Japanese firms not benefitting from rising interest rates

Japanese firms’ holdings of interest-bearing assets have risen relative to their interest-bearing liabilities and some are suggesting that they benefit from rising interest rates as a result. But with domestic interest rates little changed as the Bank of Japan keeps policy loose, net interest income has not increased. We find no evidence of a net gain from interest rates rising overseas either. The upshot is that Japan’s stock market isn’t serving as a hedge against rising interest rates as some have claimed.