BoJ raises rates

Japan’s central bank is widely expected to raise its policy rate to 1%, its highest level in 31 years. The move is meant to counter imported inflation pressure tied to the Middle East conflict, and it matters because it can move the yen, bond yields, bank earnings, and the cost of selling Japanese goods abroad.

If the Bank of Japan raises rates, the first ripple is usually through money and bonds. Japanese banks can earn a bit more on loans and new investments, but they also pay more for deposits and may see losses on older bond holdings. That is why the financial sector is likely to look mixed rather than simply better or worse.

Then comes the currency effect. Higher rates tend to support the yen, and a stronger yen is usually a headwind for exporters because overseas sales turn into fewer yen and products can look pricier abroad. That leaves autos, industrial exporters, and overseas-heavy consumer and tech names more exposed. The key thing to watch next is whether this is a one-off response to the price shock or the start of a longer tightening path; that will decide how far the pressure spreads.

Nomura can earn more on domestic funding and lending as Japanese rates rise. Higher rates can also bring more activity in fixed income and trading, which helps its markets business.