Photo/Illutration This branch of Mizuho Bank advertises a consultation corner for people thinking about a housing loan. (Asahi Shimbun file photo)

Experts are warning consumers eyeing housing loans to brace themselves for higher interest rates, one of the ripple effects expected from the Bank of Japan’s surprise policy change.

Takashi Shiozawa, an executive with MFS Inc., which operates the Mogecheck website that provides comparisons between housing loans offered by different companies, said consumers should take heed.

“There will be an effect on the fixed interest rate for new housing loans,” he said.

Financial institutions will bear higher costs to provide housing loans, so they will likely raise their fixed interest rates to loan applicants.

But the BOJ’s Dec. 20 decision to adjust the window for long-term bond yields, seen as a rate hike of sorts, will likely have only a limited effect on variable interest rates for housing loans, since they are linked with short-term interest rate trends.

Shiozawa added this is likely just the first step for the BOJ and said consumers should be aware of the risks associated with short-term interest rates.

Consumers will not be alone in feeling the economic winds of change in the short term.

Export-oriented companies have accumulated record profits because of the weaker yen brought about by the low interest rates in Japan. But they may face tougher months ahead, as the yen strengthens against the dollar.

Companies that faced higher costs for importing materials could, on the other hand, be helped by the higher long-term interest rates.

Ken Kobayashi, chairman of the Japan Chamber of Commerce and Industry, said the move at least finally brings the BOJ closer to the Western consensus on rates.

“While we cannot be extremely happy about the decision because the cost of obtaining funds will increase, it can be said to be appropriate as a step toward bringing interest rates closer to those in the United States and Europe,” he said at his Dec. 20 news conference.

Masatoshi Kaku, chairman of the Japan Paper Association, meanwhile said the “benefits of a stronger yen will emerge because we import our materials and fuel.”

Speaking at his own news conference, he said his industry remains in a tough spot because it had based its plans on the yen trading at about 115 yen to the dollar. It was still stuck at about 132 yen on Dec. 21.

Higher long-term interest rates will also mean the government will have to shoulder a heavier burden to pay interest on government bonds.

Mari Iwashita, chief economist at Daiwa Securities Co., said the latest BOJ decision will not have a major immediate impact on the government’s fiscal condition.

But there could be one once the BOJ begins to implement an exit strategy from its ultra-loose monetary policy. Doing so would entail actual hikes in the long-term interest rate.

(This article was written by Ayumi Sugiyama, Yasuyuki Onaya and Hideki Aota.)

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