With Japanese banks regaining financial health, the ad hoc regime of full-deposit insurance is about to end. Beginning April 1, deposits will be protected only up to 10 million yen in principal plus interest -- the same limit that was in force until 1996 when it was removed temporarily amid growing instability in the banking sector. The keyword is risk.
For depositors, limited insurance coverage means that they need to exercise greater discretion in their dealings with banks. For banks and their corporate clients, it signals keener competition in the banking world. As Bank of Japan Gov. Toshihiko Fukui puts it, "We're not going back to the perfect, peaceful world of the past in which no financial institution collapsed."
To ensure the safety of their money, depositors must be able to distinguish between "safe banks" and "risky banks." That requires keeping a close watch on how banks are managed. One basic rule for deposit safety is this: If you see increasing risks at your bank, move part or all of your money to a safer bank.