Yen for Living

Here's your money: Bank of Japan

As the fiscal year draws to a close the relevant government ministries and agencies release their statistics for the previous calendar year. This week, the media mostly concentrated on a survey by the Bank of Japan that revealed a steep rise in the percentage of households (two or more people) with absolutely no financial assets, meaning no stocks, bonds, savings or annuities: 28.6 percent, 6.3 points higher than it was in 2010 and the highest it has ever been since 1963, when the BOJ started conducting this particular survey. Among the households that did have financial assets, the average amount per household was ¥11.5 million, or ¥190,000 less than in 2010. The reason cited by the BOJ is a loss of value in securities affected by market performance in response to the March 11 disaster and the European credit crisis. However, one aspect of the survey that tends to get overlooked in most news reports is that 8,000 questionnaires were sent out but only 47.5 percent were returned with responses, which means the number of households represented was less than 4,000.

For a bit more insight into the nation’s economic well-being, there’s the chingin kozo kihon tokei chosa, a survey conducted by the Health, Welfare and Labor Ministry to find out the situation with regards to salaries and wages. According to the results the average monthly pay of a full-time worker in Japan in 2011 was ¥296,800, which was 0.2 percent less than it was in 2010. Yearly salaries have been going down since 2008, when the average was ¥299,980. This amount includes basic wage plus any regular allowances but does not include overtime or bonuses. The ministry received responses from 45,818 firms, each of which has at least ten employees. Broken down a bit further, the average yearly pay for men was ¥328,300 (about the same as it was in 2010) and for women it was ¥231,900. That’s about 70 percent of men’s pay, but ten years ago women’s average pay was 60 percent of men’s.

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If you go to the University of Tokyo, you not only are more likely to receive an interest-free loan, but you'll probably get a job that will allow you to pay back the loan more readily.

As we explained in an earlier post, university-level scholarships, meaning grants, are pretty hard to come by in Japan. Though the term shogakukin is usually translated as “scholarship,” it’s really a student loan, administered by the publicly funded Nihon Gakusei Shien Kiko, or Japan Student Services Association (JASSO). We’ve already talked about how JASSO has increasingly cracked down on graduates who are slow in paying back these loans. According to the Asahi Shimbun, the number of lawsuits the association has brought against debtors increased ninefold over the past five years, owing mainly to the fact that graduates have not been able to find gainful employment.

The newspaper illustrates the problem with the story of a young man in Kitakyushu who last summer was instructed by JASSO to pay the entire remaining balance of his ¥2.2 million student loan. After graduating from a private university in 2006, he found a job selling kimono and started paying back the loan at a rate of ¥13,000 a month. Five months after starting the job the company went out of business. He took a job in a restaurant, but it only paid ¥140,000 a month and he was unable to keep up payments. He asked for and was granted an extension. In 2007 he got married and started making the payments again, but after a year and the arrival of a baby the burden became too much, so he asked for another extension. He quit the restaurant in June 2010 and supported his family with temporary jobs. He started making payments again but last spring JASSO asked him to settle the loan and pay back the entire balance, which amounted to ¥1.9 million. When he didn’t respond, JASSO threatened him with a lawsuit. Eventually, he refinanced the loan, which now included a penalty, agreeing to pay ¥15,000 a month until 2023.

JASSO offers two types of student loans. The first type (dai-isshu), which carries no interest, is approved for students whose grade-point average in high school is at least 3.5 (out of a possible 5.0) and whose household income is less than ¥10 million a year. The second type (dai-nishu) carries an interest rate of up to 3 percent and, according to the Wikipedia entry on shogakukin, is given to anyone who applies for it and, presumably, doesn’t qualify for the first type. A lawyer interviewed by the Asahi points out that the majority of people threatened with lawsuits by JASSO are type-two loan recipients, who typically go to non-elite schools and have trouble finding steady employment after they graduate. The gap between their expectations of what a university degree will provide and the reality of the job market can be inferred by the statistics. In 2006, JASSO sued 547 former students. Last year they sued 4,832.

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One of the most contentious issues to be argued in the next U.S. presidential election is whether or not to tax wealth. President Barack Obama believes the rich aren’t paying their fair share while Republicans are against any increase in taxes (with certain exceptions). Since Japan’s budget deficit is even worse than America’s, levying higher taxes on the rich would seem to be up for discussion here as well, but all we hear about is the consumption tax. Nevertheless, a number of Japanese economists have proposed a fuyuzei, or wealth tax, modeled on a similar idea that’s been used in Europe. The way the tax has been proposed makes its purpose twofold: while it should be able to generate lots of revenue for the government, it may also have the effect of getting dormant savings into circulation, which is just as important as reducing the national debt.

