Long-term interest rates reach levels not seen since 1996. We look at a week of simultaneous stock price gains and the end of subsidies from a household perspective.

Long-term interest rates reach levels not seen since 1996. We look at a week of simultaneous stock price gains and the end of subsidies from a household perspective.

The 3 major topics of the week

① Long-term interest rates briefly hit 3.115%, the highest level in about 30 years since August 1996
In the bond market on September 25, the yield on newly issued 10-year Japanese government bonds, which serves as a benchmark for long-term interest rates, briefly rose to 3.115%. According to Japan Bond Trading Co., Ltd., this is the highest level in about 30 years and one month since August 1996.
The rise is attributed to the spillover effect of rising long-term interest rates in the U.S., as well as the selling of government bonds due to inflation concerns fueled by high crude oil prices. Long-term interest rates serve as a benchmark for fixed-rate mortgages and corporate financing costs.

② The Nikkei Stock Average rose for 5 consecutive business days to 66,364 yen. The dollar-yen exchange rate is in the 158 yen range
With the market closed from September 21 to 23, trading took place only on the 24th and 25th. The Nikkei Stock Average closed at 66,364.20 yen on the 25th, up 850.21 yen from the previous day, marking its fifth consecutive day of gains. The closing price on the 24th was 65,513.99 yen.
Bank stocks, which benefit from rising interest rates, and AI/semiconductor-related stocks were bought. In the previous article, I wrote, “The expected range is 63,500 to 67,000 yen. Can it reach the 66,000 yen range?” and it reached that level on the fifth business day.
The yen is trending weaker, with the dollar trading between 158.60 and 159.04 yen in the New York market on the 24th, and remaining in the high 158 yen range in the Tokyo market on the morning of the 25th.

③ Electricity and gas bill support ends with September usage. Subsidies will disappear from the November billing
The support for electricity and gas bills, which had been implemented for usage from July to September, will end with the September usage. Since September usage is reflected in the October meter reading, the final bill to which the discount is applied is the October bill. Bills without subsidies will arrive starting in November.
The unit price for September usage was 3.5 yen per kWh for electricity and 14 yen per cubic meter for city gas, which was estimated to reduce the burden on a standard household by a total of approximately 1,500 yen for electricity and gas.

Where will the interest rate hike show up in household finances?

Last week’s Bank of Japan interest rate hike was a matter of time lag, with the effect “taking hold in 2027.” This week is the opposite, with things that have a more immediate impact, such as long-term interest rates and the end of subsidies moving. The order in which the impact is felt differs for those with fixed-rate loans, those whose assets are mainly in savings, and households with heavy utility costs.

Converting this week’s news into monetary terms

• If you are borrowing at a fixed rate from now on: The most frequent Flat 35 interest rate for September is 3.460% per annum. This is a 0.17 percentage point increase from 3.290% in August, reaching the highest level under the current system

• For 1 million yen in ordinary savings: The three megabanks will raise the rate to 0.5% on November 2. This is 5,000 yen per year (before tax), an increase of 1,000 yen per year compared to when it was 0.4%

• Electricity and gas: A subsidy of about 1,500 yen per month for a standard household will disappear from the November bill

• Gasoline: The benefit of the subsidy is 51 yen × amount refueled (L). If you use 50L per month, it is about 2,550 yen (the unit price from October 1st onwards has not been announced)

• Weak yen in the 158 yen range: While it affects the cost of imports and gasoline, the yen-denominated valuation of foreign currency-denominated assets increases

① Mortgage loans: The 3.115% long-term interest rate affects fixed rates, not variable rates
Last week’s interest rate hike was about short-term interest rates and affected variable interest rates. This week’s rise in long-term interest rates affects fixed interest rates. Even though it is the same “interest rate hike,” the people affected are different.
The most frequent Flat 35 interest rate for September (repayment period of 21 to 35 years, loan ratio of 90% or less) is 3.460% per annum. It has risen from 3.290% in August and is at the highest level under the current system since October 2017. If long-term interest rates rise further, it will also spill over into the applicable interest rates from October onwards.
For those who are about to borrow or whose fixed-rate period is ending
Because long-term interest rates move daily, the applicable interest rate changes depending on the month the loan is executed. Keeping the following order in mind may be useful when making decisions.

1. For Flat 35, the interest rate for the month in which the loan is executed is applied. It is not the interest rate at the time of application

2. If you have an “initial fixed-rate period” and the end date is approaching, check the contract for the end date and how the interest rate is determined after the period ends

3. If you are comparing refinancing, an interest rate difference of 0.3% or more, a balance of 10 million yen or more, and a remaining period of 10 years or more can be a starting point for consideration. Miscellaneous expenses are generally around 2-3% of the loan amount. (Administrative fees are often around 2.2% of the loan amount, and in some cases, costs can be further reduced by choosing other options such as guarantee fees, registration fees, or fixed-rate administrative fees)

