Archive for the ‘Banking & Investment’ Category

Western Union charges into the money transfer breach

Friday, February 25th, 2011

A year ago, a new shikin kessai-ho (funds settlement law) went into effect with regard to foreign currency exchange, and as a result it is now legal for almost any financial institution to offer overseas money transfer services. Previously, in Japan only Japanese banks could offer this service, and anyone who has tried to wire money overseas through a bank will understand why a new law was needed. Besides charging sizable handling fees (tesuryo) for sending the money on top of an exchange fee, banks seem to take forever to make it happen.

Make that to go: Travelex window in Ueno Station

Western Union, the legendary telegraph company that provides international money transfer services in 240 countries, applied in Japan last July for permission to provide overseas remittances. The company presently commands an 8 percent share of the money transfer business in Asia, and its revenues have been decreasing every year since 2006, so Japan is seen as a vital opportunity. The service would specifically target foreign workers who regularly sent money back to their home countries, a market that will only grow as Japan inevitably allows more foreigners to work here and which Japanese banks have mostly ignored, at least until now.

Many foreign workers in the past used non-profit organizations whose intentions were above-board but which nevertheless operated in a legal gray area. Japanese banks tend to charge at least ¥4,000 to remit funds overseas, no matter how small, which is OK if you’re sending money once a year, but many foreign workers send money once a month. And since the bank is usually sending the funds to an unaffiliated financial institution, that institution charges the Japanese bank a fee, too, which the sender usually has to pay. With Western Union, it’s the same company on both ends of the transaction, so there’s only one fee.

WU has hooked up with the British currency exchange service Travelex, which already has outlets in six prefectures. Fees range from ¥990 for sums under ¥10,000 to ¥12,000 for remittances between ¥500,001 and ¥700,000, which is the maximum amount that WU Japan will transfer per transaction. (According to the Funds Settlement Law, you still need to use a bank to transfer funds of more than ¥1 million.) Better yet, the transfer is instantaneous, while it normally takes a bank several days to send your money. The Asahi Shimbun has already reported on how popular the service is among foreign workers and students in Japan.

Naturally, other companies are now entering the ring. Japan Travel Bureau and the SBI Group have started overseas remittance services that are actually slightly cheaper than WU’s: ¥880 for amounts of less than ¥30,000. Until the end of March, SBI even offers a special low fee of ¥1,980 for remittances over ¥250,000. Services other than Western Union’s, however, usually charge different fees depending on the country of destination. In addition, Rakuten Bank has also started a remittance service in January with Travelex, but only for businesses. Seven Bank, the ATM banking service connected to 7-11, has partnered with Western Union and this summer will begin offering money transfer services overseas through its system of 14,000 ATMs. SBI will offer a similar service through ATMs in Family Marts and branches of Japan Post’s Yucho Bank. Though they’ve been slow to acknowledge the new competition, Japanese banks are starting to stir. In November, Sumitomo Mitsui Bank started offering a 24-hour money transfer service over the Internet whose fees are ¥500 less than what they are if you make the transfer at a branch office. All transactions made through ATMs or over the Internet require pre-registration and documentation of email addresses and identification.

Telephone swindlers adapt; old folks don’t

Thursday, January 6th, 2011

It sounds so 2004, but the scourge of furikome sagi (bank transfer swindles), formerly known by the less sophisticated term “ore-ore sagi” (It’s me! It’s me! swindles), is still very much a problem even if the media no longer finds it interesting enough to cover. According to the National Police Agency, as of Nov. 10, there were 6,030 reported cases of telephone fraud nationwide for the year 2010 in which a total of ¥7.2 billion had been swindled. And despite the change in terminology and huge publicity campaign that brought attention to the problem, “ore-ore” cases, in which swindlers pretend to be children or grandchildren of the persons they call, pleading for money to solve a pending debt crisis or pay off someone for a slight, are still a popular form of con. However, a more common method in the last couple of years has been callers pretending to be police officers actually investigating swindling rackets. The fake officers tell the people they call that they may be the victim of a bank swindle and need their bank cards and passwords in order to make sure their accounts are safe. Then they drop by, dressed as bank officials, to collect the cards and information. Other con jobs involve the sale of previously unlisted stocks, “fees” for converting television systems from analog to digital, and government handouts (kyufukin), which somehow requires the recipient of the handout to first pay a large amount of money.

