The Nikkei Average at 66,364 Yen and Long-Term Interest Rates at 3.115% Occurred on the Same Day | How Interest Rates Affect Stocks and Real Estate in Opposite Ways
September 25th in the Tokyo market. The Nikkei Average rose for the fifth consecutive day, closing at 66,364.20 yen.
On the same day, long-term interest rates (yield on newly issued 10-year government bonds) rose to as high as 3.115%. This is the highest level in about 30 years, since August 1996.
I work in asset management for entire rental apartment buildings and commercial buildings in Tokyo, and stocks are not my primary business. However, I felt that the fact these two figures appeared on the same day could not be overlooked. This is because the effect of interest rates on stocks and real estate is almost opposite.
On the day stocks rose, interest rates also rose.
Stocks rose due to semiconductors and banks.
The Nikkei Average for this week (two business days from 9/24 to 9/25) rose by 1,345.25 yen, or 2.07%, from the previous week. The high on the 25th was 66,410.27 yen.
There are two driving forces. One is semiconductors. Following the trend where AI and semiconductor stocks were bought in the U.S. during Japan’s consecutive holidays and the Nasdaq Composite hit a record high, stocks such as Tokyo Electron, Advantest, and Kioxia rose.
The other is banks. On the 25th, Mizuho FG was up 4.38%, Mitsubishi UFJ up 3.83%, Sumitomo Mitsui FG up 3.35%, and Resona up 4.55%. By industry, banks, securities, and other financial services topped the list of gainers, while information/communications and construction fell.
Even so, it has not yet reached the record closing high of 69,317 yen set in June. It is still 2,953 yen away, or 4.4%.
“Record high range” and “record high” are slightly different.
Interest rates were pushed by both Japan and the U.S.
On September 18, the Bank of Japan raised its policy interest rate to around 1.25%. Two days earlier, on September 16, the U.S. Federal Reserve also decided to raise interest rates by 0.25%, bringing the policy rate to 3.75–4.00%. This was the first rate hike in about three years, and it was unanimous. The year-end outlook (the median of the dot plot) is 4.1%, suggesting another rate hike within the year.
Added to that was the selling of U.S. Treasuries, which pushed Japan’s long-term interest rate to 3.115% on the 25th. I believe the point of this week is that this figure was not moved solely by Japanese monetary policy.
Exchange rates were also moving. On the 25th in Tokyo, the dollar-yen rate weakened to 158.92 yen before moving to the 157 yen range. The New York closing price was 156.94 yen. It was a day where caution regarding intervention coincided with a stall in U.S. interest rates and crude oil prices.
The same interest rate is a tailwind for banks and a headwind for real estate.
The logic behind rising bank stocks is easy to understand. If long-term interest rates rise, the margin on loans expands.
Real estate is affected in the opposite direction.
The TSE REIT Index fell 0.47% from the previous day to 1,731.48 points on the 25th. This was on a day when the overall stock market rose 1.3%. Since real estate prices are determined by “rent divided by yield,” if interest rates rise and the yield required by investors increases, prices are pushed downward even if the rent remains the same.
What I am most concerned about is this difference.
In the Japan Real Estate Institute’s Real Estate Investor Survey (as of April 2026), the expected yield for a studio apartment in the Jonan area of Tokyo was 3.6%. The difference from the 3.115% long-term interest rate was 0.485 percentage points. Since it was 0.61 percentage points when the long-term interest rate was 2.99% in mid-September, it means it has narrowed further in about a week.
When you can get nearly 3.1% from government bonds, buying real estate that comes with vacancies and maintenance costs at a 3.6% yield is a matter of perspective. However, from the viewpoint of someone buying with a loan, I think these are quite suffocating figures.
Do stock prices and real estate prices move in the same direction?
I will hedge my bets a little here. It is possible that if stocks rise, the money from those who made a profit will flow into real estate. For the segment that buys with cash, interest rates do not have much of an effect.
On the other hand, for those who buy with loans, interest rates directly affect monthly repayments. Since fixed-rate mortgages and apartment loans are easily linked to long-term interest rates, borrowing conditions could become significantly stricter in the coming months.
Therefore, it is not guaranteed that real estate will be strong on days when stocks are high. I believe that the market will diverge between properties that can be bought with cash and properties that rely on financing. I am not yet confident enough to say whether this will prove correct.
Dates to watch next week
September 30 (Wed): US PCE Price Index, Micron earnings report. October 1 (Thu): BOJ Tankan survey. October 2 (Fri): US employment statistics (night in Japan time). October 29–30: BOJ Monetary Policy Meeting.
The Tankan survey is being watched as a factor in whether the Bank of Japan will take action in October. As of mid-September, it was reported that the market was pricing in a nearly 30% probability of an interest rate hike in October.
Stock news and mortgage news appear in separate columns. But the root cause is the same interest rate.
If you are following the real estate side daily, I believe that the long-term interest rate, the dollar-yen exchange rate, and the TSE REIT Index are sufficient. If you only look at stock indices, these three factors will be missed.
On this account, I will continue to write short daily updates on stock and financial figures from the perspective of someone working in the real estate industry.
Article written about the time lag of interest rates: The September 18 rate hike will reach repayment amounts around July 2027
Article written about the difference between expected yield and long-term interest rates: Long-term interest rate 2.99%, studio apartment expected yield 3.6%
*Compiled based on reports and materials published as of September 26, 2026 (closing prices of Nikkei 225 and TOPIX, decisions by the BOJ and FRB, long-term interest rates, exchange rates, TSE REIT Index, and the Japan Real Estate Institute’s ‘Real Estate Investor Survey’). This does not constitute a recommendation to buy or sell specific stocks, financial products, or real estate. Please make investment decisions at your own responsibility.
Real estate agent / Tokyo sales practitioner