What happens if interest rates hit 2.5%? The era where 'savings' make a comeback
Hello. I’m Sana.
For a long time, this feeling has been the norm in Japan.
“Keeping money in the bank doesn’t make it grow.”
Interest on ordinary savings is almost zero.
Even buying government bonds doesn’t yield significant interest.
Therefore, if you want to increase your assets, you need to take risks with stocks or investment trusts.
That era has continued for over 20 years.
However, that conventional wisdom is starting to change.
As of September 2026, the Bank of Japan’s policy interest rate is 1.0%.
Since the zero-interest-rate policy in 1999, Japan has been in a world of ultra-low interest rates for a long time, but now, for the first time in about 30 years, we are returning to a “world with interest rates.”
A policy interest rate of 1.5% has become a realistic level
Booooosh!
I’m Arai.
What I’ve been paying attention to lately is Japan’s interest rates.
In a Reuters economist survey, about two-thirds expect a policy interest rate of 1.5% or higher by the end of March 2027.
Furthermore, the range of the nominal neutral interest rate estimated by the Bank of Japan is approximately 1.1–2.5%.
Of course, it doesn’t necessarily mean it will rise to 2.5%.
But at the very least,
“Japanese interest rates will stay near zero”
the era of thinking based on that premise is coming to an end.
Deposit interest rates are already rising
In fact, changes are already appearing in bank deposits.
The interest rate for ordinary deposits at major banks is already around 0.4%.
For time deposits, products with rates in the 1-2% range have also emerged, including promotional offers.
If ordinary deposits were to rise to 1.5% in the future,
time deposits could be expected to reach 2.5%.
At 2.5%,
10 million yen would yield 250,000 yen per year.
30 million yen would yield 750,000 yen per year.
Although this is before taxes, cash that previously generated nothing now earns interest.
Moreover, since the principal is guaranteed, this difference cannot be ignored, especially for those with significant assets.
However, general deposits protected by deposit insurance are limited to 10 million yen in principal plus interest per person per financial institution.
If you are depositing a large amount, you also need to consider diversifying across banks.
Government bonds have also become quite attractive
Another area to pay attention to is Japanese government bonds for individuals.
For the September 2026 offering,
Floating 10-year 1.95%
Fixed 5-year 2.24%
Fixed 3-year 1.96%
interest rates have risen to these levels.
It is no longer the case that one can simply say,
‘Government bonds are safe but the yields are too low.’
The situation has changed.
In particular, the floating 10-year bond has its applicable interest rate reviewed every six months.
If interest rates continue to rise, there is a possibility that we can keep up with them to some extent.
I think it is a very easy-to-use product for those who want to manage large assets while avoiding the risk of losing their principal.
Stocks will no longer be the only way to manage assets.
This is the biggest change this time.
Until now, cash does not grow.
Therefore, buy stocks.
This way of thinking was quite strong.
However, if you can earn a yield of nearly 2-3% per year on highly safe yen assets, the story changes.
If you could manage 30 million yen at 3% per year, that would be 900,000 yen annually.
If it were 100 million yen, it would be 3 million yen per year.
Of course, you need to consider taxes and inflation.
Even so, if you can earn a few percent without taking the risk of a major stock market crash, it becomes a viable option.
Especially for those who have already built up assets,
‘managing without losing’ will become stronger than ‘increasing further’
should be the prevailing mindset.
For the past few years, stock prices have risen significantly, mainly in US stocks.
However, the market will not continue to rise forever.
We don’t know when the next crash will come, but the fact that you no longer have to rely solely on risk assets is significant in itself.
From now on,
Stocks
Investment trusts
Cash
Deposits
Government bonds
Commodities
How should we combine them?
The very way we think about asset management might change.
Sana: So, Arai-san, will you also increase your cash and government bonds?
Arai: Well, I don’t have any significant assets to begin with.
I’ll continue to focus on US tech stocks and cryptocurrency.
I’m going to keep betting on high returns with my surplus funds.
Sana: You haven’t changed at all, have you?
Arai: For me, that’s a conversation for after I’ve grown my assets.
And the important thing is that in the coming era, I think it will be crucial to know how to ‘avoid taking on debt’.
Sana: Then let’s focus on loans next time!
Arai: Alright, Sana!
I’ll provide the ingredients (title), the sauce (article source), and the spices (personal anecdotes), so you make a delicious meal (article)!
Leave the plating (finishing touches) and the waiter (posting) to me!
Let’s make sure the customers (readers) get to enjoy a delicious meal!
Sana: Understood!
I will definitely make everyone turn pale with the meal I’ve lovingly kneaded together💕
Arai: ⁉️⁉️⁉️ (Turn pale…😨)
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