The key point for judgment is whether the “total amount reduced by interest rates” exceeds the “miscellaneous expenses.” Why not try a simulation, as each financial institution provides one?
For those currently repaying with a variable interest rate
This week’s rise in long-term interest rates does not directly affect variable interest rates. The schedule for last week’s interest rate hike is more important, so I will review the contents of last week’s issue. For the June rate hike, most banks are expected to raise their base rates by about 0.25% on October 1, with the reflection in repayment amounts starting from January 2027 or later. For the September rate hike, it is reported that the base rate revision will be in April 2027, and the reflection in repayment amounts will be from July 2027 or later.
However, the timing of the revision varies by bank. It is reported that MUFG Bank plans to revise on December 1, so October 1 is not uniform. It is better to check the interest rate revision notice you receive to see when your lender will revise.
What you should be careful about here are the “5-year rule” and the “125% rule.” These are mechanisms to suppress sudden increases in repayment amounts, but not all banks adopt them. Since some banks do not adopt them, if interest rates rise, that portion will be directly reflected in the repayment amount. You can check which one your contract has in the contract terms.

② Savings and investment: 3 megabanks to 0.5%. 1 million yen becomes 5,000 yen per year
Contrary to mortgages, savings benefit from rising interest rates.
On September 18, the three banks—MUFG, Sumitomo Mitsui, and Mizuho—announced that they would raise their ordinary savings interest rates from 0.4% to 0.5%. The application will start from November 2. This is the highest level in about 34 years since August 1992.
The interest on 1 million yen deposited for one year is 4,000 yen at 0.4% and 5,000 yen at 0.5% (both before tax). The difference is 1,000 yen per year. After tax (20.315%), it becomes 3,984 yen from 3,187 yen. *This is a simple calculation assuming the interest rate does not change for one year.

As for investment, the weak yen is pushing up valuations
Along with the Nikkei Stock Average figure of 66,364 yen, the dollar-yen exchange rate was in the weak 158 yen range this week. If you hold foreign currency-denominated assets, the yen-denominated valuation will swell while the yen is weak, and will decrease if the yen strengthens. I want to keep in mind that the current valuation is a figure mixed with “actual performance” and “exchange rates.”

③ Utility costs: Subsidies disappear from the November bill. Establish a baseline now
In last week’s article, I wrote that “continuation after October is undecided,” but this week it was confirmed that it will end with the September usage. What is easy to misunderstand here is the timing when the burden increases.
September usage is metered in October, and the discount is applied to that bill. The bill without subsidies will arrive next, starting in November. If you look at the October bill and judge that “it is still cheap,” you will be surprised in November.
You can calculate how much your own bill will increase from the usage amount on your meter reading slip.

For example, for a household using 400 kWh and 30 m³ per month, that is 1,400 yen + 420 yen, or about 1,820 yen per month. Since the “standard household” figure often cited in reports does not specify the assumed usage, it is closer to reality to calculate it using the numbers on your own meter reading slip. As this coincides with the time when heating starts to be used, the usage amount itself will also increase.
If you create a benchmark for comparison, you can anticipate your bills from November onwards.

1. Check your “contracted amperage,” “usage amount,” and “fuel cost adjustment amount” on your meter reading slip or app

2. Keep a record of the bill amount for the same month last winter. The level from before there were subsidies will serve as a direct benchmark

3. If you have an amperage-based contract, review whether your contracted amperage is too high. A guideline is 30A for a 2-person household and 40-50A for a 3-4 person household. If you have a smart meter, it can be changed remotely, no construction is required, and you can apply by phone or online

As for gasoline, the subsidy unit price of 51.0 yen (for September 17–30) remains at its highest level since the system began. The unit price for October 1 and beyond has not yet been announced. For a household that refuels 50L per month, the impact if the subsidy disappears is about 2,550 yen per month.

④ This week’s numbers, in one line by position
I will break down what moved this week by position.

• People planning to borrow at a fixed rate: Flat 35 applies the interest rate of the month of execution. September is 3.460%, the highest level under the current system

• People whose fixed-rate period is ending soon: Check your contract for the end date and how the interest rate after the end is determined. The rise in long-term interest rates will be reflected in the next fixed interest rate

• People currently repaying with a variable interest rate: This week’s rise in long-term interest rates does not have a direct effect. Repayment amounts will change from January 2027 and July 2027 onwards. Check your contract terms for the existence of a 5-year rule

• People focused on savings: 0.5% at the three mega-banks from November 2. Compare this with the upper limits and campaign conditions of internet banks

• Households with a heavy burden of utility costs: The subsidy will disappear starting from the November bill. Keep a record of last winter’s bill amount while you still can

• People who use cars daily: The subsidy unit price is 51.0 yen up to September 30. Wait for the announcement for October onwards

October starts next week. What will move?

• October 1: Publication of the BOJ Tankan (corporate business sentiment). This will show how companies view the current interest rate level and the weak yen

• October 1: Revision of housing loan base rates reflecting the June rate hike. The October applicable rates for each bank will be released

• Announcement of the gasoline subsidy unit price for October 1 onwards. A new unit price reflecting crude oil market prices up to late September will be decided

*This article is for informational purposes only and does not recommend specific investment or borrowing actions. Please check with your financial institution, etc., regarding actual decisions based on your own situation.
*This article contains affiliate links to Amazon.co.jp through participation in the Amazon Associates Program.
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