Say you need a new refrigerator, rice cooker, toilet, or air conditioner. This could be because the old one broke, because you are moving into a new house, or just because it’s time for an upgrade. There are various ways to save money without sacrificing much, and we will go into them here.
Buy Used or “unused” – This is something many Japanese people don’t like to do, but you can turn their reluctance into your treasure. Used products are referred to as “Chuko” in Japanese. If you don’t want to buy something used, ask yourself if there is an actual logical reason, or it’s just a “feeling”. I know someone who tried snowboarding once, decided he likes it, and them immediately went out and bought a ton of snowboarding gear. I suggested he at least buy his first set used, but he scoffed, saying he wanted that new snowboard smell. “Sekaku dakara!” was a phrase he used, which means something like “since we’ve come this far…” or “If you’re going to do it, you may as well do it right”, but in this context, it’s really just an excuse. Predictably, he got bored of it, and the stuff sits unused at his house after just a few uses. When he does sell it, he would be very lucky to get half price – and then someone like myself can pick it up very cheap. Used stuff can be bought from individuals on places like Yahoo Auctions and Merucari, but also from stores that will clean, test, and warrant the items. If you need something small buy expensive like a camera, laptop or phone, this may be a very good option. Larger appliances such as washing machines and refrigerators are usually not a good deal, as when you buy new, you can typically have the old item disposed of quickly and cheaply. When you buy used, then you normally have to deal with the old item yourself – which can be expensive and time consuming. There are even “Mishiyo” (unused) items, which are new, but re-sold. This often happens if someone gets something as a gift but doesn’t want it. They sell it to a shop, who will then resell it to you.
Buy “kata-ochi shouhin” – aka last year’s model. Almost all items have a new version released by the manufacturer each year. The new version often costs the same as the old one, and so stores lower the price of the old one to make sure they sell out. Sometimes they will put it on deep discount just to get it out of the store. It’s simpler to manage fewer products, after all. Let’s say you are looking to buy a rice cooker – is the 2025 model that much different than the 2024 model? Probably not. It might have a new color, or an extra feature that you will never use – but it will be 99% the same. What won’t be the same, however, is the cost. Last year’s model will often be discounted 30% or more. The longer it sticks around, the more discounted it will be. It’s still new, and still carries a warranty.
Buy “teijihin”, or Display Models. Often stores have display models that they change out whenever a new product arrives. When the 2026 lineup of refrigerators is released, the 2025 one becomes old and they will sell those display models. Typically these might be moved to an outlet for sale, f.e. the Bic Camera Outlet store in Ikebukuro. Again, many Japanese people don’t like the idea of buying something that a lot of people have touched, but again this is more feeling than anything concrete. There is nothing wrong with a display model refrigerator or washing machine that a bit of alcohol spray can’t fix.
Shop around. Stores that offer points, such as Bic and Yodobashi, often don’t have the best prices. The items that they offer fewer points on are the ones they are making less profit on, which means they are typically a better deal. Accepting various payment methods such as credit cards also means they need to pay fees to the payment processors. You can buy from a store that only accepts bank transfers, and they will almost always have the exact same product for less. You can search for almost anything at kakaku.com or Hikaku.com, or other similar sites.
Consider installation & disposal cost. Larger items such as refrigerators can be difficult to dispose of, and some items such as air conditioners need special installation by a professional. Disposing of an item on your own can sometimes mean waiting for weeks, whereas if they pick up the old item as part of the service when you buy a new one, it will likely be very fast and fairly cheap by comparison. A used refrigerator might be cheaper than a new one, but when you factor in the time and money needed for disposal, buying from a place like Yodobashi is probably the way to go for larger appliances if you are replacing a broken unit. Likewise if you got an air conditioner dirt cheap but it simply arrives in a box, then you need to search for someone to install it for you. If you saved 10,000 on the AC unit compared to a major retailer, but the installer charges you 20,000 to install it, then you’ve gained nothing and lost time.
Ask about government rebated and discounts. Local governments often will pay you to upgrade to a more energy efficient appliance. You can typically file by yourself after the fact, but stores like Bic and Yodobashi will actually do it for you and give you the discount on the spot if you provide photos of the old appliance.
Personal Experience
This last year has been an unlucky year in that a lot of things have started breaking, and also I bought an investment property that I had to renovate. Hence I have bought a lot of appliances.
A friend had a lemon of a bike that kept breaking. Everything she fixed something, a different part would break. I told her that her dedication to that bike was admirable, but perhaps it was time to buy a new one. When we went to the store to look at new bikes, we mentioned to the sales person that we would be willing to look at last year’s model if it was cheaper, and he happily led the way. He was happy to get rid of it, and my friend was happy to save the money. (about 20% savings).
The refrigerator I currently use was a display model from Bic Outlet (About 30% savings).
In renovating the new property, I specified the maker and features I wanted for the air conditioner, toilets, windows, etc. I told them “It should be 2022 model or newer”, and the contractor sought out 2024 models that were available at a discount. This saved at least 20% – multiply that by 5 air conditioners 2 sinks, and 2 washlets.
Also as part of the renovation, I needed to replace the old refrigerator. I asked Yodobashi staff, and they told me that I could get a 20,000 rebate from Tokyo for upgrading, so I saved about 33% on the new 60,000 JPY refrigerator. In addition to that, I saved a lot of money and time on the disposal of the old refrigerator, because Yodobashi picked it up the very next day for 5,000 JPY, whereas it would have cost a lot more and taken weeks with the “normal” process.