It's me!: Poster of swindling suspects in a post office

Even without all the intense publicity campaigns carried out by the NPA and individual banks to warn citizens about the dangers of furikome sagi, one would think that people would be naturally suspicious of anyone asking for such large amounts of money. But it seems people can still be quite gullible, especially elderly people. A recent Asahi Shimbun article related how a woman in her 70s went up to a teller in a Tokyo bank and asked to have ¥1.5 million from her account transferred to another account she had written down on a piece of paper. The teller, trained to intercept such suspicious transfers, asked the woman what it was for. The woman wouldn’t explained and became desperate, screaming at the teller to make the transfer, which the teller did. However, once the woman left the bank, the teller’s supervisor stopped the transfer and checked the receiving account, which he discovered had only been set up a few days before. He then called the woman and told her he thought the account was fake, but the woman still didn’t believe him. “Yesterday, my son called me and said he had guaranteed a loan for a friend who defaulted and had to pay it back immediately,” she explained. When the bank employee asked for her son’s telephone number, she refused. Fortunately, the son happened to drop by his mother’s house that day just as the swindler called asking why the money hadn’t been transferred yet.

This is what banks and the police have to contend with. In the case cited above, the police discovered that the swindling team had information about the woman’s family and were able to convince her that the caller was her son (with a cold, thus explaining the change in tone). However, in more and more cases, at least 40 percent in 2010, swindlers didn’t utilize telephones, opting instead for face-to-face encounters. Last year, police arrested 254 swindlers, 67 of whom were “ambushed” outside victims’ homes. Swindlers also try to avoid ATMs now, since many have security cameras and other devices that can pinpoint when a suspicious withdrawal takes place. In any case, criminals seem to be a lot more resourceful than old people.

Tourist spots averse to foreign exchange

Thursday, November 25th, 2010

Sign at Hakone souvenir shop

Discouraging words: Sign at Hakone souvenir shop

A friend in the tourist industry recently brought a group of middle aged and elderly Americans to Hakone National Park in Shizuoka Prefecture and the area around Mount Fuji. In Hakone, one of Japan’s most famous sightseeing spots, the Americans were discouraged from buying souvenirs when they got off the sightseeing boat at Lake Ashi because the large store at the dock does not take credit cards. This is not unusual for merchants outside of the major cities in Japan, but Hakone supposedly is enthusiastic about attracting foreign tourism. In fact, the policy seems downright stupid since the one souvenir shop in Hakone that does take credit cards is always packed.

My friend said that he always has the same problem in Hakone. Most of the restaurants there don’t take credit cards either. In addition, there are no foreign exchange services in Hakone except at some large hotels, which only guests can use. And the hotel in Fuji City where the American group stayed because it has a good view of Mount Fuji also does not exchange money. In fact, when our friend asked the front desk where people could exchange money in Fuji City the employee said he didn’t know.

We called the Hakone tourist association directly and asked about foreign exchange. The person who answered had to inquire of someone else and then told us that “some banks” in Hakone offer foreign exchange services but he didn’t know which ones. Also, banks in the area close at 3 p.m. on weekdays and are not open at all on weekends. We know that ATMs in post offices and 7-11 convenience stores will dispense yen for most foreign credit cards, but that means foreign tourists have to know this beforehand and then locate those businesses.

The truth is, Japan has never been very accommodating to tourists when it comes to foreign exchange, despite occasional campaigns like “Yokoso Japan” to boost foreign tourism. Of course, most tourists prefer to use credit cards these days, and you can use them easily enough in large Japanese cities, but once you leave metropolitan areas it gets a bit dodgy. Stand-alone foreign exchange services (ryogaejo) can be found at international airports and places like Tokyo Disneyland, but elsewhere they’re usually integrated into banks, which often make the exchange process a chore, requiring the copying of passports and other time-consuming procedures.

Let’s face it. Most Japanese businesses don’t trust anything but yen, in cash.

No need to feel sorry for the Incubator babies

Friday, September 24th, 2010

That's all, folks!

That’s all, folks!

When Nihon Shinko Ginko filed for bankruptcy on Sept. 10 the media reacted predictably with alarm. Any bank that fails is bound to send shivers through the population, even those who don’t have accounts with the institution in question. Incubator Bank of Japan, as it’s called in English, had debts that exceeded its assets by more than ¥180 billion, incurred through making loans to small businesses. Exactly 126,779 people had time deposits in the bank.

What makes the story especially notable is that this is the first instance of a bank failure in which the government will limit “payoffs” (deposit guarantees) to ¥10 million per account (plus interest earned) since the deposit guarantee program was begun in 1971. Between 1996 and 2005, the cap was suspended to prevent runs on banks that were hard hit by the post-bubble recession. The cap was reinstated as part of the financial reforms undertaken by former prime minister Junichiro Koizumi (Incubator, in fact, was started in 2004 by Takeshi Kimura, a pal of Koizumi’s financial services minister, Heizo Takenaka). For Incubator customers with more than ¥10 million in their accounts, there is no guarantee they will get it all back.

