Japanese mortgage rates rose by as much as 0.35 percentage points Saturday, another sign that the Bank of Japan 's massive easing campaign isn’t going quite as planned.
The Bank of Tokyo-Mitsubishi UFJ and Mizuho Bank, two of Japan’s biggest lenders, increased their preferential rates on fixed 10-year housing loans to 1.6% from 1.4%, raising the cost of mortgages for the second straight month. Rates at SBI Sumishin Net Bank jumped 0.35 points to 1.53% from 1.18%.
While rates under 2% may be seen with envy in the U.S. and Europe, if not disbelief, a second straight month of increases in mortgage rates seems to conflict with the agenda of the central bank when it unveiled its aggressive easing package to tackle deflation on April 4.
At that time, the bank said it would double its purchasing of Japanese government bonds “with a view to encouraging a further decline in interest rates across the yield curve.”
But after the yield on 10-year JGBs briefly plunged to a low of 0.315% the day after the announcement, it began rising, hitting 1% on May 23, the day of the first big slide in Tokyo stocks of the Abenomics era.
The yield on the 10-year bond is one factor banks consider when setting
While the central bank has taken measures to try to reduce volatility in the bond market and keep a lid on yields, it also seems to have changed the tone of its language on interest rates.
Speaking on April 26, BOJ Gov. Haruhiko Kuroda said the bank’s buying of bonds was likely “to curb” rises in long-term interest rates to a significant extent.
On May 22, Mr. Kuroda said, “I am not expecting long-term interest rates to increase sharply considering the strong downward pressure being exerted on them by our quantitative and qualitative easing,” adding that “real interest rates,” factoring in inflation expectations, were probably falling.
Meantime, the Nikkei reported Saturday that the rise in mortgages is sparking a new boom in fixed-rate home loans – a sign that Mr. Kuroda is succeeding in his quest to change expectations of Japanese consumers. For years, homeowners chose variable rate mortgages, figuring there was no risk of rising rates anytime over the course of a 30-year home loan. Now, more borrowers seem to think that risk is rising. The business daily said that adjustable-rate mortgages were just 46% of all home loans in April, the lowest level in more than two years, according to Japan Housing Finance Agency.
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