Finally, I needed to replace all of the lights as part of the renovation project. Again there was a rebate of 4,000 yen each, for all of the incandescent and florescent lights I replaced. A helpful staff member at Bic Camera told me about this once I mentioned I was replacing old lights.
For all of the appliances like microwaves, rice cookers, etc., I found last year’s models on sale and looked onkakaku and other sites to find the best deals.
Here’s the thing. Everything I bought was brand new, and all of it was Japanese brands, under warranty. I didn’t have to buy suspicious stuff from brands I’ve never heard of on Ali Express or Wish, I didn’t need to really lower my standards at all. Nobody renting my house is going to complain “Hey, this is a 2024 model air conditioner!”, or “I think this refrigerator might have been a display model!” Nobody, including me, will notice the difference, and yet I saved hundreds of thousands of yen (Thousands of dollars) in outfitting a small house.
I have been asked by friends and classmates about credit reporting in Japan, and how it works. For example, people have asked me “Is there such a thing as credit reporting agencies in Japan?” “Do the agencies that report overseas also report in Japan?” “Will Japanese banks check overseas credit reports?”, etc. I hope to answer these and more.
If you are living in Japan and applying for credit with Japanese companies (or foreign companies with a Japanese presence), they will almost for sure check your credit information (信用情報).
In this post, I will cover the credit reporting system in Japan, including the agencies, common questions, and best practices.
What are Credit Reporting Agencies?
In many countries, credit reporting agencies exist. These are organizations that collect and provide credit information on people. The information they collect and report on includes credit card information, loan usage history, and bill payment. Generally, for each loan the following are reported: The date the loan was taken our or the account was opened, available credit, credit used, credit available, and payment history.
Financial institutions like banks and credit card companies will use this information to decide whether to lend money or not, the credit limit, and interest rate they will charge.
One major purpose of this information is to prevent debt overload and help insure people maintain a healthy financial balance.
The major credit reporting agencies in Japan
In Japan, there are three main companies:
CIC (Credit Information Center Corporation): This company is mainly owned by the credit card companies and credit finance companies.
JICC (Japan Credit Information Reference Center Corporation): Members include consumer finance companies, credit card companies, and banks.
KSC (National Information Center of Japan): Operated by the Japanese Banker’s Association (全銀行協会), most members are banks.
Each agency has different types of members, so the credit report used is usually determined by your use case.
Credit Reporting Details in Japan
Information Stored
In order to make sure the correct credit report is provided, information such as your name, date of birth, address, and phone number(s) are used to identify you. Note that unlike some other countries, your Tax ID numbers (MyNumber, Pension Number, etc.) are not recorded or used for these purposes.
Contract details for loans and credit cards. This includes the date you entered into the contract, the type of contract, amount you owe, the amount remaining, etc.
Payment status including payment dates, whether there have been missed or late payments, etc.
Recent Inquiry information, when will list who has checked your credit report, for what reason, and when.
In the case of KSC, information about bankruptcy, financial reorganization, etc., is also included.
Information not stored
Some information is not stored on your credit report:
Bank account and brokerage account balances. If you want these to be included when you apply for a loan, then you need to ask the bank for an official balance statement (残高証明書) and provide this to the potential lender.
Overseas accounts of any kind. Credit reporting agencies in Japan don’t receive input from banks, utility companies, or credit card companies overseas. If you move to Japan you are starting fresh.
It’s also important to note that most companies won’t try to check your overseas credit reports either. In some cases, if you have used the same company overseas, they may share the account information internally to know your history with them.
Data Retention Period
Once a contract ends (For example, when a loan is paid off in full), the information is usually kept on file for about 5 years.
Delinquency Information is usually kept on file for about 5 years after it has been resolved.
Information such as bankruptcy and financial reorganization is usually kept for around 7-10 years.
It’s important to understand that information can stick around on your credit report for years to come, so you really want to avoid any negative information such as late payments, etc., and resolve any missed late payments as soon as possible.
When if your credit report checked?
When you apply for a credit card
When you apply for a loan, including house loans, car loans, education loans, “card loans” (Cashing), etc.
Whenever you use a guarantor company as part of renting an apartment.
When you sign up for mobile phone service, in many cases. This is particularly true if you sign up for a plan where you are not paying for the phone up front in cash.
There may be other scenarios as well, for example if a landlord decides to check your credit, or as part of a larger background check.
The Blacklist: When it all goes bad
When you have a long term payment delinquency (you are behind in payments for a long time). 1-2 days is not usually an issue, but months of late payments will be a large issue for sure. Make sure you pay on time, every time.
Bankruptcy or financial re-organization – Anything like this is a black mark that lasts for a while.
Any time a guarantor company needs to pay out because you didn’t.
When a credit card company cancels one of your cards involuntarily.
Note that there isn’t actually a “Blacklist”, but if a lender pulls your credit report and it is full of late payments, etc., then they are basically not going to loan you money.
Best Practices
Make sure you pay on time! This is by far the most important point. If you know a credit card or utility payment is coming, then check the balance of the bank account it will be deducted from before-hand. Check the balance of the upcoming payment, and make sure you have enough in the associated bank account to cover it. Also check after the payment was scheduled to be made to make sure it actually was. If there are any issues, contact the company immediately, and arrange to make a payment the same day. If you receive a paper bill, make sure you keep it somewhere where it is easy to find or notice, and put a note in your calendar to pay it on time. If you have a choice of when the payment date falls, make it as close to (but after) your pay day as you can.
