BOJ Rate Hike Slams Younger Borrowers with Heavier Repayment Burden

The Bank of Japan (BOJ) raised its policy rate to around 1.25%, the highest level in 31 years, on November 18th.

In response, Japan's three megabanks - MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank - announced that they will raise ordinary deposit rates by 0.1 percentage point to 0.5%, effective November 2nd.

While depositors stand to benefit from higher interest income, younger borrowers with mortgages are expected to face a heavier repayment burden.

According to estimates by Mizuho Research Institute, households in their 60s will see a net gain of ¥20,000 (approximately $130) per year due to higher deposit rates. In contrast, those aged 29 and under will face a net loss of ¥22,000 (approximately $140) annually due to higher interest payments on mortgages and other debt.

The benefits of higher deposit rates are heavily skewed by generation, with older households enjoying increased deposit interest income while younger generations with mortgages face a decline in disposable income.