Central banks in Japan and South Korea raise interest rates

Central banks in Japan and South Korea are implementing interest rate hikes, leading to increased financial pressure on households through rising mortgage costs.

In Japan, the Bank of Japan has raised its policy interest rate to approximately 1.25% to combat persistent inflation. This shift from a negative interest rate era is expected to impact mortgage holders. For example, a 60-million-yen home on a 50-year loan could see monthly payments increase by roughly 16,000 yen if rates rise from 1.5% to 2%. Regional banks in Kyushu and Yamaguchi have already begun adjusting variable rates.

In South Korea, the proportion of variable-rate household loans rose to 57.3% as of August, up 4.3 percentage points from the previous year. Many borrowers opted for variable rates to minimize immediate interest payments, as they were lower than fixed rates at the time of borrowing. However, following consecutive policy rate hikes by the Bank of Korea, there are growing concerns that these borrowers will face significantly higher repayment burdens as market rates climb.