Use credit card cash advances and “Cashing” cards sparingly – These types of loans are recorded separately, and many lenders will look at this as a negative. Often people need to borrow cash because they don’t have any on hand, and it can indicate problems with gambling, etc.
Avoid many applications in a short time period – Be aware that credit applications are recorded, and if you apply for lots of credit cards or loans at the same time, it tends to make banks worry that you might be in financial trouble. You should try to keep it to under 3 applications per 6 months. Note that for some types of loans, such as mortgages, “Shopping” is considered normal and may be overlooked.
Check your own credit report regularly – You should grab a copy of your credit report from each of the agencies about once per year and have a look. You want to look for any incorrect or outdated information, and contact the credit reporting company in case there are any such issues. You can apply online for a copy of your credit report from each agency. (A small fee may apply).
Only borrow as much as you need to – Just because you can borrow doesn’t mean you should borrow. The more you borrow, the harder it will be to pay back. If you owe money, then you can’t sensibly invest money, and investing money is the key to financial independence. Therefore, when it comes to credit cards, only spend what you can afford to pay back in full in the next month. Even zero interest shopping loans can add up if you purchase multiple items.
Prepare ahead of time for large or important loans – You might want to get a copy of your credit report a few months ahead of time to make sure that you don’t have any surprises when you apply for that important loan. A few months is generally enough time to pay off any loans you had forgotten about, correct mistakes, etc. It’s generally a good idea to have one credit card or other loan to build credit, so that when the time comes, there is something on your credit report.
How to repair damaged credit
If you are denied a loan, check the reports and understand the facts.
Make sure you pay the minimum payment on all loans and other bills, and then work on paying off any accounts you are behind on. If there is no way to pay everything on time, then it is better to be late on one account than two or more.
Beware of “Credit repair” companies, these are generally scams. There are legitimate ways to consolidate debt, negotiate your debt, etc. These are something you should consider if there is truly no way to get ahead, however bear in mind that these will leave a black mark on your credit report for 7 years or more.
Realize that it will be hard to get new credit and may be restrictions on existing accounts until you pay things down or get the information corrected.
If the problem is not errors, but overspending, etc., then fixing your behavior should be the priority. Even if you pay everything off, you don’t want to fall into the same trap again.
The Application Process and Criteria
When you apply for a credit card, home loan, or any other type of loan, the bank will do an screening assessment (審査), in order to determine whether they want to loan you money.
They will pull your credit report as part of that process and examine the information in the report. For example, they will check the following items:
your payment history
The percentage of available credit you have used
The number of open accounts
The length of your credit history
The number of recent applications.
They will also check your history with their own institution, and with any guarantor companies they are affiliated with. (Note that this information does not go away when it ages off of credit reports, as they could keep information internally forever!)
Aside from that, though, they are most concerned about your “stability”, this is reflected, in their mind, by things like:
Your address history. The longer you have been at your current address, the better. The less you have moved in the last 10 years, the better. If you haven’t lived at your address for at least 2 years, this will generally be seen as a negative.
Your employment history. Much like address, the longer you have been at your current employer, the better. The less you have changed jobs, the better. If you haven’t been at your current employer for at least 2 years, it will be seen as a negative. Larger, more famous, and more Japanese companies are generally seen as more stable.
Income Amount and Stability – They will ask for your income information as part of the application process. If your income varies by a huge amount because you are in a profession like sales, then that will count for less than a smaller but more regular salary.
They may ask you to give an official bank account balance statement. This is more to show that you have enough to actually make the down payment, etc., than anything else.
In general, banks don’t care as much about how much you have or how much you make, compared with your stability and payment history. From the bank’s point of view, just because you “can” pay doesn’t mean you “will”. For example, even if you make 12M JPY per year and have 50M in cash the bank, but you change jobs every 18 months, move often, and have a lot of late or missed payments, nobody is going to loan you money.
Also note that Japan doesn’t have an equivalent to the “FICA Score” used in the US. For example, CIC does provide an “Index” (指数), but the other two agencies do not as of now, and this is not consistently used by lenders either.
Personal Experience
Although I am not a foreigner, I do have friends who are foreigners, and I also extensive experience with the credit system in Japan.
Missed payment by 1-2 days
I have has this happen a number of times, often because I forgot to transfer money into an account where the money was taken from.
It’s important to call the company in this case, because some companies will try the deduction again later that day or next day, whereas other companies will only try once, and you will need to send them the payment manually if it doesn’t go through.
I always check on the scheduled day of the deduction, and if it hasn’t happened by noon, then I will call the company, so I can take care of the problem on the same day if possible.
Generally if you have to pay manually, it will involve doing a bank transfer. If the payment is late, there are generally not late fees, but there may be additional interest fees, so be sure to check the exact amount you need to send.
In some cases, you may also be able to pay at an ATM or in person.
Overseas Loans – I had private student loans overseas, and when I mentioned this to a loan officer at a Japanese bank, he said “I didn’t hear that”. They don’t check overseas credit reports, and they don’t want to know.
Paying back loans and having that be reflected
In preparing to borrow about 2000 man for a loan, I decided to pay down some outstanding credit card loans, etc.
