[Policy Interest Rate 1.25%] Who Benefits from the Rate Hike? | The “Benefits” and “Points of Caution” for Deposits, Government Bonds, and Bank Stocks

Good morning, this is Fukkun? “I’d be happy if the interest on my deposits increased.” “I wonder if this will be a tailwind for bank stocks?” Perhaps some of you have thought about things like this after seeing the news about the rate hike. The Bank of Japan decided to raise the policy interest rate from around 1.0% to around 1.25% on September 18, 2026 and the new policy was applied starting September 24. 1.25% is the highest level in about 31 years, since 1995. This is an additional rate hike about three months after the one in June. This time, I will consider the “side that benefits from the rate hike” through deposits, government bonds, and bank stocks. Even with the same interest rate increase, the impact we receive changes depending on the assets we hold, the conditions of the products, and the price at which we buy them. ? 3-line summary of this article
Deposits and government bonds may see an increase in interest received due to the rise in interest rates. However, the mechanism by which interest rates change differs for each product.
Improved bank earnings do not necessarily lead directly to a rise in bank stock prices. We look at profit growth and the expectations already priced into the stock price together.
Taxes, prices, and interest payments must also be considered to see the benefits for your own household budget.
[1. How much will the household budget change if deposit interest increases?] A familiar benefit of the rate hike is the rise in deposit interest rates. Even if the policy interest rate becomes 1.25%, the interest rates for ordinary deposits and time deposits will not automatically become 1.25%. The actual interest rates and the timing of changes vary depending on the financial institution and the product. So, how much will the interest received change due to the difference in interest rates? Let’s assume you deposit 10 million yen at the same interest rate for one year.
At 0.1% per year the annual interest is 10,000 yen before tax, about 8,000 yen after tax.
At 0.5% per year the annual interest is 50,000 yen before tax, about 40,000 yen after tax.
At 1.0% per year the annual interest is 100,000 yen before tax, about 80,000 yen after tax.
*These are hypothetical figures for comparison and not the current interest rates for individual products. Calculations are based on simple interest, applying the general 20.315% tax rate on individual deposit interest. In this example, the difference between a 0.1% and 1.0% interest rate results in a change of about 72,000 yen in annual after-tax interest. For every 1 million yen, that is a difference of about 7,200 yen per year. I think it becomes easier to grasp the difference in interest rates when you apply it to the amount you have deposited yourself. Regarding interest income and expenses, the more deposits you have and the fewer loans you have that are affected by rising interest rates, the easier it is to benefit. On the other hand, fixed-term deposits have conditions regarding duration and early withdrawal. I prefer to check ‘when I plan to use the money’ along with the displayed interest rate. [2. Government bonds differ for ‘those buying now’ and ‘those who already own them’] Regarding government bonds, some clarification is needed. ? First, for those buying now. If market yields rise, an opportunity arises to purchase at a higher yield than before. ? Next, for those who already hold standard fixed-rate government bonds. The amount of interest received generally does not change, and as market interest rates rise, the price of the government bonds you hold tends to fall. If you sell them midway, this price drop will have an impact. Redemption at face value when held until maturity and the price when sold midway must be considered separately. ? And finally, the ‘Floating 10-Year’ government bonds for individuals. These have their applicable interest rates reviewed every six months. The mechanism involves multiplying the base rate, which is based on the results of 10-year government bond auctions, by 0.66, with a minimum interest rate of 0.05% per year. This is not a product to which the 1.25% policy interest rate is applied directly.?When the benchmark interest rate rises, the interest received also increases.?However, in principle, you cannot redeem them early for one year after issuance. Even after that, if you redeem early, an amount equivalent to the after-tax interest for the two most recent periods will be deducted.?Note that the redemption mechanism for individual government bonds differs from selling general government bonds on the market. Including “Fixed 5-Year” and “Fixed 3-Year” bonds, these are not products where you directly bear the market price decline caused by rising interest rates.?Rather than grouping them together as “they are all government bonds,” I want to confirm how the interest rate is determined and the conditions for converting them back into cash.?[3. The difference between banks making a profit and making a profit from bank stocks]?As an investor, what I am particularly interested in is bank stocks.?Banks receive interest from lending and securities investments, and pay interest to depositors and others.?If the increase in interest received exceeds the increase in interest paid, it becomes a tailwind for earnings.?The Bank of Japan’s “Financial System Report (April 2026 issue)” also analyzes that as interest rates on loans and held securities are gradually revised, the interest margin improves, contributing to the improvement of financial institutions’ earnings.?However, each bank differs in how it collects deposits, who it lends to, and what bonds it holds.?If they pay high interest rates to collect deposits, expenses will increase accordingly. If the management of borrowers deteriorates, the risk of not being able to recover the loaned money also increases. A decline in the value of held bonds can also lead to losses.?I myself have bought back Mitsubishi UFJ Financial Group (8306). Bank stocks are also a theme I have thought about by actually investing in them.?Based on that experience, along with the news of interest rate hikes, I would like to confirm the following three points.
