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Japan waking up to the problems of sleeping cash

by and

Special To The Japan Times

In recent weeks there have been two well-reported robberies of people carrying large amounts of cash on the street. Thieves got away with ¥384 million after attacking a merchant in a Fukuoka parking lot. In Tokyo’s Ginza district, a mugger managed to take ¥40 million from a man walking along a popular shopping boulevard. Both crimes happened in broad daylight.

Some will say these two unrelated incidents prove that Japan isn’t as safe as it’s thought to be, but what they mainly show is how cavalier people in Japan can be with cash. In Japan, many monetary transactions, including ones involving huge sums of money, are done in cash. Partly, this tendency has to do with a general mistrust of credit cards and debt, as well as with small businesses wishing to avoid the added cost and trouble of bank remittances and other forms of non-cash payment.

But there is another, more recent reason for why cash is king. According to an article in the April 10 Mainichi Shimbun by economist Hideo Kumano, the amount of legal tender in circulation in Japan in 2016 was ¥102.4 trillion, the highest ever. That works out to about ¥810,000 for every man, woman and child. A good portion of the population, Kumano assumes, actually has a lot more than ¥810,000. The problem is that the government doesn’t really know because so much of this cash is privately hoarded.

Starting in the late ’90s, the government lowered interest rates to near zero levels and they’ve never returned. As a result, many people just took their money out of financial institutions, fearful that they would fail. At any rate, these people weren’t making any money keeping their savings in a deposit account. Then, in 2015 the inheritance tax was increased, so well-to-do families who wanted to pass on their assets to heirs started keeping more of those assets in cash to avoid detection by the authorities.

The My Number identification system that began in January 2016 intensified paranoia among certain people who were afraid their assets would be identified and seized by the government.

These developments, says Kumano, led to an increase in so-called tansu yokin (wardrobe deposits), meaning cash kept at home. He estimates the amount to be about ¥43 trillion based on how many ¥10,000 notes have been printed and entered into circulation in the past few years. The increase in newly minted ¥10,000 notes has been conspicuous because people are obviously hoarding them. Every so often, refuse workers find large amounts of cash among the discarded possessions of people who have died alone.

The government wants this money to re-enter circulation through investment, consumption or taxation, and since its measures to promote the former two have been less than successful under the current administration’s economic policy, taxation may be the only route. But how will they find that money, short of breaking into people’s homes?

Another answer is just to wait for it to show up, as illustrated by the government’s recent law to address the issue of kyumin koza (“sleeping” bank accounts). Last year, the Diet passed a bill to tap these accounts. Money sitting in an account that hasn’t been accessed for 10 years can be confiscated by the relevant financial institution. Previously, if the amount was less than ¥10 million, the bank would keep the money, but the new law stipulates that after the bank makes a concerted effort to contact the account holder and receives no response, the money goes to the government, which puts it in a fund. The money will then reportedly be used to help nonprofit organizations and other community groups that work on social welfare activities, though these details have yet to be worked out.

The government estimates that ¥100 billion to ¥110 billion in sleeping accounts “mature” each year. Most of these accounts are small, with less than ¥10,000, and likely belong to people who are deceased. Due to the rapidly aging population, not to mention the huge increase in elderly single-person households, it’s predicted that the amount of money in sleeping accounts will increase.

An article in the April 16 edition of the Asahi Shimbun reports that this same idea may be applied to another problem called iryukin, referring to cash left behind by people who die without heirs. The newspaper surveyed 20 cities and the 23 wards of Tokyo, and 39 of the respondents said they currently hold a cumulative stash of ¥1.142 billion in iryukin that was found in the homes of people who died alone. Since there is no special law to handle this kind of cash, local governments hire lawyers to process the money in family courts, and after legal fees and other expenses are subtracted, it goes into the national treasury.

However, in many cases, the amounts are too small to justify fees for lawyers, so the municipalities just keep the cash in vaults. Asahi says this money is quickly filling those vaults, and some municipalities want a law like the one for sleeping deposits to deal with it. However, rather than ending up in the hands of social welfare groups, the money would eventually go back to the local governments themselves.

According to a survey conducted by Mitsubishi UFJ Research, only 34 percent of 1,000 people polled had ever heard of sleeping deposits. Most people believe that banks just confiscate accounts when people die, but, in accordance with the new law, they have to make an effort to locate the account holders. Even after the 10-year time limit is reached and the money is sent to the national treasury, if the account holder shows up demanding their money, the government has to give it to them. The authorities are also expected to do their utmost in locating family members of deceased persons who are found in possession of cash, though such searches will cost local governments time and money. In the Asahi report, an official of Tokyo’s Shinjuku Ward says that some of the relatives of deceased persons contacted by the ward have refused to accept any money because they “severed relations” with the deceased person sometime in the past.

Another survey, conducted by a government organization called the Central Council for Financial Services, found that 43 percent of households with two or more members say they will leave their property to their children, while another 17.6 percent say they will only do so “if our children take care of us in old age.” Less than 5 percent of multiple-person households say they won’t leave their money to their children because they don’t want to “spoil them.” However, 30 percent of single-person households say they plan to spend all of their assets before they die since they have no heirs. Given how difficult it is to predict accurately when you will die, it seems likely these people will leave behind iryukin.

Yen for Living, a column that covers issues related to making, spending and saving money in Japan, runs on the second Saturday of every month.