The Bank of Japan raises interest rates. How will deposits, loans, and prices change? Money matters to check for your household
The Bank of Japan raises interest rates. How will deposits, loans, and prices change? Money matters to check for your household
Even when you see news that “interest rates have risen,” it is not always easy to understand the immediate impact on your daily life.
On September 18, 2026, the Bank of Japan raised its policy interest rate from 1.0% to 1.25%. This may affect bank deposit rates and loan interest rates. However, just because the policy rate has risen by 0.25% does not mean that our deposit or loan interest rates will also change by exactly 0.25% across the board.
What is important is not memorizing the numbers in the news, but checking the terms of the financial products you are using. This time, we will organize what you should look at in your household budget, in the order of deposits, loans, and prices.
First, what is the “policy interest rate”?
The policy interest rate is a benchmark used by the Bank of Japan to influence interest rates in the financial market. When interest rates rise, the burden of borrowing money tends to increase. On the other hand, the interest you can receive when you deposit money may increase.
However, the “ordinary deposit interest rate,” “time deposit interest rate,” and “housing loan interest rate” that we see at banks are determined by each financial institution for each product. The timing and extent to which changes in the policy interest rate are reflected are not the same.
That is why the number to check after seeing news of an interest rate hike is not the Bank of Japan’s 1.25%, but the interest rate written in your own contract.
1. Deposits: If interest rates rise, how much will interest increase?
If deposit interest rates rise, the interest you receive will increase even if you deposit the same amount.
For example, if you deposit 1 million yen for one year at an annual interest rate of 0.1%, the interest before tax is approximately 1,000 yen by simple calculation. At 0.3% per year, it is approximately 3,000 yen. The difference is about 2,000 yen.
What is easy to overlook here is taxes. In principle, 20.315% tax is withheld from interest on general deposits and savings in Japan. In the example above, the estimated amount you receive after tax is as follows.
Deposit Amount| Annual Rate| Annual Interest (Before Tax)| Estimated After-Tax Amount
1 million yen| 0.1%| Approx. 1,000 yen| Approx. 797 yen
1 million yen| 0.3%| Approx. 3,000 yen| Approx. 2,390 yen
*This is an estimate if the same amount is deposited at the same interest rate for one full year. Actual interest will vary depending on the deposit period and calculation method.
You might feel it is “less than you thought.” Even so, knowing the difference in interest rates is useful when comparing where to deposit your money.
Here are the four points you should check:
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The interest rate on the ordinary deposit you are currently using
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The interest rate and deposit period if you choose a time deposit
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The conditions for receiving a higher interest rate
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Whether you can withdraw the money when you need it
You do not need to move money into long-term time deposits just because of interest rates, including money for living expenses or emergency savings. Consider both interest and ease of use.
2. Loans: The concern is ‘when will it be reflected in repayments?’
Those who should especially check the impact of the rate hike are those who have borrowed money with a variable interest rate. Depending on the lender and the contract, including housing loans, the method for reviewing interest rates differs.
For example, you cannot simply calculate how much your monthly housing loan repayment will increase based on the news that ‘the policy interest rate has risen by 0.25%.’ In reality, factors such as the outstanding loan balance, the remaining repayment period, the contractual interest rate, and the timing of the review are involved.
Please try looking for these four things in your contract or your financial institution’s app first.
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Current applied interest rate: The interest rate currently used for your loan
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Next interest rate review date: When your loan interest rate will be reviewed
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Repayment amount review method: When your monthly payment amount will change
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Outstanding loan balance and remaining period: Figures for estimating future repayments
What to be careful about here is that even if your monthly repayment amount does not change immediately, the content of the repayment may change. Monthly payments include interest payments and repayment of the borrowed principal. Depending on the contract terms, if interest rates rise, the proportion of interest may increase, and the rate at which the principal decreases may slow down.
If you are worried about the impact on repayments, it is practical to try a simulation provided by your lender for ‘what happens if interest rates rise.’ In that case, in addition to how much the monthly payment increases, check how the total repayment amount changes as well.
On the other hand, even for those who have already borrowed at a fixed interest rate, it is reassuring to check when your fixed period ends. For those who are going to borrow, it is important to think about whether you can borrow an amount that leaves room in your household budget, rather than just looking at the current repayment amount.
3. Prices: If interest rates rise, will shopping become cheaper?
Interest rate hikes are aimed at curbing price increases. This is because when the cost of borrowing money rises, it affects corporate and household spending, which in turn leads to movements in prices.
However, you cannot say that ‘because interest rates were raised, food will be cheaper next month.’ Multiple factors are involved in product prices, such as raw material costs, transportation costs, labor costs, and exchange rates.
To protect your household budget, it is more practical to look at where your own spending has increased rather than trying to predict future prices.
For example, even if your food expenses have increased by 5,000 yen compared to last month, the countermeasures will change depending on the reason.
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Prices went up even though you are buying the same products → Compare products and where you buy them
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The number of times you eat out has increased → Decide on the frequency and a budget per meal
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You have more leftover food → Review the amount you buy
Instead of just saying “it can’t be helped because prices are high,” if you separate the portion caused by price increases from the portion caused by changes in your own spending habits, you will see ways to review your finances without undue strain.
4. What should those who are investing think about?
Changes in interest rates also affect stocks, bonds, and foreign exchange. However, the market reacts not only to the rate hike itself, but also to future outlooks and the economy. There are no simple rules like “if rates rise, stocks will definitely fall” or “it will definitely lead to a stronger yen.”
Before you panic and buy or sell based on the news, try dividing your money into the following categories:
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Money to be used in the near future: Living expenses, rent, and money earmarked for upcoming payments
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Money for unexpected expenses: Money set aside for illnesses, appliance breakdowns, etc.
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Money not needed for the foreseeable future: Money that can be allocated for long-term goals
Check whether you have put money that you will need soon into products with fluctuating values. This is what you should check first, rather than trying to predict the market.
5. A 15-minute checklist to review your household finances
Once you finish reading this article, try checking the following in order.
First 5 minutes: Deposits
Check the interest rate on your savings account using your bank’s app or official website. If you find a product with a higher interest rate, also check the application conditions and how easy it is to withdraw money.
Next 5 minutes: Borrowing
If you have a loan, check your current applicable interest rate, outstanding balance, and the next review date. If there are items you don’t understand, look at your repayment schedule or the information provided by your lender.
Last 5 minutes: Expenditures
Compare your statements from last month and the month before, and find just one expense category that has increased. Instead of trying to cut everything at once, start by checking the items with the largest amounts.
Conclusion
With this interest rate hike, how much deposit interest increases and how much loan repayment increases for each person depends on their individual contracts. You cannot determine the impact on yourself based solely on the news.
However, the order in which you should check is clear. Look at your deposit interest rates. Look at your loan terms. Look at your monthly expenses. If you grasp these three things, you will be able to relate financial news to your own life.
Now that interest rates are moving, why not take a look at your own numbers before rushing into any major decisions?