?? Is it leading to profit? I will check how the “loan-deposit interest margin,” which is the difference between lending and deposit interest rates, and the interest balance are changing. I will also check the loan balance.
?? Is it being offset by other losses? I will check if “credit costs,” such as expenses to prepare for repayment anxiety of borrowers, and bond losses are increasing.
?? To what extent has the stock price already priced in that good news? Even if an increase in profit is expected, if the stock price has risen more than that, the investment decision will change.
?For example, suppose many investors expect an increase in profit due to a rate hike and have bought the stock in advance. Even if the actual financial results show an increase in profit, if it is not as much as expected, the stock price could fall.?That is why I want to think about “how profit changes when interest rates rise” and “at what price to buy the stock relative to that profit” as a set.As I am always conscious of in my regular investments, tailwinds for a business and the purchase price at which I can make a profit must be verified separately.[4. Even if deposit interest increases, it does not necessarily mean you have become wealthier]What I do not want to forget here is prices.For example, even if the deposit interest rate is 1% per year, the after-tax yield is about 0.8%.If prices rise by 2% during the same period, even if your money has increased, the amount of goods you can buy with that money will decrease.This is a numerical assumption, but it is based on the idea that when the inflation rate exceeds the deposit yield, purchasing power declines.I want to keep an eye on both the interest in my passbook and my daily expenses.In my own daily market checks, I confirm not only stock prices but also interest rates, crude oil, and exchange rates. This is because each of these is linked to corporate profits and our living expenses.Deposits have the role of preparing for daily payments and sudden expenses. Once that role is secured, I think about how to manage funds that will not be used for a long time.I believe that it is precisely when interest rates rise that it makes sense to review where you keep your money.[5. I am on both the ‘borrowing side’ and the ‘investing side’]In May 2026, at the age of 50, I purchased a used condominium and chose a variable-rate mortgage. On the other hand, I also continue to invest in stocks and other assets.Therefore, interest rate hikes have both the aspect of increasing the burden of borrowing and the aspect of changing the environment for asset management.Of course, the rise in bank stock prices and dividends does not necessarily compensate for the increased burden of a mortgage.So, why did I choose a variable interest rate? And when interest rates rise, where do I review my repayment strategy?I wrote about that line of thinking in detail in my previous article. I have organized it to include the peace of mind of a fixed interest rate, working styles from the age of 50, and the significance of keeping cash on hand.? If you have a mortgage or are planning to buy a home, please take a look at this as well[Mortgage: Variable or Fixed?] My Choice After Buying a Home at 50 | The “Life Margin” I Want to Protect in an Era of Rising Interest RatesIf you read this alongside the discussion on the “asset management side” in this article, I think it will become easier to think about your household finances from both sides of the interest you receive and the interest you pay.[6. Four Types of People Likely to Benefit from Interest Rate Hikes]Finally, I will organize my own answer to the title, “Who benefits from interest rate hikes?”
? People who have a lot of deposits with rising interest rates and little debt affected by interest rate hikes.
? People who can purchase bonds with higher yields than before using funds they do not need for the time being.
? People who hold “Variable 10-Year” individual government bonds, etc., where the rise in the base rate is reflected in the interest received.
? People who invest in banks whose earnings grow with interest rate hikes, after checking their profit forecasts and stock prices.
? through ? are benefits mainly through interest received. ? is an investment opportunity in bank stocks, which also carries the risk of price declines.And whether or not you have gained overall in your household finances depends on everything including taxes, prices, interest payments, and asset price movements.I intend to continue looking at investments and household finances while thinking about where changes in interest rates create profits and where they increase burdens.How are you combining deposits, government bonds, and stocks in this era of interest-bearing accounts?Please let me know your thoughts as well?? Tonight’s Article PreviewTonight (September 27) at 19:30, I plan to publish an article looking back at this year’s trades. “I’ll show you all my trades this year. The complete record of 15 US stocks I bought in pessimism, 13 wins and 2 losses [2026]” Which stocks I bought, when, and at what price. Along with the trading dates and unit prices, I will also share how I use the RSI and Fear & Greed Index as benchmarks for my decisions. Regarding the “business tailwinds” and “the price at which I buy” mentioned in this article, I will provide a more concrete look at that mindset through my actual trades in tonight’s article. I would be very happy if you could come and read tonight’s article as well ? Fukkun (@BeyondTheAZ) *This article is written based on information as of September 26, 2026. The calculations are hypothetical and do not constitute a recommendation to purchase specific products or stocks. Please check the latest information from each financial institution for actual interest rates and product terms.