Foreign residents in Japan should prepare for significant changes in the financial landscape as long-term interest rates reached their highest level in nearly three decades, signaling a major shift in the country's economic environment that could affect everything from mortgages to savings accounts. On January 19, 2026, Japan's 10-year government bond yield—the benchmark indicator for long-term interest rates—surged to 2.275%, marking the highest level since February 1999, according to NHK. This dramatic rise represents a fundamental change for a country that has maintained near-zero or negative interest rates for most of the past quarter-century. The timing of this spike is particularly significant as the Bank of Japan (BOJ) prepares for its monetary policy meeting this week. While the central bank raised interest rates in late December 2025 and is expected to maintain current policy levels at this meeting, the recent weakening of the yen has intensified focus on the pace of future rate increases, NHK reported. The BOJ must now balance concerns about yen depreciation against the need for gradual policy normalization. For expats living in Japan, these developments carry practical implications. Higher long-term interest rates typically translate to increased borrowing costs for mortgages and other loans, but also mean better returns on savings accounts and fixed-income investments. Those considering purchasing property or refinancing existing mortgages should expect higher interest rates on home loans in the coming months. Conversely, expats with yen-denominated savings may finally see meaningful interest earnings after years of negligible returns. The interest rate movements come against a backdrop of persistent inflation concerns. A recent BOJ survey on individual living conditions revealed that over 80% of respondents expect prices to continue rising, according to NHK. This high level of inflation expectation remains stubbornly elevated, reflecting ongoing concerns about the cost of living—a particular worry for foreign residents managing household budgets in yen while potentially supporting obligations in their home currencies. The Tokyo stock market responded negatively to these developments, with share prices falling on January 19 as the yen strengthened. Export-related stocks faced particular selling pressure due to the stronger yen reducing the competitiveness of Japanese exports, NHK reported. This market volatility underscores the interconnected nature of currency movements, interest rates, and equity values. Despite these short-term fluctuations, broader sentiment remains cautiously optimistic. An NHK survey of 100 major Japanese companies found that nearly 70% expect the economy to "gradually improve" in 2026, driven by anticipated growth in consumer spending and capital investment. This suggests that while financial markets may experience turbulence, the underlying economic fundamentals remain relatively sound. For foreign residents, particularly those paid in yen, the stronger currency could make international travel and overseas purchases more affordable. However, expats receiving income from abroad may find their purchasing power in Japan diminished as the yen appreciates. Financial advisors recommend that expats review their investment portfolios and savings strategies in light of these changes. Those with adjustable-rate loans should budget for potential payment increases, while savers should explore newly competitive interest rates on deposits and bonds. Additionally, expats should monitor exchange rates carefully if they regularly transfer money internationally, as currency volatility could significantly impact the value of these transactions. As Japan's financial landscape continues evolving after decades of ultra-low rates, foreign residents should stay informed about monetary policy developments and consider consulting with financial professionals familiar with cross-border financial planning to navigate these changing conditions effectively.