Posts Tagged ‘savings deposits’

College students’ savings habits indicate anxiety about the future

Thursday, April 24th, 2014

Screen shot of website offering financial advice to college students

Screen shot of website offering financial advice to college students

Asahi Shimbun recently reported that more and more university students are trying to save money even before they graduate and get a job. The article conjectures that young people are anxious about the future and uncertain about their job prospects so they think they have to be financially prepared.

One 19-year-old Keio University sophomore, who commutes to school from his parents’ home in Tokyo, managed to save ¥1.8 million over the course of a year. He works part-time 3 or 4 days a week in an office, sometimes until midnight, and receives ¥250,000 a month, which is actually quite good for part-time work at that age. He saves half his pay, and the rest goes to his ¥1 million a year tuition, which he pays himself. He spends about ¥30,000 a month on food, ¥10,000 on “music activities” (he’s in a band), ¥10,000 on clothing (“I buy cheap clothes”) and “only” ¥10,000 a month for his phone (because he uses Line). His sole major outside expense was a snowboarding excursion last winter that cost him ¥100,000.

CONTINUE READING about college students' savings habits →

Aging boomers may prove to be just as tight with savings

Tuesday, September 17th, 2013

Praying is free (but the incense will cost you)

Praying is free (but the incense will cost you)

The media has been all over the new figures related to seniors that were released by the Ministry of Internal Affairs and Communications to coincide with Respect for the Aged Day. To recap, the number of Japanese people over 65 increased by 1.12 million from the previous year, which marks a 0.95 percent rise.

The big news is that this brings the total number of seniors to about 32 million, or one-fourth of the entire population. This was expected since the huge cohort of baby boomers — which in Japan refers only to people born during a brief period in the late 1940s — is now passing the 65-year mark, and the projection is that seniors will make up a third of the population by 2035. To break down these portions even further, 18 percent of the population is over 70, 12 percent over 75 and 7 percent over 80.

What hasn’t been discussed as widely is the economic ramifications of these developments. In 2012 there were 5.95 million people over 65 who were still in the work force, or 9.5 percent of all workers over the age of 15. The average amount of savings — whether bank accounts, annuities or securities — of households with more than one person where the householder is at least 65 is ¥22.57 million. The average savings of all households is ¥16.64 million. Also, 16 percent of over-65 households have savings of more than ¥40 million, while only 10 percent of all households have saved that much.

The hope has been that once they retire boomers will spend their savings more readily than did previous generations, but so far that doesn’t seem to be the case. The ministry’s statistics indicate that more money is being spent by seniors who are still working. Those who aren’t working, meaning they are on fixed incomes provided by government or company pensions, are spending much less.

In either case, working or not, the seniors are not touching their savings. They are only spending their income. In the parlance of economists, they are asset rich but cash poor. The average income of an over-65 household is ¥2.96 million (that of an average household in general is ¥5.8 million), but the median income of an over-65 household is ¥2.29 million, meaning the majority of these households are within the ¥1 to ¥3 million income range, and that’s what they are living on.

A Cabinet Office survey conducted in 2011 asked seniors what the purpose of their savings was. About 62 percent said it was for sudden illnesses and future care and 20 percent said it was for “maintaining existence” in case of an unexpected financial problem. Only 5 percent said they would spend it on leisure, and a mere 1.6 percent wanted to use it for travel. It should be noted that 90 percent of these respondents owned their own homes or did not pay rent, so housing, at least, was not a primary concern. However, given the cost of private nursing homes, which charge upwards of ¥20 million just to move in, it’s perfectly reasonable to think that seniors believe they have to save for those final years. Until that sort of anxiety is addressed, it will always be difficult to get seniors to part with their savings.

