Personal Finance in Japan

By J Tomes

Traditionally the wives of Japan were responsible for the family’s finances. Many families today still work on this principle. The woman of the house controls the family’s spending with absolute control over such things as savings, children’s allowances, and even the allowance of her husband. This is advantageous in that it allows someone who has the time to control finances, and keep the husband’s entertainment expenses under control. People who study Japan often talk about this in terms of gender quality in Japan. Women rule at home while men rule in society.

Note that this is how things are traditionally done in Japan. Many modern Japanese households are much more egalitarian, however the idea of allowances for adult family members is very common. The “pay yourself first” idea in which money is separated into allowances, savings, and bills has been common in Japan for some time.

Now we will discuss some of the Japanese customs that facilitate saving money.

First is the idea of the “hesokuri” which is the money that a housewife stores away without the knowledge of her husband. She may use this to buy stocks or other investments, she may save it for just in case there is a family emergency. It could also be her own unemployment insurance just in case the husband gets laid off (or his companies does a “risutora” or restructuring which allows even workers with “lifetime” employment to be released). Essentially the “hesokuri” is a semi-secret savings from which the family can rely on when necessary. It can serve the same purpose as a reserve of a few months pay, and also fits the idea of “forgotten” money that a family won’t touch except in the event of extreme circumstances.

Credit cards are now ubiquitous in Japan, however the most common use is the “ikkatsu barai” which is to pay off at the end of the month. Ikkatsu barai does not incur any interest. Ikkatsu barai os of course the default form of payment. When one chooses to pay by “bunkatsu barai” or monthly payments the cashier often seems surprised. Most credit cards in Japan demand double digit interest for bunkatsu barai use, so the downside of this is that if you happen to use this card this way the interest charges are quire severe.

The third on my life of the common practices in Japan that facilitate healthy personal finance practices is the lack of personal checks. Bills are generally paid through one of three methods, automatic withdrawal from a bank account, ikkatsu barai (the one time payment mentioned above), and cash payment at banks or convenience stores. There are no checks, and therefore no bounced checks as well. Failure to pay a bill on time incurs strict penalties.

There are also many ways that housewives have traditionally used their time and control of the home finances and food budgeting to save money for the family. Food shopping in Japan is very different from the way we do it in the United States. In Japan, there is an effort not to waste, even if it requires much more effort.

There are many other ways that common practices in Japan provide a useful road map for saving money. Women who work before marriage are traditionally expected to bring substantial savings with them when they wed. Men also tend to live at home for some time before marriage. The commonality of the nucelear family also tends to allow young people the opportunity to save a lot of money before leaving the nest. The bonus pay system also help families balance books once or twice a year when a healthy lot of money is dropped into the bank account. Many credit cards and loans offer “bonus payment” plans which allow people to automatically pay a large part of the principle with their winter or summer bonus pay. When a significant event happens in a family, it is common for a company to pool money together to offer a cash gift in a fancy envelope. A marriage could net a cash gift of anywhere from 10,000 yen to 50,000 yen.

Although credit card and loan debt in Japan is an increasing problem, ways to manage personal finances have long been a natural part of life in Japan. If one avoids excessive use of credit cards, keeps a percentage of the paycheck as savings, sets reasonable allowances, and holds onto a healthy-sized “hesokuri” a family will be in a position to weather any unexpected circumstances and have very no trouble with personal finance management.