Bank of Japan, highest interest rate in 30 years... Elderly smile, 30-40 years old 'sigh'

The Bank of Japan raised the benchmark interest rate by 0.25 percentage points, and some analysts point out that this will bring different economic impacts to various generations. It is expected that the elderly will benefit from increased income due to higher deposit interest, while the younger generation will face a heavier burden in loan repayment.

On December 19 of last year, the Bank of Japan decided to raise the short-term policy interest rate from around 0.5% to around 0.75%. This is the highest level since 1995 and marks the highest record in 30 years. This rate hike is interpreted as a move to gradually exit the long-term ultra-low interest rate policy amid an economic recovery.

Private think tank Mizuho Research & Technologies specifically analyzed the impact of the Bank of Japan’s rate decision on households. The report estimates that, from an overall household perspective, there will be a positive effect of approximately 800 billion yen (about 7.5 trillion KRW) annually. Based on households with two or more members, an average benefit of about 15,000 yen (approximately 140,000 KRW) is expected.

However, this positive effect varies significantly across generations. The elderly over 50 will directly benefit due to their larger deposit assets, while the 30s and 40s age group with higher mortgage loan proportions may see increased burdens. By age group, those over 70 are expected to gain about 41,000 yen (around 386,000 KRW) annually, those in their 60s about 33,000 yen (roughly 310,000 KRW), and those in their 50s about 8,000 yen (approximately 75,000 KRW). Conversely, the 40s age group is expected to see an increase of 14,000 yen (about 132,000 KRW) in financial costs, and the 30s age group an increase of 27,000 yen (around 254,000 KRW).

Market reactions have also been swift. The yield on the 10-year Japanese government bond has risen to 2.02%, the first time breaking through the 2% mark since August 1999. Major commercial banks are also raising deposit interest rates. Mitsubishi UFJ Bank and Sumitomo Mitsui Banking Corporation plan to adjust their current savings deposit rates from 0.2% to 0.3% starting February 2026, which is the highest level in about 33 years.

This trend may trigger comprehensive changes in Japan’s domestic consumption patterns and asset management methods in the future. Especially if the high-interest-rate environment persists long-term, there are concerns that it could lead to suppressed consumption and reduced borrowing, mainly among the younger generation, thereby hindering economic recovery. On the other hand, the increase in financial income for the elderly may also expand some consumption effects. Therefore, the importance of future policy coordination is increasingly evident.