As it turns out, only 3,423 of Incubator’s depositors had more than that amount, and their total at-risk deposits — meaning the money in excess of the ¥10 million limit — only came to ¥11 billion of the total ¥582 billion in time deposits. The reason for this low amount is simple: Incubator took advantage of the payoff system by telling potential customers that there was no risk if they deposited less than ¥10 million, and then offered much higher interest on time deposits than any other bank, a cool 1.9 percent for five-year accounts. Consequently, they got lots of customers. They could offer this high rate because they do not offer regular savings accounts, which require lots of resources and personnel to maintain.

And the rest of the banks, or, more precisely, those banks’ depositors, provided the refunds to the Incubator depositors. Every bank has to pay the Deposit Insurance Corp. of Japan 0.084 percent of its total deposits as insurance premiums. And if that amount isn’t enough to do the job when the occasion arises, the government will step in with tax money.

But it sounds as if they aren’t going to need all that money anyway. On the first day refunds were made available, only ¥5 billion was removed, equivalent to 0.9 percent of the relevant deposits. One week later, the total amount so far taken out was only ¥29 billion. Apparently, most of the depositors who showed up to claim their money changed their mind once things were explained to them. While the DIC sorted out the bank’s affairs, time deposits would continue to accrue their 1.9 percent annual interest for up to eight months, at which point it is projected that a “reconstruction sponsor,” or replacement bank, will step in to take over these accounts. Then, most likely, the interest rates will drop to whatever that bank offers. But in any case, there’s no danger of losing money or interest, so depositors might as well keep their money there. In a sense, it’s important that they do, since the more money that’s taken out of Incubator, the more difficult it will be to find a replacement bank. If you do take your money out and the account has not reached its five-year maturity, your interest rate will drop to a fraction of the original 1.9 percent rate.

If the Incubator bankruptcy isn’t as dire as it was reported to be, it does, however, provide a modest illustration to average people of what “high risk-high return” means, and thus may have an even more flattening effect on investments. The amount of household assets that are now in cash and savings is ¥806 trillion, the highest it’s been since 1997. Japanese people are already afraid wary of stocks, mutual funds and other investment instruments, and the Incubator story isn’t going to make them any more willing to try something new. The people who put their money into Incubator are considered, relative to the average Japanese consumer, risky investors, which is why it is so easy to talk them into keeping their money there even as the media continues to report on its insolvency. The vast majority of Japanese put their money in the bank, even if it just sits there doing nothing.

Do you know Yucho?

Monday, August 30th, 2010

 

If it looks like a bank and smells like a bank, it must be a bank

If it looks like a bank and smells like a bank, it must be a bank

Yubin chokin, the savings function of Japan’s post office, has perpetually been a thorn in the side of the Japanese banking industry, much the same way that postal insurance plans have been the thorn in the side of foreign insurance companies that have tried to make inroads in Japan’s lucrative life insurance market. The privatization of Japan Post that former Prime Minister Junichiro Koizumi staked his career on has been slowed lately with the ascendancy of the Democratic Party of Japan, which is trying to roll back some of Koizumi’s reforms.

Actually, a lot of people already have Yucho Ginko passbook accounts but may not use them much since most companies demand that employees open accounts in designated banks in order to receive salaries. In fact, a new Japan Post advertising campaign reminds viewers that their yucho accounts still beat bank accounts in a number of ways. The CM in question emphasizes that yucho accounts are pretty much the norm in the countryside, since banks still have not penetrated that far. But the ad then shows that city folk, personified by a new shakaijin (full-time employee) who just moved from his rural home town, should keep using their Yucho passbook accounts because they’re more convenient and economical than bank accounts.

There are about 24,000 post offices throughout Japan and almost every one has an ATM, so your money is available anywhere you roam. More significantly, these ATMs don’t charge fees for withdrawals or transfers between Yucho ATMs, even at night and on weekends. Almost all banks charge ¥105 per withdrawal between 6 p.m. and 8 a.m. weekdays and all day on weekends for regular passbook accounts. (If you use your Yucho ATM card to access your cash through a bank ATM then you will be charged the fee.)

Availability, however, is limited in terms of time. The smaller the post office, the less likely its ATM is working outside of normal business hours. But medium-sized post offices have ATMs that are open from 7 in the morning until 11 at night. And a few in the larger cities are even open 24 hours a day. Except for the most remote post offices, most are available 9 a.m. to 5:30 p.m. on Saturdays and Sundays.

Another reason yucho accounts were a pain to the banking industry is that their savings plans offered higher interest. Despite the partial privatization, they still do. Granted, the difference is minuscule, but given the compulsive belt-tightening that characterizes the current recession and which adds to the deflation spiral, it’s obvious that people are looking for bargains wherever they can, regardless of how small they are. Though still tied to the government, Japan Post is desperate for funds, so it’s finally taking promotional advantage of its small but significant perks to get people to use its bank more.

