(Bloomberg) -- Japanese bank stocks rose the most since December 2022 after the nation’s central bank raised its benchmark interest rate and unveiled plans to reduce bond buying.
The Topix Banks Index climbed 4.7% amid speculation lenders’ interest income will improve as rates rise. The gauge extended gains from early trading, when it was already the best performing sector after local broadcaster NHK reported that BOJ officials will discuss increasing interest rates.
Japan’s largest lenders including Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc., which is set to report earnings after the market close on Wednesday, all rose more than 4%.
“A sense of higher interest rates is lifting bank stocks,” said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management Japan. “The rate hike was earlier than expected, but that doesn’t mean the BOJ will stop raising the policy rate.”The benchmark 10-year bond yield climbed as far as 1.06%, before paring that increase.
The BOJ increased its policy rate to around 0.25% from a range of 0 to 0.1%, according to its statement. It also said it would reduce its monthly pace of bond buying to around ¥3 trillion ($19.6 billion) in the first quarter of 2026.
Japan’s megabanks earlier this month called on the BOJ to make deep cuts to its monthly bond purchases during hearings of market participants at the central bank, according to people who attended.
Meanwhile, real estate shares were lower as higher borrowing costs are expected to weigh on developers. The benchmark 10-year bond yield climbed as far as 1.06%, before paring that increase.
(Updates with comment in fourth paragraph.)
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