Following the BOJ’s rate hike, deposit rate increases are expected to outweigh the higher cost of mortgages for households overall, improving their finances. However, the analysis indicates that the burden will increase in some regions, particularly for people in their 30s and 40s, and that wage growth will be essential to maintaining purchasing power.
Expectations are growing that the BOJ will accelerate the pace of rate hikes from once every six months. The latest outlook sees a high likelihood that the policy rate will be raised from the current 1.00% to 1.25% in September. The report estimates the impact of higher interest rates on households using projected rates for deposits, mortgages and retail Japanese government bonds.
Long-term interest rates are expected to remain on an upward trend. Net interest income for households overall is estimated to increase by ¥0.8 trillion year on year in fiscal 2026, ¥1.0 trillion in fiscal 2027 and ¥0.4 trillion in fiscal 2028. The fact that household deposits far exceed outstanding mortgage balances will help relatively reduce the burden of interest payments.
However, mortgage costs are expected to rise significantly for people in their 30s and 40s, who are generally of working age. By age group of the head of household, households headed by people in their 50s and older will receive greater benefits from interest income, while households headed by people aged 29 or younger, in their 30s or in their 40s will be notably affected negatively. Employment income, including wage increases, rose in 2025, but was not sufficient to fully offset the increase in interest payments. Continued wage growth is therefore seen as the key to maintaining purchasing power.
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