JAPAN: Widespread Personal Debt Forces Gov’t to Act

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jun 3 2003 (IPS) - Maeda tumbled into the debt vortex with alarming swiftness. The 54-year-old, who asked that his full name not be revealed, worked for an apparel maker in Japan until he was laid off three years ago.

Now he is saddled with debts of 5 million yen (about 42,000 U.S. dollars). In Japan, where the per capita income is 35,600 dollars, this represents a year’s worth of wages – which would be a fair reckoning of his financial position if Maeda had a job. But he does not.

"To make ends meet I worked as a taxi driver but told my wife I was still going to my regular job," he explained. "To keep up the pretence I had to borrow from loan sharks." He said it is not uncontrolled consumption, but providing for essentials like servicing his house mortgage, paying for his children’s private schooling and household expenses that led him to borrow.

As a retrenched worker, Maeda found that his unemployment allowance was insufficient to meet these expenses.

He also wanted to maintain his repayment schedule to hide his true financial situation – a pretence that has proven to be very costly indeed for Maeda. Officially, private lenders can charge up to 29.2 percent interest, but he is indebted to ‘yamikinyu’ (illegal loan sharks) too, who squeeze out much more.

"The situation is horrendous," said lawyer Kenji Utsunomiya of the Nationwide Group to Control Underground Money Lenders. "The government has turned a blind eye to the situation for too long." The lawyer says greater support for borrowers, such as easier lending terms, and a tough crackdown on private lenders, is urgently needed to address the problem.

Indeed, Yoshio Honda, spokesman for the Tokyo-based Group Against Loan Sharks, estimates that around two million have fallen prey to the ‘yamikinyu’, proof enough, said the group, of official negligence and the need for reform.

Relentless lobbying by anti-loan shark groups in Japan has at last forced the government’s hand. A new bill is expected to be discussed in the current session of Japan’s Diet (parliament), which contains draft provisions like increasing fines on illegal lending syndicates to 10 million yen (84,000 dollars) and prison terms of up to five years.

As the law currently stands, unregistered moneylenders or lenders charging more than the official annual rate of 29.2 percent can be fined up to 28,000 dollars and jailed for up to three years.

"It is a good thing," said Prime Minister Junichiro Koizumi in April when the bill was presented. "There are many people experiencing serious harm due to high interest and harsh collection methods."

This is precisely the condition that Maeda and his wife find themselves in. Harassed by ruthless illegal loan sharks, they are seeking counsel from one of the several private organisations which have sprung up to help the hundreds of thousands who are unable to make repayments to mostly illegal private lenders.

It is clear though that it will take more than well-meaning legislation to tackle the problem. Utsunomiya’s group alone has reported 5,000 dubious loan shark companies for investigation to the Tokyo metropolitan government.

Yet, according to statistics released in April by the Justice Ministry, the number of investigations involving ‘yamikinyu’ were just 238 in 2002, although Honda claims there are around 10,000. The gaping difference between independent assessment and official records, said critics, illustrates the absence of official monitoring of the loan shark syndicates.

Utsunomiya said that Japan’s recession of more than a decade, lax registration requirements, and changing social values have all conspired to make illegal consumer loans a highly active and profitable sector.

The recession has resulted in unemployment reaching record levels of 5.4 percent in April. The rise in the number of the jobless, combined with stricter lending conditions from local banks, but with consumer lifestyles that are not being reined in, have provided the social fuel that the ‘yamikinyu’ need to thrive.

"Most borrowers are jobless people," explained Utsunomiya. "They go to the ‘yamikinyu’ after they have borrowed from consumer credit card or other private lending companies. Unable to pay the official high interest rates, they resort to predatory loan sharks and end up desperate."

It is a vicious cycle not helped by young Japanese having few qualms about borrowing in order to fund their lifestyles.

There is an even darker side to the problem. Honda said that more than half of those seeking his counsel are women. Often, they borrowed from loan sharks to repay mortgages as their husbands have lost their jobs, or even to fund living expenses. But in some cases, counselors have rescued women who are forced to work as prostitutes in entertainment facilities operated by their gangster lenders.

Crime has become an inevitable link to the loan sharks’ networks. Most ‘yamikinyu’ are affiliated with criminal syndicates, but yet can register a business that pays as little as 400 dollars.

It is in reaction to the growth of illegal takings that the Tokyo metropolitan government has doubled the number of its officials in charge of regulating the money-lending business – including the canceling of business registrations.

Even so, counselors report that almost half of the people seeking advice on how to get out of debt are in their twenties or thirties, with none of the responsibilities that Maeda has. They borrow to fund a vacation or new clothes or branded goods, then find themselves unable to repay or even plan repayment.

But particularly for the rest, unwilling victims of Japan’s economic morass, the message that campaigners like Utsunomiya are driving home to the authorities is that those who have borrowed from unscrupulous money lenders are victims who need public protection. "This concept seems to have finally reached the government," he said.