Impact of BOJ rate hike

The Bank of Japan's policy shift may affect individual borrowers and corporate activities.

On the plus side, interest rates for deposits at banks and other financial institutions will rise. Until now, many banking facilities have been setting their rates for ordinary deposits at 0.001 percent, reflecting the BOJ's negative rate policy.

But the central bank has decided to lift the measure and raise the policy interest rate. The move could prompt financial institutions around the country to raise their rates for ordinary deposits.

On the negative side, housing loan rates may also climb. Banks and other institutions have already raised their fixed-interest rates on mortgages in the wake of rising long-term interest rates.

The BOJ's short-term interest rate hike this time could see financial institutions raise their floating interest rates, which are chosen by more than 70 percent of home loan borrowers.

Also, companies will likely see a rise in interest rates for borrowing. That could create a heavier burden for those starting a new business or making capital investments. Observers say some businesses could face difficulty repaying their debts and fall into financial trouble.

But the BOJ says it will sustain easy money conditions and will remain cautious about repeatedly raising rates.

People in Tokyo's financial district expressed mixed feelings.

One company official said he saw no reason to maintain the negative interest policy, adding "I think many people including me, feel that there's a big difference in prices between Japan and other countries when traveling abroad. There is also said to be a labor shortage."

Another man expressed concern about the effect of interest rates. "I work for a midsize company, and my salary has not gone up. Even if I put my money in a time deposit, I can't earn much interest."