September 29, 2026

Interest rates have risen by 0.50 points over the past year. Savings accounts have only received 0.14 points—where does the increased interest go?

Yesterday, I opened the Bank of Japan’s balance sheet. The 412.6574 trillion yen in current account deposits that banks hold at the Bank of Japan will earn interest at an annual rate of 1.25% starting September 24.

Today, I will look at the level below that.

When the Bank of Japan is paying 1.25% per year to banks, what percentage are banks paying on your deposits?

“The Bank of Japan has raised interest rates multiple times, yet the interest rate on my savings has hardly changed”—I think many people feel this way. Is that feeling correct, or is it just my imagination? I will compare one year ago with today, using the same date to count.

What is called a “rate hike” is not just one interest rate

First, let’s clarify the terminology. When the news says “the Bank of Japan is raising rates,” in reality, several interest rates with different characteristics are moving simultaneously.

Basic Loan Rate (the rate at which the Bank of Japan lends to financial institutions)
Interest on Current Accounts (the rate the Bank of Japan pays on money it holds from financial institutions)
Short-term Prime Rate (the benchmark rate for when banks lend to their most creditworthy corporate clients on a short-term basis)
Over-the-counter Deposit Rate (the rate banks show at the counter when accepting deposits from us)

These four move from the top down, from those directly determined by the Bank of Japan to those determined by the banks themselves. Only the top two can be determined by the Bank of Japan, while the bottom two are at the discretion of the banks.

🔍 Deep Dive Note ① [Summary: The “policy interest rate” is not the rate at which the Bank of Japan lends money to banks] The Bank of Japan’s policy interest rate is a target for the level at which banks lend and borrow money among themselves for just one day (the uncollateralized overnight call rate). It is not the interest rate at which the Bank of Japan lends to anyone. The rate at which the Bank of Japan lends to financial institutions is a separate figure called the “Basic Loan Rate,” which is set slightly higher than the target. This is what used to be called the “official discount rate.” The name was changed because, with financial liberalization, the relationship where “moving the official discount rate automatically moves deposit rates” ceased to exist, and the current Basic Loan Rate acts as a ceiling cap when market interest rates spike.

Comparing one year ago with today on the same date

I will align the dates for comparison. September 10, 2025, and September 10, 2026. Both are dates for which the Bank of Japan has published figures.

The Basic Loan Rate was 0.75% per year as of September 10, 2025. It was 1.25% per year as of September 10, 2026. This means it has risen by 0.50 points over the past year (and has further increased to 1.50% per year starting September 24).

Now, how much of this 0.50 points has trickled down?

The lending interest rate has risen by the full amount

The short-term prime rate is published by the Bank of Japan after collecting figures from major banks.

September 10, 2025: 1.875% per year
September 10, 2026: 2.375% per year

0.50 points, exactly. It does not deviate by even a millimeter from the increase in the base lending rate.

The short-term prime rate is the interest rate that serves as the benchmark for small and medium-sized enterprise operating loans and variable-rate mortgages. In other words,for those borrowing, the full amount of the increase is passed on directly.

For those depositing, it was 0.14 points and 0.22 points.

What about deposits over the same year?

The Bank of Japan publishes monthly statistics called the “Average Interest Rates on Deposits by Type.” There are two types listed:ordinary depositsandtime deposits (deposit amount of 10 million yen or more, 1-year term).

Ordinary deposits: September 2025 0.183% → September 2026 0.322% (+0.139 points)
Time deposits (10 million yen or more, 1 year): September 2025 0.256% → September 2026 0.472% (+0.216 points)

They have risen. However, when comparing the magnitude of the increase to the 0.50-point base lending rate,

100% for lenders, 30% to 40% for depositors. This is the actual measurement for this past year.

🔍 Deep Dive Memo ② [Summary: Do not mix ‘%’ and ‘points’] When the interest rate on ordinary deposits went from 0.183% to 0.322%, one could write that it ‘rose by 76%.’ This is not incorrect, but using this phrasing in discussions about interest rates will inevitably cause misunderstanding. It is standard to count interest rate changes in ‘points’. 0.183% → 0.322% is a ‘0.139-point increase.’ The 76% figure only appears large because the base value is very small; it does not mean your interest increased by 76%.

