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Monday Dec 1 2025 23:10
2 min
Japan is experiencing a historical shift as interest rates rise, with the 2-year Japanese Government Bond (JGB) yield exceeding 1% for the first time since 2008. This shift, marking the end of an era of extreme monetary easing, not only impacts Japan but also reverberates across global financial markets.
Since the economic bubble burst in the 1990s, Japan has struggled with persistent deflation. To combat this, the Bank of Japan (BOJ) adopted unconventional monetary policies, including zero and negative interest rates, aiming to stimulate spending and investment. However, these policies appear to be reaching their end, with rising interest rates and a potential return to inflation.
Japan has long been a major source of outbound capital, driven by low domestic interest rates. With rates rising, we may see a shift in these flows, as investing in Japan becomes more attractive. This could lead to reduced Japanese investments in other markets, such as the US, Southeast Asia, and China.
The rise in Japanese interest rates could lead to a contraction in the Yen carry trade, which has been a significant driver of asset prices for risky assets like stocks and Bitcoin over the past decade. We may also see effects on currency markets, as the Japanese Yen is expected to strengthen, potentially impacting the competitiveness of Japanese exporters.
Stocks: Global equities may face pressure as liquidity decreases and borrowing costs rise. However, Japanese stocks may benefit in the long run from improved economic conditions and a return to inflation. Gold: Gold may benefit from a weaker dollar and rising economic uncertainty, making it a safe haven asset. Bitcoin: Bitcoin is likely to be among the most negatively affected assets in the short term due to reduced liquidity. However, in the long run, Bitcoin may benefit from increasing concerns about the stability of the global financial system.
In summary, Japan's rising interest rates represent a significant turning point for the global economy. Investors and analysts should closely monitor these developments and assess their potential impact on their investment portfolios.
Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients.
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