Mizuho Bank to raise long-term prime rate to 2.3% from 2.2%

Mizuho Bank to raise long-term prime rate to 2.3% from 2.2%

Mizuho Bank, a leading financial institution in Japan, has announced plans to raise its long-term prime rate to 2.3% from the current 2.2%. This move comes amidst a backdrop of shifting economic conditions and market expectations. The decision reflects Mizuho's strategy to align its lending rates with broader economic trends and central bank policies.

The increase in the long-term prime rate is part of a broader trend in the financial sector, driven by the Federal Reserve's anticipated rate cuts and the expectation of a prolonged easing cycle. According to Mizuho Bank, the latest U.S. labor report has left the Federal Reserve with little choice but to begin cutting interest rates in September [3]. This report showed sharp cooling across the board in employment, work hours, and wage growth, which has led to a reassessment of the Fed's inflation and unemployment rate forecasts.

Mizuho Bank expects the Federal Reserve to embark on a sustained easing cycle, aiming to lower interest rates to a "neutral level" around 3% by March 2026. The bank also noted that if a new Fed chair pushes for even stronger stimulus, rates could fall toward 2%, suggesting a potential for further rate reductions in the future [3].

In addition to the impact of the Federal Reserve's policies, the Japanese government's bond market has also been influenced by political developments. The resignation of fiscal hawkish Prime Minister Shigeru Ishiba and the potential leadership of Sanae Takaichi, who favors stimulus and monetary easing, has fueled concerns about the Bank of Japan's (BOJ) reluctance to support rate hikes [1]. This has led to a rally in Japanese government bonds (JGBs) as long-term yields at historic highs attracted buyers.

The rally in JGBs has been supported by diminished expectations for central bank rate hikes and the potential for a new administration that may be more inclined to pursue stimulus policies. The benchmark 10-year JGB yield fell 1.5 basis points (bps) to 1.550%, and the 30-year yield lost 3.5 bps to 3.245%, down from Monday's 3.285% that matched the all-time high hit last week [1].

The long-term prime rate increase by Mizuho Bank is a strategic response to these evolving economic and political conditions. The bank aims to position itself in line with broader market expectations and central bank policies, ensuring that its lending rates remain competitive and aligned with the economic climate.

References:
[1] https://m.economictimes.com/markets/bonds/japanese-bonds-rally-as-yields-near-historic-highs-lure-buyers/articleshow/123776452.cms
[2] https://www.ainvest.com/news/broadcom-mizuho-raises-pt-355-320-maintains-outperform-rating-2509/
[3] https://www.facebook.com/manuel.guevarra.369210/posts/japans-mizuho-bank-says-the-latest-us-labor-report-has-left-the-federal-reserve-/764605019786042/