As of May 2025, S&P Global Ratings forecasts inflation of around 2%-3% through 2028. With wage hikes of over 5% on average again expected after spring negotiations this year, we expect inflation to have a limited impact on borrowers' ability to repay debt. The policy rate in Japan has risen to 0.5%. We forecast the rate will rise to 1.5% by 2027. However, a rise in interest rates will not directly affect the performance of underlying JHF loans, which are all fixed-rate mortgages. We believe this acceleration of delinquency rates is partly due to changes in borrower attributes. We have seen an increase in self-employed borrowers, rather than civil servants or regular employees. More borrowers now tend to have debt