Even Mickey isn't safe

The proposal was recently explained in Tokyo Shimbun by Hiromichi Shirakawa, the chief economist for Credit Suisse. The basic idea is to tax the money in savings accounts and treasury bonds on an annual basis. Based on surveys conducted by the Financial Information Center, the total amount of money in savings accounts and treasury bonds is about ¥854 trillion, so if the wealth tax rate were set at 1 percent, the government could collect ¥8.5 trillion a year. In 2010, the amount of revenue generated by the consumption tax was ¥10.2 trillion.

Other economists have suggested variations on this theme, such as a graduated tax bracket system, meaning the more money you save, the higher the percentage of tax you would pay. Or, in order to really make it a tax on the rich, set a bottom limit for how much money is being saved, so that only people who fall above those lines pay the wealth tax. Of the ¥854 trillion mentioned above, 52 percent is controlled by persons with cash assets of ¥30 million or more.

According to the Bank of Japan, as of December 2011, individual cash assets in Japan amounted to ¥1,471 trillion, at least half of which is money in near zero-interest savings accounts. The wealth tax would not be levied on money invested in securities or insurance. As it stands, the government levies a flat 10 percent tax on capital gains from stocks, while it withholds 20 percent from interest income. Stock profits used to be taxed at 20 percent as well, but the government reduced it to spur investment with the aim of eventually returning it to 20 percent. The increase has been continually postponed, however, presumably because people still aren’t buying enough stock.

Shirakawa has advanced his idea on several TV shows and received numerous complaints from older people, whom the wealth tax would affect more since they have more savings than do younger people. In Tokyo Shimbun he said older people should think of their grandchildren, who will inherit this massive debt. But the main hurdle to introducing such a tax is lack of bureaucratic resources rather than political will. Because so many individuals keep the money in various accounts and/or invest them in various instruments, it is difficult for the Tax Bureau to determine exactly how much each citizen has in terms of assets. In fact, one of the arguments in favor of the controversial taxpayer ID number system currently under discussion is that it would make such calculations much easier, since all accounts and investments would be tied together through a personal ID number. (In fact, the government introduced the same sort of tax in 1950 but cancelled it after three years because it couldn’t get a bead on people’s assets.)

But what about so-called tansu yokin (savings in the wardrobe), meaning cash that is simply stuffed under a mattress or crammed behind the cookie jar, without any record that it even exists? No one has ever estimated how much cash is held secretly in Japan, though every once in a while you get some idea when an old house is torn down and a worker finds a stash of ¥10,000 bills; or an elderly person is swindled over the telephone by someone pretending to be his or her relative needing money right away to solve a problem. Last week, an old woman in Gifu handed over ¥60 million in cash to someone who said he was representing her son. Apparently, she had most if not all of this money on hand.

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Redundant? Dish dryers that also disinfect

A Japanese non-profit organization called the Housekeeping Association recently conducted a survey of “married women” about the appliances they have purchased over the years. Among the association’s findings was a ranking of appliances in terms of effective usage. They asked the 3,900 respondents to rate appliances in terms of what they expected of them and then whether or not those expectations were met. The greatest degree of “disappointment” was registered for automatic dishwashers, followed by clothes dryers and bread-making machines.

One of the reasons dishwashing machines fared poorly in the survey is that dishwashing itself was deemed by 78.8 percent of the respondents to be one of the “most important housekeeping chores.” In addition, 75.4 percent of the women who owned dishwashers said they found it “stressful” when a load of dishes did not seem to be clean after using the appliance. Consequently, they would have to clean each dish, glass or piece of flatware by hand, rendering the appliance virtually useless. And since as an appliance the dishwasher also used lots of energy and water, it became even more of a wasteful piece of equipment. After all, the reason these women bought the dishwasher was to save time.

According to the Asahi Shimbun, only 26.9 percent of Japanese households have dishwashers, as opposed to about 62 percent of American households (as of 2007). The reason is mainly space, which Japanese kitchens have less of, but also the running expense, since, as implied by the responses to the above-mentioned survey, they require a lot of energy and water. This is also one of the reasons clothes dryers are not so common in Japanese homes — the electricity costs — but, of course, the main reason clothes dryers aren’t popular is that Japanese prefer hang drying clothes, as evidenced by the fact that almost every residence in Japan incorporates some sort of facility for a drying pole, such as a veranda. The belief is that sun drying disinfects clothing and heat drying does not.

Similarly, many Japanese belief that it is healthier to allow dishes to dry naturally, which is why in addition to table-top dishwashers there are also table-top dish-dryers, an appliance that Americans, at least, would probably find redundant. Many Japanese homemakers do not like to towel dry dishes, believing it to be unsanitary, so they either leave them out to dry naturally, or they dry them in dish-dryers.

Nevertheless, appliance makers, always on the lookout for something new to market, have made a concerted effort to sell electric dishwashers to the Japanese. In America, new homes come with dishwashers, usually as a standard built-in feature. Very few in Japan do, and in almost all cases they are an expensive option. Most dishwasher owners have the table-top type, which takes up a lot of room and requires unsightly hoses and electrical cables, which most likely compound the feeling of dissatisfaction.

