Yonemoto’s first apartment, a two-bedroom unit in central Tokyo near a rail station designed by the Japanese architect Kengo Kuma, was not cheap. It cost over $US500,000 (close to $750,000), more than eight times her annual salary at the time.

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Nonetheless, she figured it was worth it — money was essentially free.

She contacted an online bank and secured a rate of 0.527 per cent for a floating-rate loan with no down payment. Her monthly payment was around $US1,500.

That was five years ago. Yonemoto is now married with a 2-year-old son. She is selling her apartment and moving into a larger one in the same building. To buy her new apartment, she went to a different bank and secured a floating-rate loan currently at 0.325 per cent.

Along the way, Yonemoto started sharing her experience as a borrower on Instagram, offering advice and hoping to demystify home buying for people like her. These days she is closely following news about the Bank of Japan.

If rates go to around 1 per cent, “I don’t think it would be too much of a strain on our lives,” she said. “But if it goes up to 2 per cent, I am going to start thinking, ‘Wait. …’”

The Bank of Japan’s decision to increase rates this year for the first time in 17 years was based partly on the belief that consumers could handle the hit to things like their mortgages, given that many of Japan’s large companies had recently provided big salary bumps.

Some experts are not so sure. Japan’s economy grew 0.8 per cent in the April-to-June quarter, driven by a rebound in consumption, but this followed a long period of weak spending when wage growth lagged inflation.

Older homeowners may have savings to draw on to cushion against higher interest rates. “Those who will suffer are younger families with mortgages,” said Stefan Angrick, a senior economist at Moody’s Analytics in Tokyo.

“People say it’s just a small increase, but Japan has had very little growth — very little inflation — for decades,” he said. “It’s an entire economy that operates on a scale of small numbers.”

Indeed, some homeowners say that super-low rates were the primary reason they chose to purchase property in Japan.

Now everyone wants to know: What will the central bank do?

While there have not been signs that rising rates have prompted a big decline in new home purchases, Japanese homeowners are beginning to become unsettled.

In 2022, when the central bank announced that it would adjust its policies to allow long-term rates to rise, the mortgage comparison website Moge Check crashed because of a surge in traffic.

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Shiozawa, whose company runs Moge Check, said engineers had since increased the capacity of the site’s computer servers.

Traffic to Moge Check’s site doubled on July 31, when the Bank of Japan raised interest rates. Shiozawa said he had received an influx of inquiries from mortgage holders concerned about how the bank’s decision would affect their rates.

Generally, Japanese people have a strong dislike of loans, he said. Some of that aversion has been passed down to younger home buyers by older generations who remember when rates were a lot higher.

In the late 1980s, real estate and stock market prices in Japan shot up and homeowners at some points faced mortgage rates above 8 per cent. When that asset-price bubble burst in the early 1990s, Japan’s economy slowed to a crawl, and anxious households began to save more.

Shiozawa said he was concerned that higher mortgage rates could affect the confidence of homeowners, who already have a tendency to scrimp on other purchases to pay back mortgages as quickly as possible.

“If you are using your money on paying back loans early, you are not spending it elsewhere,” Shiozawa said. He added that it was one of a number of not-so-visible ways that higher interest rates could put the brakes on the economy: The consumption mindset of homeowners “freezes.”

This article originally appeared in The New York Times.

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