Millions of Japanese Sucked into World of 'Dark Money'
Korea Herald
January 28, 2003

 TOKYO (AFP) -Toru Okada, 50, had a well-paid job at a top tier Japanese bank until a friend defaulted on debts five years ago and pulled him into a world of "yamikin."

As his friend's guarantor, Okada, not his real name, saw his 600,000 yen ($5,085) a month salary heavily pared down by debt repayments.

When the bank found out about the problem, they asked him to retire to avoid any messy entanglements.

Before filing, for bankruptcy last year, Okada had racked up 11.8 million yen in debts, piling up loans to pay for previous ones from consumer finance firms which legally charge 29.2 percent in interest, and from illegal "yamikin" loan sharks, whose rates reach thousands of percent.

"This is an entirely typical case," said Okada's bankruptcy lawyer, Kenshi Nishida.   

Nishida estimates there are three to four mi1lion others in Japan like Okada, a "reserve army" of those on the brink of bankruptcy whose debt payments take up over half of their monthly incomes.

"These are people who have no choice but to borrow more to pay off their loans. And their debts are just increasing," he said.

Worse than consumer creditors are "yamikin" operators, Nishida said, who call up troubled borrowers based on leaked financial data and offer to transfer money into their accounts at such exorbitant rates as 10,000 yen in interest on a 30,000 yen loan - due in 10 days.

Debt collectors embarrass and intimidate borrowers by turning up at their to place of work, call in the middle of the night, or worse, Nishida said.

"I have had clients who have been virtually kidnapped. Females have been taken and forced into prostitution. And these people tell them 'this is how you will work off your debts' without batting an eyelid," he said, adding that Okada is one of 500 clients with similar problems.

The rush to lending has helped push up the number of personal bankruptcies filed at courts across Japan in 2001 to 160,457 cases, a 125 percent increase from five years earlier, according to the Supreme Court.

"They are delving into new markets all the time, and competition is very fierce. In other words, the lending rush is on."

According to the Japan Consumer Finance Association, despite the slumping economy, outstanding loans by 93 member companies rose by 54.9 percent to 6.39 trillion yen as of March 2001 from five years ago.

Defaults on those loans have stayed a steady 3.1 percent from 2000 to 2001, while legal intervention on behalf of troubled borrowers fell from 2.2 to 2.1 percent of all cases. Personal bankruptcy accounted for a steady 1.5 percent.

A spokesman for a major consumer credit firm said lawyers themselves and the poor economy are to blame for the increase, not lenders. An October 2000 law that allowed lawyers to openly advertise their services invited more loan defaults, he said.

"We believe the advertisement law change is the trigger to the increase in personal bankruptcies," said the spokesman.

"In the past, people used to be quite reserved about resorting to lawyers to solve their problems, but now it has become very easy."

Many of Japan's 18,850 lawyers admit their businesses are booming due to the increased number of failures, corporate as well as personal.