10 Reasons To Laugh/Cry About Personal Finance In Japan

Japan is a fantastic place for you to live. It is a terrible place for your money to live.

Japanese bank deposit accounts pay an average annual interest of 0.01% p.a. That means that if you had 100 yen in your bank account and you wanted it to grow to 200 yen, you would have to wait for sixth thousand, nine hundred and fifty years.

2. JP Yuucho bank will sometimes give presents for opening bank accounts. These incentives are often packets of noodles or hand towels.

3. As of now the yield on the 10yr Japanese Government bond is 0.03%. That’s right. Lock your money up for 10 years and get 0.03% each year. The best part is that the Bank Of Japan has already told you that they are trying to create inflation, and the mountain is slowly starting to move. Millions of people, but mainly Japanese Banks and Insurance companies, KNOWINGLY purchase government securities because they are “risk free” despite there being an inverse relationship between inflation and the value of fixed interest securities. Bond holders are guaranteed to have their teeth ripped out in lock-step with the BoJ’s monetary policy objective completion. All for 0.03% a year, before the wheels fall off the wagon. Welcome to the twilight zone.

4. Japanese people’s bank account activity is authorized/protected by their hanko or jitsuin (stamp) which is the equivalent of a bearer-bond; i.e if you hold it in your hand, then you essentially have ownership and clearance to operate as the account-holder. If you have the bank book and the registered seal for a company bank account, off to the bank you go, out you walk with all the money in the account in fresh bills.

5. Foreign people often authorize their bank account activity with their signature, owing to them either not having a stamp, or not having their stamp registered. This is arguably an improvement on the Inkan system because your signature cannot be physically misappropriated. Further, most people have a signature which is hard to replicate by a third party. Japan seems to think so too. In fact, half of the time you go to a Japanese bank to withdraw money or make a remittance, requiring your signature, your signature will be unacceptable. It is “different” in its entirety, or the “angle is wrong” or the letter “T” is too tall. It’s not uncommon to have to make a few attempts at your own signature to make it look like…your own signature. I think a packet of noodles or a hand towel should be awarded for not throwing the computer monitor on the floor after their third request for you to “try again one more“.

6. The most commonly sold investment product by Japanese retail banks is a foreign currency linked fixed term deposit. These products are sold with very little explanation and available to all account-holders without any prior risk-profiling required. These deposits are essentially structured products. You will however see no information about derivatives, strike prices, barriers or deliveries. The bank staff selling the products are seldom aware of the risks involved and no probability of profit/loss calculations are provided to clients/victims. Perfect for grandmas savings.

7. Life insurance is rarely offered to foreign residents. Even when it is, all of the information is in Japanese. The policies themselves have low premiums and laughably small benefits. Most of the time, the payout is the sum of the premiums plus a nominal fixed amount. How do Japanese life insurance companies meet their liabilities? With the coupon payments from their bond portfolios. See point (3). There is a storm coming. Buy a coat.

8. NISA investment accounts (Nippon Individual Savings Accounts) are available to foreigners and seem to offer a good alternative to regular brokerage accounts. Based on the UK’s ISA which was introduced in 1999 the account aims to offer a tax-free investment account to individual savers. The gotcha? The “tax-free” only lasts for 10 years and the maximum annual contribution is less than 1/3rd of that offered in the UK. Better than nothing, but nothing is a shitty benchmark for your finances.

9. You probably get paid in JPY. Japanese Yen has been one of the most volatile currencies in the developed world with average annual volatility in excess of 10%. Have fun throwing the dice when remitting money overseas to your home country. You might gain or lose 10% every single time. Maximum volatility in the past three years was 23%. Accumulating your savings in JPY cash? Go to the doctor.

10. Want to send money outside of Japan? Want to send money to yourself? Please present your passport, or your ID, and then documents to prove where and why the money is required…and perhaps proof that the account with your name on it, is in fact yours, and not somebody with the same name in some sort of parallel universe money laundering scheme with small stakes. And of course, make sure your signature looks like your signature. One more time please.