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Rising racket hoodwinks the have-nots

by Philip Brasor

The gap between the haves and the have-nots continues to widen in Japan, and one attendant development is the rise of hinkon bijinesu (poverty businesses), enterprises that are blatant attempts to take advantage of people who are already poor.

The example most cited in the media is a practice called kakoiya, which means “enclosure company.” These organizations recruit homeless people and install them in apartment buildings the company owns and/or manages. With a permanent address, these people can then apply for public assistance, which is deposited into a special account. The organization keeps most of the money, leaving a few thousand yen for each tenant.

Then there’s oidashiya (literally “kick-out companies”), which also run apartment buildings, usually for the property owners. These companies solicit low-income tenants and act as guarantors for their rent, charging them a fee for the service on top of the usual security deposits and so-called gift money. If the tenant is even one month late on his or her rent, the company changes the locks and solicits a new tenant, starting the lucrative cycle again.

These practices only sound illegal. Lawmakers and bureaucrats are now talking about drafting legislation that would regulate them, but the fastest-growing hinkon business is one that is more difficult to regulate since it is so firmly embedded in Japanese life.

Hoshonin Shokai Kaisha are “companies that introduce guarantors” to people who need them in order to rent apartments, enroll in private schools or secure employment. The guarantor system was stipulated in the first Civil Code written during the Meiji Era (1868-1912), legally inserting an element of trust into financial transactions between two parties that were not related in any way. Basically, the guarantor promises to take responsibility for a party’s debts if the party cannot pay them.

Anyone who has rented an apartment in Japan is familiar with this system, and, in fact, HSKs arose to help foreigners with housing agreements. But the system is also increasingly implemented with regard to jobs. Since the 1990s, more companies have been hiring contract workers, and these contracts require guarantors. Since contract workers tend to occupy the poorer end of the income spectrum, they often lack the kinds of acquaintances who meet the asset requirements of the contracts, and so they have to resort to HSKs, which introduce them to guarantors for substantial fees.

NHK’s documentary series “A to Z” recently looked into the HSK industry. With its rushing, hand-held camera work and dramatic background music, the program promised hard-hitting investigative journalism, the kind that would expose a clear-cut social problem, but the report’s conclusion was more ambiguous.

In interviews with lawyers and HSK customers, NHK reporters sketched a business model that exploits a system designed for a different cultural landscape. In the 19th century, family and community ties were stronger, and thus there was always someone in your group who could vouch for you. Not any more.

NHK talked to a Tohoku man in his 30s who has worked under contract as a security guard for 10 years. Periodically he has to renew his contract and have it cosigned by a guarantor. His uncle filled this role until he died, and with no other family the man turned to an HSK. He paid ¥60,000 (he only makes ¥120,000 a month), thinking the HSK would find a guarantor who would cosign his contract and send it back to him, but in the end, the company, with which the man only corresponded over the Internet, just sent him an e-mail contact for a potential guarantor in Gunma Prefecture. The man demanded his money back and the HSK refused.

NHK contacted the potential guarantor in Gunma, who said he never agreed to be a guarantor for the Tohoku man. In fact, he registered with the HSK in order to supplement his own dwindling income, since registrants are paid a certain amount of money for each client they agree to “guarantee.” However, he claims he didn’t complete a form for this particular client.

Then the reporter located the HSK itself, which has only one employee and works out of a storefront on a suburban side street. The “president” insisted that the Gunma man completed the form, but in any case his job was only to “introduce” clients to potential guarantors. Later, when NHK tried to contact this HSK again, the company had “vanished.”

But if clients are being fooled by these companies, the guarantors are also exploited. One man on the program said he registered with one HSK and has since become a guarantor for 11 people. It didn’t matter to the HSK that this man is unemployed, and he was told to list his income as ¥8 million whenever he cosigned a contract. Now three of those clients have become delinquent in their rent and the landlords are threatening to sue the guarantor for money owed. The HSK’s website promised potential guarantors that there was “no risk.”

An industry spokesperson with 30 years in the business defended HSKs, saying they fill an important role. Though he admitted that some practices seem to be unethical, he refused to condemn them, implying that bending the truth on contracts may be necessary so that poor people can rent apartments or secure jobs.

“Guarantors do good deeds,” he insisted, adding that the system reinforces the Japanese dual concept of giri-ninjo (obligation-kindness).

That’s obviously a self-serving, facile observation, but as people at the bottom become poorer, the possibility that they will not be able to pay their rent or hospital bill or school fee becomes greater; and landlords and other “haves” will continue to demand guarantors in order to protect their interest. That means HSKs do fill a social role: one that requires greater regulation but nevertheless is unlikely to be outlawed. In a country becoming more atomized by the minute, trust — or even the illusion of trust — is a negotiable commodity.