Deposits are not rising gradually, but in ‘steps’.

Here is where it gets interesting. When you line up the monthly figures, there is a clear pattern to how deposit interest rates rise.

The monthly figures (%) for ordinary deposits are as follows.

January 2025 0.097 → February 0.098 → March 0.162 → April 0.182 → May–December 0.182–0.183
January 2026 0.184 → February 0.239 → March 0.250 → April–July 0.254–0.255 → August 0.306 → September 0.322

Periods of stability and months of sudden jumps alternate. The jumps occurred three times: March 2025, February 2026, and August 2026.

What happened shortly before these three months? The dates the basic loan interest rate was raised were January 27, 2025, December 22, 2025, and June 17, 2026.

One to two months after a rate hike, deposit interest rates rise in steps. Just like the Bank of Japan’s books seen in yesterday’s article, it takes time for decisions made at the top to reach the bottom.

With each passing round, the steps are becoming lower.

And there is one more thing to notice.The height of the steps is getting smaller each time.

The jump width for ordinary savings accounts is:

February 2025 → March: +0.064 points
January 2026 → February: +0.055 points
July 2026 → August: +0.051 points

Time deposits (10 million yen or more, 1 year) follow the same pattern.

February 2025 → March: +0.081 points
January 2026 → February: +0.075 points
July 2026 → August: +0.063 points

The Bank of Japan’s rate hike margin has remained consistently at 0.25 points each time. Yet, the portion applied to deposits is shrinking with each round. 0.064 → 0.055 → 0.051. Even for time deposits, it went from 0.081 → 0.075 → 0.063.

One could interpret this as “banks are reducing the amount they pass on,” or one could interpret it as “during the first rate hike, they applied a larger amount as a symbol of exiting zero interest rates.” Which is correct cannot be determined from this statistic alone.However, the fact that it is shrinking remains unchanged.

The 2025 rate hike took three months to arrive.

How long does it take for one step to be completed? If we track the oldest step (March 2025) on a monthly basis, the shape becomes clear.

The basic loan interest rate reached 0.75% on January 27, 2025. From there, ordinary savings accounts went: January 0.097 → February 0.098 → March 0.162 → April 0.182 → May 0.182 → June 0.182.

The month following the rate hike (February) saw almost no movement, then it jumped significantly in March, rose one more step in April, and stopped there. Time deposits were the same, at 0.127 → 0.131 → 0.212 → 0.253 → 0.255 → 0.256.

In other words, it takes about three months for a single rate hike to fully reach deposits. Nothing happens in the first month, there is a significant movement in the second month, and the remainder is added in the third month.

And, if we count the amount delivered by this 2025 round, savings accounts went from 0.097 to 0.182, a +0.085 point increase, which is 34% of the 0.25 point rate hike. Time deposits went from 0.127 to 0.256, a +0.129 point increase, or 51.6%.

Both are larger than the 27.8% and 43.2% mentioned at the beginning of this article. The observation that the steps become lower with each passing round holds true even when looking back this far.

When viewed over one year and eight months, the percentage becomes even smaller.

Let’s also count using a slightly longer scale.

The benchmark lending rate was 0.50% per annum until January 26, 2025. It became 1.50% per annum on September 24, 2026. It has risen by 1.00 point in one year and eight months.

Deposits over the same period were:

Savings accounts: January 2025 0.097% → September 2026 0.322% (+0.225 points = 22.5%)
Time deposits (10 million yen or more, 1 year): 0.127% → 0.472% (+0.345 points = 34.5%)

When measured at one year, it is 27.8% and 43.2%; when measured at one year and eight months, it is 22.5% and 34.5%. The longer the period, the lower the percentage. The fact that the most recent rate hike has not yet fully taken effect is a factor, but that is not all. The proportion passed on to deposits falls as rate hikes accumulate, which is common to both ways of counting.

The pattern of the increase differs between savings accounts and time deposits.

