily fell to a record low of negative 0.3% amid expectations of additional monetary easing by the Bank of Japan, but rose following the details of the additional easing announced in July and remained between 0% and negative 0.1%.」

「In financial markets, instability continued against the backdrop of monetary policy in Japan and the United States and the UK's withdrawal from the EU. At one point, the yen strengthened to around ¥100 to the dollar and the Nikkei Stock Average fell below ¥15,000, resulting in a stronger yen and lower share prices. The yield on 10-year Japanese government bonds, a benchmark for long-term interest rates, remained in the negative 0.1% range, but fell to the historical low of around negative 0.2% by the end of the first quarter in response to the UK's withdrawal from the EU and other factors.」