I grabbed my report from CIC, which was easy to do online because I had a Marui ePos card. This card can be used to both verify identity and also pay for the credit report fee (which was 500 or 1000 yen). Verification of my phone number was also necessary, and the reports were provided in PDF format for download. Subsequent reports within a week were free of charge, so you can pay once and download several reports. After about a week passes, you need to pay again.
When I took a look at the downloaded credit report, I was surprised to see not only credit card information, but also the outstanding balance on shopping loans for things like my mobile phone and bike.
Technically, the credit reports update every day, but some of the updates may only happen once per month. This is because your credit report will only be updated when the creditor reports your latest status, which is often only once per month.
Some of the loans I paid in full updated as “paid in full” to my credit report within a few days. Some took over a month to reflect on my credit report. In the meantime, I asked those places to provide me an official document stating that my loan had been paid off in full, so I could give that to the bank while the credit report was in limbo.
This is why getting a copy of your credit report several months ahead of time is a good way to prepare for applying for a large or important loan.
Considering financial re-organization
Many companies (often legal firms) will market to people in trouble with debt. Usually they will say “Our method is legal and recognized by the Japanese Government!”
This is true, but this method called “Financial Reorganization” (債務整理), which usually means debt restructuring or debt consolidation in combination with some negotiations with lenders. The most frequently used method is “Voluntary Liquidation” (任意整理), which avoids the costs and delays involved with the courts. The company operating on your behalf would seek reductions in the interest fees, etc.
I actually discussed my situation with one of these companies after graduating college since I had student loans debt and some other debt. My intention was only to try to consolidate debt and/or get a lower interest rate.
After discussing with them for a bit, I realized that they were advocating voluntary liquidation and consolidating with them. I asked “Why would the company let me pay less than I owe?”, and they said “Well they have already made a lot off of you already… We’ll convince them to be happy with the interest they collected so far instead of nothing. We’ll tell them you can’t afford to pay, get them to lower the amount, and then we’ll pay off the loan and add it to the consolidation balance”.
Once I realized this was a liquidation service, I thanked them and terminated proceedings. This is because I didn’t actually have any problem making minimum payments, and didn’t want to back out of my commitments. I also didn’t want to have a bad credit report for 7 years just so I could save on some interest – there are other ways.
Speaking of bad credit reports, I know a person who was applying for a home loan with their wife, and was rejected. When they asked for the reason, it turned out that it was because their wife did a liquidation 13 years ago. This information was gone from the credit report, but the liquidation affected the bank the husband had applied to, and they kept internal records forever. They ended up applying to a different bank and not listing the wife as a co-signer.
Cancelling credit cards
When I went to college, I was offered a credit card. When I started working, I was offered a lot of credit cards. Just a few at first, but since I always paid them, the amount grew rapidly over time.
Marui asked me to sign up for a discount on clothing. That sounded good, so I did. That store card turned into a Visa card, then a gold card, then a platinum card.
Likewise, NTT asked me to sign up for a card to get a discount on my internet service when I signed up for FLET’S Hikari. Sure thing.
When I got a new cell phone through NTT Docomo, they asked me to sign up for the DCMX card.
My company had me sign up for an SMBC Corporate sponsored card for business trips.
Japan Rail suggested I sign up for the View Card to get discounts and points on Shinkansen tickers.
I had an Amex Green Card since college.
Then BIC asked me to sign up for their card when I got new phone shortly after graduation, but then rejected my application.
I tried to sign up for MUFJ Amex Platinum (Also shortly after finishing college) and was rejected, but a few years later they sent me pre-approved offer for the same card. I signed up for it mainly out of revenge.
Basically every time I went shopping somewhere, they would offer me discounts to sign up for their card, so Lumine card? Sure. Muji? Why not. Yodobashi? Sure.
A few years ago I sat down looked at the growing pile of cards, and decided “This is crazy”. I mean, I had two cards just from different subsidiaries of NTT! Many of these cards had one single charge on them every month. My phone bill was on one card, my electric bill on another, etc. Some had small yearly feed. Some had huge yearly fees. Some also had extremely high limits and benefits I didn’t use. I remember by MUFG card had a limit of like 500 man yen, and my Marui card 300 man. Those two also had high yearly fees for things like airport lounges, which I rarely used.
I decided to simplify my life, and consolidated all of the cards down to just two. I checked online about the impact this might have on my credit reports. To summarize, it looks bad if you close a bunch of accounts at once. Perhaps they think you are preparing to go into hiding, commit suicide, or flee the country. Anyway, as a result of this information, I started cancelling 1 card every 4-6 months until I was down to just two cards.
One Take-away lesson: Considering how easy it is to sign up for credit cards, canceling them can be a royal pain. Some involved a simple phone call, but for others I had to go in person, bring documents, ID, my inkan, etc.
Paying Paper Invoices (払込票)
For some bills, they send paper invoices. In fact this is the case with almost all bills at first until you can switch them to direct debit or credit card payments. It’s easy to forget that these will arrive, and be caught short-handed.
If you only have one bank account, you might look at the balance and think “I have plenty of money left”, and then you get a bill in the mail for 27,500 JPY after you’ve spent most of your cash. This isn’t a fun situation, but there are some ways around it.
Have the companies charge your credit card. This is nice because you pay all your bills at once (when the credit card is due), and you know how much it will be usually several weeks ahead of time. Some companies will charge more for this, however, and many don’t offer it as an option.