Looking at the same chart again, you notice that the shape of the two lines is different.

For savings accounts, the space between the steps is truly flat. From March to July 2026, it was 0.250, 0.254, 0.254, 0.254, 0.255. It moved only 0.005 points in five months.

As for time deposits, they rise little by little even between the steps. In the same five months, it was 0.365, 0.378, 0.378, 0.381, 0.384. It is moving gradually by 0.019 points.

I will not speculate on the reasons, but it is fair to say that savings accounts are products that ‘banks decide and then do not change’, while time deposits are products that ‘are more susceptible to market interest rates because they have a fixed term’, reflecting a difference in their nature.

One more thing. The rate hike on June 17, 2026, was not yet finished as of September. After rising in steps in August, it rose further in September from 0.306 to 0.322. Time deposits also went from 0.447 to 0.472. The steps do not end in one go.

And naturally, the increase from September 24, 2026, has not yet been factored into these figures at all.

How much will you earn if you deposit 1 million yen for one year?

Since I have been talking about the third decimal place, I will convert this into monetary amounts. This is a simple calculation before taxes.

When you leave 1 million yen in a savings account for one year,

At 0.183% in September 2025, that is 1,830 yen
At 0.322% in September 2026, that is 3,220 yen

It increased by 1,390 yen in one year. That is about the price of 10 cans of coffee.

If you have 10 million yen in a time deposit (10 million yen or more, 1 year term) then,

At 0.256% in September 2025, that is 25,600 yen
At 0.472% in September 2026, that is 47,200 yen

This is a difference of 21,600 yen. Even with the same “around +0.2 points,” if the original amount is 10 times larger, the effect is also 10 times greater.

The reason interest rate discussions are hard to grasp is usually because the principal is small. 0.139 points is 1,390 yen on 1 million yen, but it becomes 139,000 yen on 100 million yen. The reason the same news becomes “irrelevant” to some and “impossible to overlook” to others is because of this multiplication.

Where does the difference remain?

If the lending side rises by 0.50 and the deposit side only rises by 0.14, the 0.36 point difference remains with the bank. This is called the interest margin.

Moreover, banks also have the option not to lend.

As I wrote yesterday, the current account deposits that banks hold at the Bank of Japan earn 1.25% per year. Even if you just take money collected at 0.322% and leave it at the Bank of Japan, mathematically there is a difference of 0.93 points. There is no worry about bad debt and no hassle of screening.

The 412.6574 trillion yen in current account deposits on the right side of the Bank of Japan’s balance sheet is, in other words, the safest investment destination for banks.

🔍 Deep Dive Memo ③ [Summary: Not all current account deposits earn interest] The basic guidelines of the Complementary Deposit Facility system stipulate that interest is paid only on “excess reserves.” Banks are required to keep a certain percentage of deposits at the Bank of Japan (Reserve Requirement System), and that required portion does not earn interest. Only the amount kept in excess of the requirement earns 1.25% per year. Since I could not determine the exact amount of the required portion this time, please read the “0.93 points” above as an upper limit assuming interest is paid on the entire amount.

This “time deposit” is the interest rate for those who deposited 10 million yen or more.

I will write one thing about the nature of the figures.

The time deposit interest rate used above is a series defined in Bank of Japan statistics as “deposit amount of 10 million yen or more, 1-year term. It is not the interest rate for a 1 million yen time deposit.

Generally, the larger the amount deposited, the better the conditions. Therefore, if you see the figure of 0.472% and think “my time deposit must be the same,” it is usually off.

🔍 Deep Dive Memo ④ [Summary: “Over-the-counter interest rates” are not campaign rates or internet bank rates] This statistic is the average of interest rates that banks standardly display at their counters. Campaign rates for new accounts and interest rates at internet banks without physical branches can be much higher than this. In other words, 0.322% and 0.472% are close to the “interest rate if you did nothing.” The interest rates for those who took action do not appear in this statistic.

For the sake of fairness, I will also present the bank’s side of the situation.

Reading this far might make it seem like “only the banks are doing well,” but that is not the whole story. I will write down three points.

