CIO Perspectives - How Will the Markets React to Interest-Rate Hikes by the Central Banks of Japan, the United States, and Europe?

The coordinated rate hikes by Japan, the United States, and Europe should not lead to a prolonged global tightening cycle, but they will keep near-term pressure on some bond yields while creating divergent opportunities across currencies and rates.

• The Federal Reserve, Bank of Japan, and European Central Bank each raised policy rates by 0.25 percentage points between September 10 and September 18, 2026, against persistent inflation and relatively resilient economies.
• The yen weakened after two BoJ Policy Board members opposed the September 18 hike, but Nomura sees appreciation support from July's coordinated Japanese-U.S. intervention, warnings from U.S. Treasury Secretary Scott Bessent, and the BoJ's faster tightening pace; higher oil prices, expansionary Japanese fiscal policy, or slower hikes remain downside risks.
• Japanese government bonds were little changed because the BoJ hike was already priced in, but the latest move came only three months after the previous one versus the usual six-month interval; medium- and long-term yields should stay under near-term upward pressure, while super-long bonds may benefit from reduced issuance.
• U.S. Treasury yields rose after hawkish comments by Fed Chair Kevin Warsh and projections for another 0.25-percentage-point hike before year-end, but Nomura expects further hikes to be limited and the 10-year yield to remain around 5%.
• German yields rose with oil prices, but wage growth has not accelerated; as inflation moderates from next year, Nomura expects ECB rate cuts and lower 10-year German government bond yields.

Takeaway: Investors should expect divergent central-bank paths rather than sustained major-market tightening, with a constructive medium-term yen view, cautious exposure to Japanese duration, a range around 5% for 10-year Treasuries, and eventual support for German government bonds, subject to geopolitical, oil-price, trade-policy, and fiscal risks.