Here are some comments I wrote to a friend recently about Japanese banking. I thought it might interest some people, though I've written about some of the stuff before.

I think the biggest problem in Japan is that no one lets a company fail. It seems like there are some ghost companies that don't make a profit and are constantly getting loans from banks. The banks know the loans can't be repaid, but they give them anyway, because they don't want people laid off, since that might worsen the economy more. But then the banks end up losing money, and the central bank of Japan gives them money so they don't collapse. Recently the prime minister has been urging banks to dispose of bad loans, and some of them are cleaning up their act. If they let more companies close down, it would be better for them, because at least the bank system would remain healthy. Then the banks could help fund healthy businesses and new ones.

Also, some companies have been propped up by government regulations. To give the car manufacturers a lift, there is a really expensive registration process every two years. However, if you have a new car, you can wait three or four years before renewing it. Instead of keeping an old car and paying over a thousand dollars in registration, most people sell it and buy a new one. A lot of the cars end up shipped to other countries and resold there. One of my friends, Amir, from Pakistan is in the business of shipping these cars around.

Japan is really strange about banking, I think. First, banks always close at 3pm, so it's really hard to go to the bank here. Second, there's almost no internet banking at all. Third, ATMs close between 6pm and 8pm, depending on the location. I do postal service banking, which is in english and closes later, at 11pm. Fourth, you are charged money for depositing or withdrawing money after 6pm or on Saturdays or Sundays (about a dollar each time). I can't understand why they have such limited access to cash. During the New Year's week, all the ATMs are closed (for a whole week!). These things pretty much operate themselves, so I don't know why they lock them up at all. Maybe after midnight for safety would be good, though. The ATMs aren't connected to networks like PLUS or CIRRUS. Instead, they have agreements between some banks in Japan, but it is really difficult to tell if your bank card will work at any given ATM in Japan. It won't work at all anywhere else in the world, which is a real pain. You can also take any amount of money out of the ATM. I took out 6,000 dollars one time to send home!

Credit cards are just starting to be popular here, but almost all of them have annual fees, which pisses me off. Only large stores take them. Most people carry around some 300 dollars or more at any given time. They don't have personal checks, either, so it is a cash only society.

People save a lot of money here. They won't invest in the stock market because a lot of people lost money when the stock market crashed in the 90s. They are frightened of it, so they only invest in savings accounts, which all tend to lose money due to the low interest rates. I always see Japanese people shopping, but the newspapers say that demand in Japan is not as high as it used to be. I guess they used to buy things like crazy. Instead, everyone saves their money which worsens the economic problems. The only thing helping them now is a large trade gap between America and Japan. So, they are quite concerned about the dollar going down against the yen. It is making their products less competitive in America. Recently the yen has gone up again by 4 cents, probably because of intervention by the Japanese central bank.