Analysis suggests that the interest rate hike in Japan could shake the financial circumstances of American consumers. A warning indicates that if Japanese interest rates rise and the appeal of U.S. Government Bonds diminishes, this could ultimately lead to an increase in U.S. loan interest rates, affecting household expenses.
Hana Securities analyzed that the shift in Japan's interest rate policy on the 29th could have a significant impact on global financial markets, including the U.S.
Lee Young-joo, a researcher at Hana Securities, noted, "The sharp rise in long-term Japanese Government Bonds and high foreign exchange hedge costs have recently diminished the attractiveness of investing in U.S. long-term Government Bonds for Japanese investors," adding that "there is a possibility that Japan could consider selling U.S. Government Bonds as a means to respond to U.S. tariffs, which could deliver a significant shock to the U.S. Government Bonds market."
In reality, major investors in the U.S. Government Bonds market, such as Japan and China, have been continuously reducing their holdings since 2008. The combined share of these two countries in U.S. Government Bonds is approximately 5.2%, accounting for 21% of foreign-held volumes. If they turn away from U.S. Government Bonds, it would mean that a crucial foreign funding source would disappear for the U.S.
This researcher assesses that the interest rate hike in Japan could impact U.S. liabilities, interest rates, the stock market, and household expenses.
If the U.S. government finds it difficult to sell Government Bonds, interest rates will rise, leading to increases in mortgage interest rates, credit card loan rates, and corporate loan rates.
Simultaneously, because the government will need to spend more money on interest expenses, public expenditures on education and defense may have to be cut. The U.S. will need to repay or refinance trillions of dollars in liabilities in the future, and it has been explained that issuing long-term bonds, which is essential for this, could become more difficult due to rising interest rates.
This researcher emphasized, "Given that Japan is no longer a predictable economic structure, attention should be paid to the possibility that this impact could spread to U.S. and global financial markets," adding, "In fact, when the yen appreciates, the U.S. stock market tends to decline."