Have the companies direct debit your bank account. While this is less work than paying in person, it also means that you may still be surprised by the amount and timing if you don’t really keep on top of things. Still, if you know that your bills generally add up to X per month, you can make a separate bank account that has X + B, where X is your estimated total from all your bills and B is some buffer amount. Every month when you get paid, you transfer enough money to bring the account back to X + B. This way, you don’t see the money in your mail account and aren’t tempted to spend it. One downside is that many companies don’t support minor banks for direct debits. For example, View Card doesn’t support PayPay bank.
You can pay the paper bills using PayB or Mobile Regi, phone apps that let you scan the bar code and pay from your bank account. Here, at least you can control the timing somewhat, since you can pay them before they are due from the app out of your bank account (which again can be separate from your account).
You can pay paper bills Using Nanaco. This is not true for all bills, but most can be paid via Nanaco. Since a Nanaco card can hold 20 man JPY, you can actually put money into a Nanaco card (or your mobile Nanaco) each month for things like property taxes, milk delivery, etc.
Official Balance Statement (残高証明書)
If you have a bank account with a passbook, then that is actually quite convenient when banks ask for an “official record” of you account, as a copy of your passbook is typically enough.
If not, then you can often provide evidence in two stages.
First, you take a screen shot of your online banking information. This screenshot should include at a minimum, your name, the account number, the date, and the balance. They will usually start the screening process if you can provide this.
For final confirmation, you will need the bank to provide an official statement of balance. This will be printed on fancy paper and have the bank’s official seal. If you are dealing with a net bank, then you can typically order this online and they will mail it to you. If you are dealing with a brick and mortar bank, then you may need to go in person to request it and wait a week or more.
Because this can take time, I highly recommend you apply early.
Proof of Income
Typically banks will accept two types of proof of income, and may ask for one or both.
Tax Records – There are two types, one for the current year that shows taxable income (課税証明書), and one for the previous year that shows taxes actually paid (納税証明書). These can printed at city hall, or in some cases at convenience stores like 7-11.
Remuneration Statements / pay slips (給与明細) – These would be provided by your employer, either on paper or PDF.
I have been asked for these things when applying for loans.
Proof of Employment
Banks might ask you to provide proof that you are currently employed, with the company you say you are, and to check the type of contract, date you were employed, etc.
In this case, you can ask your employer for a certificate of employment (在籍証明), which would list the company name, your name, the date of employment, type of employee, and often some other things like your base salary. Most importantly, it will have the company’s stamp, so they know it hasn’t been tampered with.
I have been asked to provide this as well when applying for loans, and my company has always been cooperative.
Other Documents
Other common documents you might be asked for are your residence register (住民票) and inkan registration (印鑑登録証明書). These can both be printed at city hall, or a convenience store if you have your MyNumber card set up to allow this.
Foreigner experience 1: I know one person from Taiwan who moved to Japan on a work visa and was able to set up a phone contract with an installment plan almost immediately. After several years in Japan, they applied for citizenship and were able to get a home loan.
Foreigner experience 2: I know one person who was here on a student visa and got a phone from Docomo without issue. They lost the phone, and decided to stop paying the bill even though they were on an installment plan and the phone was not yet paid off. This had a negative effect on their credit since they still owed Docomo money, and they weren’t able to sign up for a new phone several months later. They realized their mistake and paid the phone company, but were still not able to sign up for a new phone via the normal routes. Their phone was eventually found and returned by the police, but it was too late by then. They eventually signed up for a kakuyasu SIM plan with no contract and bought a new phone in cash.
Foreigner experience 3: I know one person married to a Japanese partner who was asked by a store to sign up for a credit card. She was surprised when they were approved.
Foreigner experience 4:I know another person married to a Japanese partner who has no problem signing up for credit cards and home improvement loans, but hasn’t been approved for a home loan. This is likely partly because they are on a spouse of Japanese national visa and not a permanent resident status, and partly because they work in sales. Even though they work for a major Japanese company and their average salary is quite high, the variability in pay is also quite high and the guaranteed salary is low. This person is also quite wealthy and had no problem buying a house in cash, but that alone didn’t convince banks to lend to them.
Other Oddities – Borrowing more is lower risk?
In general, when investing you will find that higher return requires taking on more risk. Likewise, a desire to expose yourself to less risk means earning a lower return.
If you think about it, a bank loan is just a bank investing in you. That means the more risky they think you are, the more interest they will charge. On the other hand, the less risky they think you are, the less interest they will charge. If they think you are extremely risky, then they simply won’t lend to you at all.
This is why, for example, loans with collateral such as home loans typically carry less interest than unsecured loans such as credit cards.
There is one part of the Japanese system that might surprise you, however.
If you apply for certain types of loans, you will find that they will decide your maximum balance and interest rate together.
For example, have a look at this advert from Sony Bank:
https://sonybank.jp/lp/cl/02.html
Here they say something like “Let’s have fun now with Sony Bank’s Card Loan”. Yes, great idea, have fun now, pay them lots of interest later. This is essentially a loan similar to the cash advance feature of your credit card. You can take out cash, spend it on anything you want, and have to pay a lot of interest.
Anyway, the interest is listed as 2.5% – 13.8% APR, and the amount you can borrow varies from 10 man JPY to 800 man JPY.