The bonus is in the bank

Wednesday, July 14th, 2010

Japan Post wants your bonus, too

Japan Post wants your bonus, too

The life insurance company Sonpo Japan DIY just released its annual survey, in which it asks about 500 carefully selected housewives whose husbands are salaried employees between the ages of 20 and 50 what they plan to do with this summer’s bonus. The bonus is one of the cleverest ideas ever developed by the Japanese business world. Ostensibly, bonuses are tied to a company’s good fortune or an employee’s performance, but Japanese workers have always deemed them to be part of their salaries, and tend to plan their finances accordingly. Employees and employers look at bonuses differently: The former see them as an entitlement, while the latter use them as a safety valve.

Consequently, for the past several years, many companies have reduced bonuses and some have even eliminated them as profits have tanked. The Sonpo survey, though it’s rather small, is significant since it gives some idea of how the economy affects the average household.

The good news is that the average bonus this summer was ¥670,000 after taxes, which is about ¥115,000 more than it was last year. This is the first time in three years that the trend has reversed. About 41 percent of the respondents said that their bonuses increased from last year, while a little more than 28 percent said it went down. What’s still a bit scary is that, of the respondents who said their bonuses were less than last year’s, the average decrease was ¥159,000.

Perhaps of more concern to the government is what these people are doing with their bonuses. According to a survey by a research panel in the Bank of Japan, 74.2 percent said they planned to put all or part of it in their savings. Last year, the percentage who saved was a little more than 50; 39.6 percent said they would spend theirs on “everyday life,” and 37.6 percent said it would go toward repaying a mortgage or other loans. Not much economic stimulation going on there, which could mean that those companies will continue to be stingy with their bonuses in the future.

Debtors left in the dark after new law goes into effect

Monday, July 5th, 2010

Notice at loan ATM indicating new rules related to proof of income

Notice at loan ATM indicating new rules related to proof of income

In December 2006 the government revised the law for consumer loans making it more difficult for certain people to borrow cash and reducing the amount of interest moneylenders could charge. Over the past 3½ years the law went into effect in stages, and as a result a number of consumer loan companies went out of business, since many were forced to pay back excessive interest they had charged their customers in the past. The main aim of the law is to curtail the occurrence of spiraling debt spread out among multiple companies.

Last month the last element of the revised law went into effect. From now on, a customer will not be able to borrow more than the equivalent of one-third of his or her annual income, and will have to submit documentation as proof of income. Though the law was conceived to save people from crushing debt, it may effectively drive more people to bankruptcy or to underground loan sharks.

Unfortunately, a lot of people don’t seem to know about the law. According to the Mainichi Shimbun, the Financial Services Agency found that less than 50 percent of the people it asked had ever even heard about the new law.

Housewives make up a good portion of consumer loan customers, and it seems they will be shut out of the system because of the new rules. Many housewives turn to consumer loan companies to pay the monthly bills when their husbands’ paychecks aren’t enough, and a good portion of them will not be able to borrow any more money from now on. The main reason is that they do not have jobs themselves and so have to submit their husband’s employment information. However, in many cases the husbands don’t even know their wives are borrowing money and the wives don’t want them to know. Even if they did get their husband’s information, because of the one-third limitation, they may not be able to borrow what they need. Much of the money that these women borrowed from consumer credit companies was used to pay off credit card debt.

The moneylenders industry association, Japan Financial Services Association, surveyed 4,000 customers in 2009 and found that half of them had debts that exceeded one-third of their annual income. It also estimates that there were 14.2 million people with outstanding loans at consumer credit companies, such as Acom, Promise and Aiful, when the law went into full effect June 1, and that about 4.9 million are housewives. (Many others are small businesses, which also rely on consumer credit to keep their companies operating on a daily basis.)

In addition, 85 percent of existing consumer loan companies have said they will no longer cater to housewives because the cost of developing systems that can handle their special needs under the revised law is prohibitive. A survey of 500 housewives conducted by JFSA found that 37 percent “know something” about the revised law, and the rest either “don’t know” about it or “don’t understand” what it means.

Josei Jiritsu no Kai (Women’s Independence Group) and other non-profit organizations have set up services to help these women who are now stuck with multiple debts and no way to refinance them, but the main problem right now is getting the word out. Though the government revised the law it didn’t take into consideration publicizing the fact and giving people enough time to prepare for the change. The JFSA, realizing the government’s neglect, started running TV commercials and other advertisements last month, but they may be too little too late. It’s likely that in the near future the personal bankruptcy rate will skyrocket, not to mention the divorce rate.

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