BOJ Rate Hike Could Mean Both Good and Bad for Households

Tokyo, Dec. 20 (Jiji Press)--The Bank of Japan's decision on Friday to raise its policy interest rate further is expected to affect households and businesses in both positive and negative ways.

Following the latest BOJ decision, MUFG Bank and Mizuho Bank, two of the country's three megabanks, announced that they will increase their short-term prime lending rates to 2.125 pct from 1.875 pct.

The short-term prime rates are used to adjust floating mortgage rates every six months. About 80 pct of housing loan users in Japan are said to choose the floating-rate type.

While most loan contracts include measures to keep monthly repayment amounts unchanged for five years, higher interest rates mean larger interest payments and smaller principal repayments. Therefore, overall repayments will increase.

However, this negative impact on households may be offset if the BOJ rate hike curbs inflation and wages continue to increase, as the BOJ expects.

[Copyright The Jiji Press, Ltd.]