Normally, I would assume that the more they lent someone, the riskier that would be, and so the more interest they would charge. As it turns out, I would be wrong, as they also include this helpful table listing the possible loan amounts and corresponding interest rates:
https://sonybank.jp/lp/cl/02.html
Notice something funny? The more you are approved to borrow, the lower your interest rate becomes!
This is because they don’t think of risk as a function of how much you are borrowing from them, but instead as a function of your income and credit history.
If you don’t owe any other debts, have a great credit history and a high income, they may well approve you for the highest bracket. You can borrow a lot of money and for very cheap.
On the other hand, if you don’t have a great credit history, your income isn’t that high, or you owe debt elsewhere, you will be stuck with both a low limit and a high interest rate.
For this reason, it is often better to get one large loan from one company than several small loans from various companies.
Considerations for Foreign Residents
As a rule, foreign residents fall into one of a few categories:
Short term residents and non-residents – These people generally are not even eligible for bank accounts, much less credit.
Medium term & Long Term residents – These people are not always considered for loans by all banks. Banks may feel that they could leave the country suddenly with unpaid debt. Generally getting credit cards and small loans such as shopping loans and mobile phone loans is not an issue if they are employed. Some banks are more generous than others in this regard, and banks will generally be more lenient to people who have been in Japan for a long time, and those married to a Japanese spouse.
Permanent Residents – People with this status are generally treated by banks the same as if they were Japanese citizens.
Foreign debt not showing up in Japanese credit reports can be both a curse and a blessing. On the one hand, since you will start off fresh in Japan, any bad credit history you may have had overseas is effectively erased. On the other hand, that also means that years of diligence in paying off your loans is not going to help you either.
Conclusion
Credit Reports are similar to a report card for your finances.
Credit reports are not complex, they are just a listing of your debts and payment history.
An understanding of how credit reports work in Japan, what information is recorded, and what matters, is important to making sure you will be able to apply for credit when needed.
Future Posts
If you want to see samples of actual credit reports or detailed guides on how to apply, then please contact us via the contact form to vote for this.
There are three main categories that get deducted from the paycheck of the average worker in Japan:
[National] Income tax (所得税)
Local [Income] Tax（住民税）
Social Insurance (Including Health insurance and other types of insurance)（社会保険）
We’ll call the sum of these three categories “Tax” in a broad sense, since they all get paid to the government in one way or another.
If you have a family where only one person works, they can claim other people sigh as a spouse or children as dependents. This can both lower and raise the overall tax burden. Basically speaking, claiming a person as a dependent will lower tax burden of the primary earner, while raising the fees for social insurance.
Basically, National Income tax ranges from 5% to 45%, depending on your level of income and deductions. Many people make the mistake of thinking that national income tax is charged against their salary, but it is actually charged against their taxable income (課税所得), which can be reduced through various means.
Local taxes are normally fixed at 10% of taxable income, but this can vary slightly in some locations.
Simply Speaking: Taxable Income = Gross Income (Salary) – Deductions.
This means if you want to lower your taxes, you need to lower your taxable income.
Of course you could lower your taxable income (and taxes) by lower your salary, but the amount of money you keep would also be lower!
The other option is to reduce your taxable income by increasing the amount of deductions. If you do it this way, you get to keep more of your income for yourself.
Deductions
The most basic Deduction is the “basic deduction” (基礎控除) – in principle, this available to everyone. At present, this is 48 man yen – but the rule is scheduled to change to 58 man yen in December of 2025. The amount will likely change.
If you earn a salary at a company, then you also get the “Salaryman Deduction” (給与所得控除) – Which is meant to cover minor expenses of working at a company such as buying suits, shoes, etc., rather than itemizing them as you might do if you ran your own business. This deduction is 65 man yen.
Souse Deduction (配偶者控除) – If you have a spouse that has a very low pay (less than 45 man yen per year) or doesn’t work at all, then this deduction can be applied.
Special Spouse Deduction （配偶者特別控除）- For those with spouses who earn less than 133 man/year.
Family Deduction （扶養控除）- For those with dependent parents or children who earn less than 48 man yen. (The exact amount of this deduction depends on the situation of the family member. More information cab be found here).
Disability Deduction (障害者控除) – If the earner or a dependent family member is a disabled person, then this deduction can be applied.
Survivor Deduction（寡婦控除）- Currently applicable for surviving wives in situations where the husband has died. This is usually 27 man yen, but there is a also a special deduction of 35 man in some cases. You can find more details here. This looks set to be changed in the near future for gender equality.
Single Parent Deduction （ひとり親控除）- This deduction is for single parents. Both males and females can make us of this deduction)
Working Student Deduction (働労学生控除) – For working students with low income.
Social Insurance Deduction （社会保険料控除）- Basically for people who are paying for company sponsored health insurance.
Small Company Pension Deduction （小規模企業共済等掛金控除）- This is for those with an iDeco account. Unlike other deductions, this one can only be used by the earner themselves.
Life Insurance Premium Deduction （生命保険料控除）- This has a maximum of 4 man yen per contract for a combined maximum total of 12 man yen / year. It’s important to note that this doesn’t mean your taxes could be reduced by up to 12 man yen per year, as they can be reduced by at most 12 man x your tax rate. More information can be found here.
Earthquake Insurance （地震保険料控除）- As the name states, but most earthquake insurance isn’t easy to pay out, so this may not be a very good deal. More info here.
Donation Deduction （寄附金控除）- For people who have donated. See here for hometown tax, and here for other donations.
