August 31, 2017

Akahata editorial (excerpts)

The debit balance for bank card loans is rapidly increasing, amounting to 5.44 trillion yen as of 2016, which is twice as much as the amount of outstanding loans for such moneylenders as consumer finance businesses and quick-loan outlets.

According to the Finance Agency, the most common reason given by borrowers to go into debt was lack of funds for “living expenses” (38.1%) followed by “ceremonial events”, “medical-care expenses” and “housing loan payments”. The survey brought into relief that many people had no choice but to use card loans as a last resort after struggling very hard to make ends meet. Associated with the rise in the use of bank card loans, the number of personal bankruptcies has been going up.

Interest rates for card loans provided by banks are from 4% to 14.5%. The rate for a loan of less than two million yen ranges from 10% to 14%.

Many borrowers take out bank card loans to pay off debts and then fall into a vicious cycle of accruing multiple debts. Thus, the risk of personal bankruptcies becomes greater and greater. The Japan Federation of Bar Associations asserts that there is no end to the practice of excessive lending relative to borrowers’ net incomes. For example, one person whose annual income was 3.56 million yen borrowed 4.33 million yen from a bank, resulting in personal bankruptcy.

Regarding consumer finance companies, the revised moneylending act places volume restrictions on financing under which they cannot lend money amounting to more than one third of a borrower’s annual income. However, card loans provided by banks, not subject to this law, have been left unregulated.

The Abenomics economic policy promotes “monetary easing in new dimensions” so that banks can secure funds at extremely low interest rates. Amid a downward trend in mortgage rates, for most banks, card loan businesses charging more than 10% interest are lucrative. They take advantage of this system to make more money by offering loans with a high rate of interest to those who are struggling to make ends meet under the Abenomics policy which widens economic disparities and increases poverty.

The government should fulfill its responsibility and play a role in creating a low-interest public financing system for everyone in need and preventing the occurrence of multiple debts.