Nearly half of Japanese firms hurt by BOJ interest rate hikes – Reuters poll
FILE PHOTO: A security guard stands in front of the Bank of Japan headquarters in Tokyo, Japan, December19, 2025. REUTERS/Manami Yamada/File Photo
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TOKYO, July 16 : Nearly half of Japanese firms are experiencing negative business impact from the Bank of Japan’s interest rate hikes, with higher borrowing costs hurting bottom lines and discouraging capital investment, a Reuters survey showed on Thursday.
The BOJ ended its negative interest rate policy in 2024 and last month raised its short-term policy rate to a 31-year high of 1.0 per cent from 0.75 per cent. It also signalled readiness to tighten further to tame price pressure stemming from the energy shock brought about by conflict in the Middle East.
About 5 per cent of survey respondents said BOJ hikes have had a significant negative impact on operations and 44 per cent said they have had a somewhat negative effect, whereas 46 per cent said they have had no impact.
The remaining 5 per cent said higher interest rates have had a somewhat positive effect on their businesses.
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“Interest burden has already grown sharply from last year. A further increase would have a large impact on our company,” an official at a machinery maker wrote in the survey.
Mitsubishi UFJ Financial Group became Japan’s most valuable stock in terms of market capitalisation this week due to investor expectations that higher rates would boost profit.
Asked about desirable timing of any subsequent rate hike, 12 per cent chose the current July-September quarter, 27 per cent picked October-December and 27 per cent selected the first half of 2027, while 26 per cent said an increase would not be desirable at any time.
The BOJ’s next policy meeting is scheduled for July 30-31.
About 12 per cent of respondents said a policy rate of 1.25 per cent would curb capital investment, while 16 per cent put the threshold at 1.5 per cent and 27 per cent said investment would be affected only if rates rose beyond 1.5 per cent.
Almost a third of respondents said capital investment has already been adversely affected under the current rate environment.
“We need to carry out investment for maintaining existing facilities as well as fresh capital investment. It’s not easy to ‘normalise’ our mindset that is accustomed to negative or low interest rates when we face borrowing costs for bank loans,” a manager at a transportation company said.
The poll was conducted by Nikkei Research for Reuters from July 1-10. Nikkei Research contacted 511 companies, of which 218 responded on condition of anonymity.
SOFTER YEN
On yen weakness against the U.S. dollar, a third of respondents found the trend positive for earnings, whereas 55 per cent deemed it negative.
A weaker yen provides a tailwind for exporters by boosting the yen value of overseas earnings. However, it drives up the cost of imports, from raw materials to food products, at a time when the U.S. and Israel’s war with Iran has sent oil and oil-related product prices higher.
“Costs have risen as we use imported materials, and it is difficult to raise the prices of our products. We are concerned about an adverse effect on our financial performance,” a manager at a food company said.
About 18 per cent of respondents said they were considering revising their assumed dollar/yen exchange rate for the year through March to reflect the yen’s weakness, and 5 per cent said they have already made such a revision. Meanwhile, 48 per cent have no plan to change their assumed exchange rates.
Asked what would be an appropriate dollar/yen exchange rate for their businesses, 28 per cent of respondents chose a range of 140.00 yen to 149.99 yen per dollar, while 27 per cent selected 150 to 159.99 yen. Just 1 per cent picked 160 yen or above.
The government spent a record 11.7 trillion yen ($72.18 billion) intervening in foreign exchange markets from late April through early May in an attempt to curb yen weakness.
However, the attendant boost to the yen quickly ended as the currency resumed its downtrend last month. It slumped to a 40-year low of 162.84 yen to the dollar earlier this month.
($1 = 162.1000 yen)
Source: Reuters
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