How will the Bank of Japan's interest rate hike affect household finances? Asset protection for people in their 40s and 50s to consider now
Hello, I’m Kurumi🌷
Have you been feeling the recent rise in prices for groceries, electricity, and other goods?
With daily living expenses increasing, we also have to think about our retirement. Once you reach your 40s and 50s, there are more situations where you start to worry about money, aren’t there?
“Will my current savings be enough for retirement?”
“Will my mortgage payments increase?”
“Should I start investing? But I’m afraid of losing money…”
I think it’s only natural to feel that way.
In September 2026, the Bank of Japan raised its policy interest rate to 1.25%. This is the highest level in about 31 years, and attention is focused on future movements in interest rates and prices. *1
So, how will this change affect our lives?
In this article, I will clearly explain what people in their 40s and 50s need to know about rising interest rates, the weak yen, inflation, and preparing for future financial needs.
1. How will life change when interest rates rise?
When interest rates rise, there are three main ways it can affect our household finances.
There is a possibility that interest on savings will increase
Bank deposit interest rates change depending on market rates and the policies of each bank.
For example, if you deposit 1 million yen for one year, the pre-tax interest is 1,000 yen at 0.1% per year, and 5,000 yen at 0.5% per year.
If interest rates rise, the interest you receive from your deposits may increase.
However, even if deposit interest rates rise, if the rate of inflation exceeds that, the purchasing power of your money may decrease.
There is a possibility that the burden of mortgage payments will increase
If you are using a variable-rate mortgage, you should also keep an eye on interest rate movements.
When interest rates rise, your future interest burden may increase depending on the terms of your contract.
However, just because interest rates rise does not mean that everyone’s repayment amount will increase immediately.
First, let’s check whether your mortgage is a fixed-rate or variable-rate loan, and what the rules are for reviewing your repayment amount.
It also affects companies and the stock market
When interest rates rise, the burden on companies when borrowing money may increase. On the other hand, the yields on deposits and bonds may become more attractive.
The stock market is also driven by various factors, not just interest rates, but also corporate performance, the economy, and overseas conditions.
In other words, rising interest rates do not affect all companies and assets in the same way.
2. What happens to the value of money when prices rise?
Another thing to be aware of is the rise in prices.
When the yen weakens, the prices of imported raw materials and energy tend to rise, which may affect food and daily necessities.
Of course, product prices are not determined solely by exchange rates. Raw material costs, logistics costs, and corporate pricing strategies are also involved.
If you want to check price trends, the Consumer Price Index published by the Statistics Bureau of the Ministry of Internal Affairs and Communications is a useful reference. *2
Let’s consider a simple example here.
Suppose a product or service that used to cost 10,000 yen has increased in price to 11,000 yen.
If you still have 10,000 yen on hand, you cannot buy the same thing as before.
This is what it means for the purchasing power of money to decline due to rising prices.
That does not mean that savings are unnecessary.
There are situations where you need money immediately, such as sudden illness, unemployment, or home repairs. Securing savings to protect your livelihood is also an important preparation.
3. Even if stock prices are rising, there is no need to panic
In the stock market, growth sectors such as AI and semiconductors sometimes attract attention.
If corporate productivity improves through the use of AI, it could lead to growth in performance.
On the other hand, if market expectations are already priced into the stock, or if corporate performance fails to meet expectations, stock prices can fall.
Even if the Nikkei Stock Average is rising, it does not necessarily mean that the stock prices of all companies are rising.
There is no need to panic and feel like you will miss out if you don’t start investing now.
When considering investments, do not judge solely based on trending topics; also consider the possibility of price drops and how much risk you are willing to accept.
4. The new NISA is an option for future preparation
When considering long-term asset formation, the new NISA is one of the options available.
NISA is a system where profits earned from investments in eligible financial products are tax-exempt. The system was expanded in 2024, allowing the use of the installment investment quota and the growth investment quota. *3
However, using NISA does not guarantee a profit. Depending on the products you invest in, there is a possibility that the principal may be lost.
Before you start, consider the following three points:
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When will you need the money: Is it money needed within a few years, or money that won’t be used until retirement?
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Does your household budget have a buffer: Have you secured money for living expenses and emergency spending?
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Can you handle price drops: Will your life be unaffected if your assets temporarily decrease in value?
Concentrating on specific assets, such as stocks or foreign currencies, may make you strongly susceptible to the effects of market or exchange rate fluctuations.
It is important to consider the balance of your entire portfolio, including savings, and choose a method that suits your household finances.
5. Should you make early repayments on your mortgage?
If you are currently paying off a mortgage, you might be considering early repayment due to rising interest rates.
Early repayment has the potential to reduce your future interest burden.
On the other hand, since your available cash will decrease, it may become harder to handle unexpected expenses.
Even if you choose to invest your assets, there is no guarantee that you will make a profit.
Which option is better depends on factors such as your loan interest rate, remaining repayment period, available funds, and your overall household financial situation.
First, after ensuring you have the money necessary for daily life, check your loan contract details and your overall household finances.
6. What people in their 40s and 50s can do now
I’m worried about money in the future, but I don’t know where to start.
If you feel that way, start by getting a grasp of your current household finances.
Check your monthly income and expenses, and compare your projected pension amount with your expected living costs in retirement.
For example, if your retirement living expenses are 250,000 yen per month and your income from pensions and other sources is 200,000 yen per month, a simple calculation shows a shortfall of 50,000 yen every month.
If this shortfall continues for 20 years, it will total 12 million yen.
This is just a simple estimate; in reality, the amount needed will change depending on living costs, pension amounts, medical and nursing care expenses, home repair costs, and changes in prices.
Even so, by gradually understanding your own situation, it becomes easier to see what you need to prepare for.
You don’t need to create a perfect plan from the start. It’s okay to start with what you can do, such as checking your projected pension amount or reviewing your monthly expenses.
Summary: Let’s start preparing step by step, even now
When you reach your 40s and 50s, financial anxieties regarding retirement, home loans, and family matters can pile up, can’t they?
There might be days when you feel like you should have prepared sooner.
But there is no need to assume it is too late to start now.
Instead of rushing into big decisions due to changes in interest rates or prices, start by learning about your current household finances and the money you will need in the future.
To protect the future for yourself and your family, know your current household finances and prepare for things one by one, starting with what you can do.
That is the first step toward gradually organizing your anxieties about future money.
Let’s think about this together at a pace that works for you.🌷
Reference Information
*This article is intended for general informational purposes only. Interest rates, exchange rates, and stock prices fluctuate, and investments carry the risk of loss of principal. When choosing financial products, please thoroughly review the product details and associated risks.