Medical Fee Deduction （医療費控除） – For those who have paid a substantial amount of medical fees during the year. more details can be found here.
Disaster Deduction （雑損控除）- For those who have experienced a natural disaster or other major loss. More information can be found here.
Housing Loan Deduction （住宅ローン控除）- This can be used to claim the interest on housing loans, etc. – but given that if you choose a home with poor resale value your loss will be major compared to the small amount of this deduction it deserves careful thought. (Especially any new homes will almost certainly be sold at a loss eventually).
Basically all of these deductions are designed to lower the tax burden for people who have tough situations or have already paid a lot elsewhere.
There are two main ways that taxes can be filed for most people.
Year End Adjustment (年末調整) – This is where the company files your taxes for you at the end of the year based on the information they have.
Tax Return （確定申告）- This is when you fill out a tax return and send it to the tax agency on your own.
For most people working at a company as an employee, it isn’t necessary to file a tax return.
Situations where you need to file a return include:
When you have multiple sources of income.
When you have income over 2000 man yen per year
When you want to claim deductions that aren’t within the scope of the year end adjustment.
So what kind of things do you need to claim yourself?
Hometown tax – This is handled as a donation. (Though you can use the one stop site instead of filing taxes if you are donating to 3 or fewer locations).
Medical Expense Deductions – You can claim medical expenses you had to pay over 10 man yen in the year. You can apply for expenses incurred up to 5 years ago. This always requires filing a tax return.
Spouse & Family Deductions – This can be applied when there is a dependent spouse, elderly parents, or young children, etc. Note that the key word here is dependent. If the person is working and earning a significant amount, then it may be better not to claim them as a dependent. The intent of this deduction is to allow for at least a minimal level of income per person. Note that this deduction is also scheduled for a major revision in December of 2025. Even though this is something you must apply for, you can do it via your company instead of filing a tax return.
While many of these deductions only apply in special cases, some apply to nearly everyone. In addition to that, almost everyone can use the hometown tax system. You can also use the 401k at your company if they have one, or iDeco if they don’t have one. The more you increase deductions, the lower your taxable income, and therefore taxes will be – This will leave more money in your paycheck, or at least your retirement account.
Who benefits from Spouse & Family Deductions?
First, the people who will lose out if they use these deductions are those who don’t use the deductions to their fullest, those who those who stay registered as dependents when they shouldn’t, and those who earn too much money for it to be worth while.
People will win out are those who will use the deductions they can, those who will make money even if they are not dependents, and those who will pass a minimum level of income.
Obviously, you should use any deductions that are available to you. If you are the breadwinner and you have a dependent family member who lives with you and earns a low income, then you should claim them as a dependent. This normally means you need to fill out a form so that the HR department at your company knows the situation and will adjust payroll accordingly. If for some reason you don’t want to share this information with your company, then you will need to file a tax return with this information.
It’s important to remember that the purpose of spouse & family deductions is to maintain an absolute minimum standard of living, not to enrich people who don’t work. Therefore, it does not make sense to try to limit your income to keep your status as a dependent. If you earn too much to be counted as a dependent, then you are earning enough to file for taxes on your own and receive your own deductions. The idea of “If my wife earns more than 103 man per year then I won’t be able to keep the spouse deduction” isn’t wrong, but the conclusion that this is a bad thing is just not right. The husband will pay more taxes in this case, but the wife will pay less taxes. Even though there is a grey area where the total net income will be less from working more hours, this grey area is constantly changing, well past 103 man, and anyway will quickly be passed through by most people (more details below).
Therefore, the correct way of thinking is for everyone in the family to earn as much as possible – but also use whatever deductions make sense given your current situation. If a family member you could claim as a dependent starts earning more, then even if they are removed as a dependent, and both taxes and social insurance increase – the total net income of the family will generally increase – and isn’t that a good thing?
One other thing that bears mentioning is that the tax rate only applies to the amount above each level. For example, the highest tax rate is 45%, but not only does that 45% not apply to the person’s gross income – it also doesn’t even apply to their entire taxable income. The 45% only applies to the income after 4000 man yen. This means there is no sense in fearing earning enough to put yourself into the next tax bracket. Entering the next tax bracket only means income above that amount will be taxed at a higher rate. You will still always end up with more in your pocket if you earn more, even if the tax rate and the tax paid increases.
While the above is 100% true for a primary earner, there is indeed a grey zone for spouses where the total net income can actually go down from working more. This is basically the area between 130 man to 150 man per year for most spouses. This “wall” will move each year as minor changes to the law take place, so rather than trying to manage your income to stay below a certain limit, it makes more sense to earn as much as you can, and then apply whatever deductions you can. In short, if you can earn 130 man, you can probably earn 150 man and be out of the valley anyway.
If your only goal in life is to avoid paying taxes, then you will severely limit your chances of income for your and your family.
The last thing to mention is that adding someone as your dependent for taxes will lower your tax bill and save you money, but adding them as your dependent for health insurance will raise your insurance premiums and cost your money. Because of this, you may want to go to HR and ask them about the total combined effects of any changes you are considering before adding or removing a dependent.
This topic isn’t specific to Japan, but it does affect Japan more than many other countries for reasons that will become clear. Even if you are not reading from Japan, please feel free to continue reading, as this may well save you a lot of money anyway.
The Purpose of Insurance
The concept of Insurance dates back to at least 3000 BCE, where it was practiced in China by pooling goods and dividing them among multiple boats.