First. Deposits can be withdrawn at any time. Money in a savings account might be withdrawn in its entirety tomorrow. Banks must choose where to invest based on that premise, and they cannot freely lend for long periods to earn higher interest. The low interest rate can be viewed as the price for the right to withdraw at any time. In fact, the 0.15-point difference between the 0.322% savings account rate and the 0.472% time deposit rate on the same day can be read as the price for promising “not to withdraw for one year.”

Second. The short-term prime rate is a “posted” rate, not an “actual” rate. You need to look at other statistics (average contracted interest rates on loans) to see what companies are actually paying to borrow. I was unable to obtain those figures this time. Just because the posted rate rose by 0.50 does not necessarily mean that the interest rates for all borrowers rose by 0.50.

Third. Banks incur costs just by holding deposits. Deposit insurance premiums, ATM and system maintenance, branches, and staff. Even in the era of zero interest rates, banks continued to pay these costs. It is true that interest margins have widened, but one could also say that margins that were thin for a long time are simply returning to normal.

🔍 Deep Dive Memo ⑤ [Summary: Are deposit interest rates just as slow to fall?] This article only looks at the phase where rates are rising. The question of what happens when they fall is a natural one, but because there has not been a phase of falling interest rates in Japan for a long time, we cannot compare them using only the current figures. In these statistics from January 2025 to September 2026, there was not a single month where savings account rates were lower than the previous month. To discuss the asymmetry of how they rise, we need to measure them again using the same counting method when a phase of falling rates eventually arrives. It is too early to conclude that “banks are being unfair” by looking at only one side.

With that said, this remains as a fact: Over the past year, only 30% to 40% of the increased interest rate has reached those who have deposited money.

Summary: 3 things to take away today

A “rate hike” does not mean a single interest rate moves. There are interest rates set by the Bank of Japan (basic loan rate/interest on excess reserves) and interest rates set by banks (short-term prime rate/deposit interest rates), and there is no guarantee that the latter will move by the same amount.
Over the past year, the full amount for lenders, 30-40% for depositors. Against a +0.50 point increase in the basic loan rate, the short-term prime rate was +0.50 points, savings accounts were +0.139 points, and time deposits (10 million yen or more, 1 year) were +0.216 points.
Deposit interest rates rise in “steps,” and those steps become lower with each passing time. The steps for savings accounts were +0.064 → +0.055 → +0.051 points. This is despite the fact that the Bank of Japan’s rate hike width has remained unchanged at 0.25 points each time.

In a phase where interest rates rise, the ones affected fastest are borrowers, and the ones affected slowest are depositors. The order is always the same, and this time was no exception.

There is one thing that changes depending on whether you know this or not: The figures seen here are all “interest rates for people who did nothing.” There are banks in the same country, on the same day, offering interest rates that are many times higher. You won’t know the cost of not taking action because you think “everywhere is the same” unless you check for yourself. The average value is not your interest rate.

And one more thing: The rate hike from September 24 has not yet entered these statistics by even a millimeter. If it follows the same pattern as the previous three times, deposit interest rates will rise in steps around November, and then another step from there through December. The amount that reaches you will likely be around 0.05 points for savings accounts.

Whether this prediction is correct will be known when the November figures are released. I believe that being able to write down a prediction and check the answer later is the greatest benefit of reading statistics for yourself.

Next time, we will go further down this chain to the side of the companies that are borrowing. The short-term prime rate rises in full—however, it does not rise on the day of the rate hike. I have counted how many days it actually lagged behind in the past four instances.

※This article does not recommend the buying or selling of specific stocks or financial products and is educational content for learning how interest rates are transmitted. The numerical values are based on materials published by the Bank of Japan as of September 25, 2026 (Trends in Basic Discount Rate and Basic Loan Rate / Trends in Long- and Short-term Prime Rates (Major Banks) / Average of Posted Interest Rates by Deposit Type / Basic Guidelines for the Complementary Deposit Facility). Calculations of interest margins and interest are by the author and are not figures published by the Bank of Japan or individual financial institutions. Please make investment decisions at your own risk.