Another aspect of Japanese living that makes dishwashers expensive is that, unlike in the U.S. where users do not run the dishwasher until it is full, Japanese homemakers prefer to clean up after every meal. That means the dishwasher could be used as much as twice or even three times a day.

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Big in Japan (Kyodo photo)

We’re not sure why this is coming out right now, but Sankei Express is reporting the results of a survey conducted in November 2010 by the Health, Welfare and Labor Ministry on the correlation between income level and lifestyle. The ministry divided respondents into three different groups according to household income: ¥2 million a year or less, between ¥2 million and ¥6 million, and over ¥6 million. The survey found that smoking was more prevalent the lower the annual income among both men and women. About 27 percent of men and 7 percent of women in the highest income group smoked, while 37 percent of men and 12 percent of women in the lowest income group did. Nationally, 32 percent of men and 8 percent of women smoke in all income categories.

In terms of being overweight, which the survey defined as having a BMI (body mass index) of over 25, there was found to be no significant difference between men among the three income groups, but among women the difference was stark. About 13 percent of the women in the highest income group were overweight, and the portion rose to 25.6 percent for women in the lowest group. Also, people of both genders in the lowest income group eat less vegetables regularly than people in higher income brackets, and low-income men tend to not eat breakfast.

If this doesn’t seem surprising it may be due to the fact that in the United States and the United Kingdom it’s been known for years that lower income people have poorer diets, higher rates of obesity, and smoke more than richer people do. Without going into why that is, it seems Japan is catching up with this trend, thus further undermining one of the country’s most beloved self-images of being a classless — or, more precisely, a uniformly middle class — society. If the trend continues along with the recession, it could mean even more of a crisis for social insurance schemes since it can be expected that more people will require health services in the future.

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Almost a church: a wedding chapel in Chiba Prefecture

Japanese weddings, with their interminable sentimental speeches and stage-managed atmosphere, can be more grueling than heartwarming for some guests, and what non-Japanese usually fail to realize is that they are expected to pay for the privilege of enduring these festivities. Unlike funerals, where guests pay their respects, eat a little food, and leave, friends and relatives who attend wedding receptions pay cash gifts to the happy couple. According to the bridal magazine Zexy, while there are no hard and fast rules regarding the amount of the gift, the customary contribution is ¥20,000-30,000 for “friends and colleagues” of the bride and/or groom, ¥30,000-50,000 for a boss or supervisor, and ¥50,000-100,000 for relatives (calculated as couples). In the West, guests are expected to celebrate by giving something, too, but they usually offer gifts that are presumably for the couple’s new life together. Japanese cash gifts are meant to go toward paying for the wedding.

Zexy estimates that a couple spends on average about ¥1 million on their wedding themselves, and whatever difference there is is made up for by cash gifts from guests (goshuki). That means the more guests they invite (and actually show up), the more the couple can spend. In the wedding business parlance, there are two general types of wedding receptions. Hade-kon are “showy” weddings, meant to stress appearances; while omotenashi-kon emphasize “hospitality” by putting guests first. Hade-kon are not necessarily more expensive on a per-person basis, and in any case the venue will make as much money as it can regardless of the real intentions of the people involved. Anyone who has been to a Japanese wedding will probably note that there’s always way too much food and the presents the couple gives out to guests (selected from a list provided by the service provider) are usually superfluous.

Continue reading about the requirements of a big fat wedding in Japan →

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They care

Besides manufacturing stuff, what do condiment maker Kagome, snacks producer Calbee and pharmaceutical company Rohto have in common? Not much, but in any case the three firms have joined forces to establish a foundation called Michinoku Mirai (Northern Region Future) to provide funds for young people who were orphaned by the March 11 earthquake and tsunami to pay for university or post-secondary vocational school. According to the Health Welfare and Labor Ministry, about 1,500 youngsters aged 18 or less lost both parents in the disaster, and starting in March 2012, those who graduate from high school and wish to continue their education can apply for up to ¥3 million a year from the fund to pay for anything related to that education, including entry fees, tuition and supplies.

The three companies estimate that the fund will need about ¥200 million a year, and each one will start by contributing ¥30 million for the first year, with the remainder coming from solicited contributions. They will continue supplying the fund with money for 20 years, at which point children who were orphaned as infants by the disaster will have graduated from high school. The reason the fund was created is that there is no public support in Japan for the continuing education of orphans. When orphans reach the age of 18, they are on their own. Foster care ends at 18, and since in Japan there is very little in the way of what in the West are called scholarships — meaning education grants — orphans almost never attend university. The exception is the long-standing, specialized private foundation Ashinaga Ikueikai, which provides educational support to orphans all their lives, from elementary to graduate school.

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