In December 2025, the Bank of Japan decided to raise its policy interest rate to around 0.75%, a level not seen in approximately 30 years.
The long-standing era of ultra-low interest rates has finally come to an end, and we are stepping into a full-fledged world of interest rates.
How will this historic turning point impact our savings, loans, and asset management?
1. A Historic Turning Point: The Significance of a 0.75% Policy Rate
This rate hike raised the policy rate from 0.5% to 0.75%.
This is the highest level in approximately 30 years, since the mid-1990s.
The decision aligns with market expectations and aims to curb excessive yen weakness while solidifying a “virtuous cycle of prices and wages.”
Despite the rate hike, the “real interest rate” (adjusted for inflation) remains low, indicating a cautious normalization process designed to avoid cooling the economy.
2. Impact on Households: Savings Benefit, Loans Require Caution
Rising interest rates bring both positive and negative effects to household finances.
- 【Positive Aspect】Increased Deposit Interest Rates
Interest rates on regular savings and time deposits are visibly rising.
For a long time, it was commonplace that “money deposited doesn’t grow,” but for households holding cash, an environment where they can receive interest while minimizing risk has returned. - 【Negative Aspect】Risk of Rising Mortgage Rates
Variable-rate mortgages are particularly vulnerable.
As policy rates rise, monthly payments may increase going forward.
Even with protections like the “5-year rule” or “125% rule,” there’s a risk of slower principal reduction. Re-evaluating household budget projections is essential.
3. New Developments in Asset Management: Domestic MMFs Make a Comeback After a Decade
Rising interest rates have dramatically expanded investment options.
The symbol of this shift is the revival of domestic MMFs (Money Management Funds).
- What is an MMF?
A money market fund is an investment trust that invests in government bonds and corporate bonds, offering high principal safety and the potential for higher yields than bank deposits. - Why the Current Focus?
While they disappeared due to difficulties in management under negative interest rates, companies plan to resume offering them ahead of 2026.
Going forward, the key to building wealth lies not in relying solely on stocks, but in “diversified investing that harnesses interest rates” by combining money market funds, retail government bonds, bond funds, and other instruments.
Summary: Update Your Common Sense
Financial plans built on the assumption of “zero interest rates” no longer work.
Updating your approach to savings, loans, and investments based on current interest rates—adopting the latest common sense—is the first step to protecting and growing your valuable assets.