Japan Post would prefer to let sleeping dogs, and accounts, lie

Friday, May 18th, 2012

Sleep tight: Japan Post data center in Chiba

Since last year, the government has talked about tapping so-called kyumin koza to help fund reconstruction in the areas hit by the March 11 disaster. Kyumin koza are “sleeping bank accounts,” meaning savings in financial institutions that have gone untouched for long periods of time. The government says it needs at least ¥50 billion for reconstruction, and every year banks “uncover” about ¥80 billion in unclaimed accounts, 90 percent of which contain less than ¥10,000 each. For banking purposes the definition of a kyumin koza is an account from which no transactions have been carried out for ten years and whose holder the bank has not been able to contact.

Under such circumstances, banks typically move this money into the plus column on their books, which is why the financial industry isn’t too crazy about the government’s plan to commandeer the comatose cash. The banks’ argument is that even though they have taken over this money, if the account holder does show up with proper identification and other pertinent documentation they will happily return it; but they couldn’t do that if the government has taken it first.

It’s a credible argument, though Japanese weekly magazine Gendai points out that ever since the end of the bubble era in the early 1990s, banks have become very strict about closing bank accounts, meaning that someone who had not touched their money for more than 10 years would probably require a lot of paperwork to prove the account was his. It would thus be very difficult for individuals to access accounts of family members who have died, since those individuals would have to produce death certificates, proof of relationship and other documents. Moreover, an account can only be closed at the branch where it was opened. It’s assumed that a large number of sleeping accounts have gone untouched because the account holder died without informing his or her family of its existence.

Why the sudden jump in "sleeping account" proceeds? →

Economists think about soaking the rich, a little

Tuesday, February 14th, 2012

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.

Regional bank tries to make money work for good things

Sunday, June 5th, 2011

Small, regional banks have a tough time trying to get you to switch your business from megabanks, whose main benefit to average consumers is the fact that their branches can be found anywhere in Japan. More locally situated banks tend to grow up around local commercial customers, but they need average borrowers, too. The trick is: How do they make up for the lack of a widespread presence?

Jonan's Shibuya branch

One obvious solution is to offer services and products that other banks don’t, and in that regard Jonan Shinyo Kinko, which is headquartered in Shinagawa, Tokyo, is quite creative. Perhaps their most controversial gimmick is a “lottery savings account,” a deal that was apparently frowned upon by the Finance Ministry but which has been copied by some other small banks. If you keep a certain amount of money in a special savings account, the bank will buy lottery tickets for you, and they guarantee that your odds of winning are greater than if you bought the tickets yourself.

The latest product from Jonan (which means “south of the castle,” thus indicating Shinagawa’s position in relation to Edo Castle) is much more edifying. The bank believes that Japanese society is “not safe” as long as it relies so much on nuclear power for its energy needs, and wants to encourage not only conservation but also the promotion of renewable energy sources. For its own part, Jonan has pledged to reduce its own energy consumption by 30 percent over the next three years by resetting its air conditioners and heaters, applying energy saving fixtures and facilities, installing better insulation and buying into a self-generating power system for its own offices.

Then on April 28, the bank made an announcement that it would go even further. Customers could expect more beneficial interests rates on both savings accounts and loans if they could prove to the bank that they were making a concerted effort to be more energy efficient. For instance, a depositor who could show Jonan that he spent more than ¥100,000 on conservation devices such as solar systems, electrical rechargers, or LED lamps would receive an extra 1 percent in interest on savings accounts of up to ¥1 million. Given that most banks only give about 0.02 percent, it’s a sizable allowance. In addition, if a customer takes out a home improvement loan to boost the energy efficiency of his dwelling for amounts between ¥500,000 and ¥3 million, the loan will be interest free for the first year, and thereafter interest will be fixed at 1 percent for loan periods of 3 to 8 years. Most home improvement loans are around 3.5 percent.

Jonan isn’t the only bank that is trying to make a difference since the March 11 tragedy, though it seems to be the only one that has tied its sense of social responsibility to rewards for customers. Sony Bank currently offers limited time savings accounts with special interest rates, of which Sony will donate 0.01 percent to charity. Basically, it’s no skin off Sony’s nose. Jonan, on the other hand, puts its money where its mouth it.

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