The “0.5%” Watershed: With the First Interest Rate Hike in 34 Years, Only Those Who Leave Their Savings “Untouched” Will Be Left Behind
■ Have you ever opened your smartphone banking app?
Your ordinary savings account, where your salary and living expenses flow in and out, is something you rarely look at. This autumn, the numbers in the interest rate column are quietly about to be rewritten. The Bank of Japan raised its policy interest rate in September, and in response, major banks and Japan Post Bank have successively announced increases in their ordinary savings interest rates. While it may seem like a dull news headline, the substance of the matter is that the difference between “interest earned by doing nothing” and “interest earned by taking a little action” will become clearer than ever before. Today, I will organize what is happening at the entrance to this “world with interest.”
[Old Man]
“Oh, there’s talk of interest rates in the newspaper again. For a long time, even if you deposited money in the bank, the interest was like a sparrow’s tears—or rather, an era where it didn’t even amount to tears—but it seems the tide is finally turning. I suppose I’ll open my passbook for the first time in a while.”
■ Fact: The BOJ’s rate hike and the follow-up by major banks and Japan Post Bank
First, let’s confirm what happened in order. At its Monetary Policy Meeting on September 18, 2026, the Bank of Japan decided to raise the policy interest rate by 0.25% to approximately 1.25%. The vote was 7 to 2 in favor, and the application begins on September 24, 2026. This is the first rate hike in three months since the June meeting, and it represents a slight acceleration of the pace so far. It is considered the highest level in about 31 years.
Following this move by the BOJ, the three major banks—Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank—announced that they would raise their ordinary savings interest rates from the current 0.4% to 0.5%. The application will begin on November 2, 2026. The 0.5% level is the first time in about 34 years, since August 1992. Furthermore, Japan Post Bank also announced that it would similarly raise the interest rate on ordinary savings from 0.4% to 0.5%, which is scheduled to be applied from November 9, 2026. This is a move to keep pace with the major banks.
[Old Man]
“They make it sound complicated, but it’s just a matter of the banks raising the ‘interest they pay to us customers’ in line with the BOJ raising the ‘interest rate for when banks lend money to each other.’ It might seem like just a small change from 0.4% to 0.5%, but it’s worth remembering the weight of the phrase ‘first time in 34 years.'”
■ Background: Why has the interest rate been almost zero until now, and why has it started to move now?
To begin with, why has there been almost no interest earned on bank deposits until now? For many years, the Bank of Japan has continued a monetary easing policy that maintains extremely low interest rates to support the economy. Since 2016, it even introduced a “negative interest rate policy,” a mechanism where there is no interest on even a portion of the money financial institutions deposit with the BOJ, and a state where market deposit interest rates were effectively near zero has continued for nearly eight years.
That situation began to change in March 2024, when the BOJ lifted its negative interest rate policy. Since then, the BOJ has been raising interest rates in stages while watching price trends, and with this September rate hike, it has further accelerated that pace. In fact, this is not the first time that deposit interest rates have been raised. Starting with major banks raising their ordinary savings interest rates to 0.3% in December 2025, which was reported as the “first time in 33 years,” the three major banks announced an increase from 0.3% to 0.4% on June 16, 2026, following the BOJ’s rate hike (applied on August 3), and now, following the rate hike on September 18, 2026, an increase from 0.4% to 0.5% has been announced (applied on November 2). This 0.5% is an extension of those three steps of increases.
[Old Man] “In other words, after slowly climbing the slope, we have finally reached a clearly visible watershed. On one side of the slope are those who do nothing and just stare blankly at their bankbooks, and on the other side are those who have taken action to seek even slightly higher interest rates—until now, the slope was so gentle that no one cared, but from here on out, it will be an era where that difference will gradually take its toll.”
■ Think of it as a personal matter: Ordinary savings accounts are a common touchpoint for almost everyone
The tricky part about this topic is that, unlike discussions about benefits or pensions, it is not a matter that “only affects a limited number of people.” Most working generations have ordinary savings accounts, and many people leave their money sitting in ordinary savings accounts at mega-banks or regional banks without a second thought, using them as accounts for salary deposits and daily living expenses.
While the rise in interest rates from 0.4% to 0.5% is welcome news, the point to pause and consider here is whether that is enough to be satisfied with. In Japan, there are multiple options available, not just ordinary savings accounts, but also time deposits and internet-only banks that offer higher interest rates. Even if you deposit the same 1 million yen, there will be a difference in the interest you receive depending on the type of account and the financial institution. Just because interest rates have risen does not mean you will automatically benefit without doing anything; the results will change depending on whether or not you take the time to confirm whether your current deposit destination is optimal for you.
Furthermore, for those who have taken out home loans with variable interest rates, the Bank of Japan’s rate hike is not irrelevant. However, we are still at a stage where official announcements from each financial institution regarding how this rate hike will be reflected in actual home loan interest rates have not yet been fully released. It would be wise to keep this in the back of your mind as a future trend and confirm it again once concrete figures are available.
Incidentally, interest on savings is subject to a total tax of 20.315%, including income tax and resident tax. Since this is withheld at the source, the interest recorded in your bankbook is already the after-tax amount. Taking this tax rate into account, we will look at the concrete figures in the next part to see how much of a difference the change from 0.4% to 0.5% actually makes, and what the difference is between leaving it alone and comparing it with other options. For anyone who has an ordinary savings account for salary deposits, this is a matter that concerns everyone.
[Old Man] “Now, from here on, let’s talk a bit more specifically to the younger generation. ‘Wait and see’ is one approach, but at the very least, there is no harm in having the perspective to compare how your savings are doing. It’s a different situation from when I was young, but let’s look at it step by step.”