Modern insurance was born from the ashes of the 1666 great fire of London. Over 10,000 houses were burnt down, and fire became a major source of fear among the public. The first modern insurance companies were formed in this period to cover fire and marine ship loss.
The basic idea was as follows. A house is a very expensive asset that most people only buy once, if at all. It is the most expensive thing most people ever buy, and they may spend many years paying for it. If it burns down, they can’t ever recover. Since the majority of their assets may well be tied up in the house, they may become bankrupt without a place to live.
There is only a very small chance that a particular house will burn down in any particular year, but if your house does burn down, you are ruined and homeless. The risk is small, but if you win the unlucky lottery, the result is catastrophic.
Insurance is a way to spread the risk over a large number of people, so that instead of a few unlucky people losing their houses and going bankrupt, everyone will pay just a small amount.
Let’s use the example of a $250,000 USD house.
Without insurance, if your house burns down, you are out $250,000. If it doesn’t burn down, you are down $0.
Let’s say that through data analysis, you learn that the average chance of a house burning down is 1 out of 5000, or 0.02%.
This means that on the average year, if you have 5000 houses, one will burn down.
If you divide $250,000 by 5000 houses, you will get an average cost of $50 per house per year.
To put it another way: If you were able to gather 5000 people, and convince them all to pay $50 per year, then you would gather $250,000 per year.
If one of the houses burns down, you can use the money you gathered to buy a new house to replace the one that burned down.
In effect, you turned a small chance of losing $250,000 into a 100% chance of losing $50.
Likewise, taking trips across the ocean can be perilous. There are huge storms and pirates, etc., so some ships never make it to their destination, or gave their goods stolen en route. This might only happen a small percentage of the time, but could bankrupt a small shipping company. Marine insurance can collect money from every insured sea voyage to cover the loss of a small percentage of ships or their cargo.
The above are ideal cases. In real life, insurance will cost more than the “expected value” because of the following:
Administrative fees
Fraud, and investigation to prevent fraud
The need to maintain a buffer because while there are statistics and averages, the future is not perfectly predictable. For example, an earthquake may cause many fires to happen at the same time.
For profit insurance companies will want to keep some of the insurance premiums as profit
Aside from the above, insurance is messy in real life because not everyone’s house will have the same risk of burning, or the same exact purchase cost. A concrete house is less likely to be damaged than a wooden one, and some houses can be repaired rather than replaced. Pirates robbing a ship cost less than if the ship sinks beneath the ocean.
Either way, the main point is that Insurance is a way of taking a large risk that you would never be able to handle without going bankrupt and turning it into a palatable payment instead.
Self Insurance
In the example above, the mathematically equivalent payment to cover a $250,000 house was $50 per year. If you owned 5000 houses, then you would be indifferent to buying insurance for all of them vs. not buying any insurance at all, because [assuming the statistics are accurate], you would be paying $250,000 every year either way.
In real life, insurance companies exist to make money, and even non-profit insurance cooperatives have administrative expenses, so if the “break even” fee was indeed $50 per year, the insurance premium you actually pay would be more – perhaps $60 or $70 per year.
This means that statistically, paying for insurance is always a losing proposition. If the insurance company is going to make money on average, then by definition the policy holders are always going to lose money on average. The point here is that most people don’t own 5000 properties, and can’t count on the law of large numbers to protect them. If losing one property would destroy you, then a small premium makes sense, to save you from the chance of losing it all.
If you could cover the loss, then insurance doesn’t make sense. In these cases, it makes more sense to “self insure” – that is, to set aside money to handle the losses that might occur. If you can do that, you will save money on average by avoiding the administrative costs and making insurance companies wealthy at your expense.
An Aside
Health insurance and Life insurance are outside the scope of this article because they aren’t really “Insurance” in the sense that we are defining here. Like it or not, we’re all guaranteed to get sick, and we’re all guaranteed to die.
In this sense, health insurance is spreading the cost of care among a large number of people so that you pay more than you otherwise would when you are healthy, and less than you otherwise would when you are sick – but unlike building fires, the chance isn’t that small.
Life insurance is also trying to protect against the inevitable, so in the short term it’s like buying a lottery ticket where you win only if you die.
Small Item Insurance and Extended Warranties
One thing that has become popular around the world in recent years is insurance on relatively inexpensive consumer goods. You can now get insurance on televisions, computers, toasters, tires, refrigerators, and mobile phones.
The important thing to know is that in all these cases the reason the companies offering these policies offer them is of course to make money. If they are making money, then in general you are losing money.
For example, if you buy a new refrigerator for $500 at Yodobashi camera, it will generally come with a 1 year warranty as standard. They will tell you “You can extend this warranty to 5 years by just using 5% of the points you get from this purchase!” This sounds great. The points were free anyway, right?
Well, not so quick. First of all, the points weren’t free. You could have gotten the same refrigerator elsewhere for 10% cheaper instead of paying more and getting 10% points. (If you don’t believe me, check kakaku.com).
Since we’re talking about a $500 refrigerator, then assuming you paid cash, you would get 10%, or $50 in points. Using half of those points is equivalent to paying $25 to insure your refrigerator. (Your refrigerator which you could have gotten elsewhere for $450…)
Since the refrigerator came with a 1 year warranty, you are essentially paying for 4 years of insurance. $25 divided by 4 years = $6.25 per year.
$6.25 / $500 = 1.25%, so the company is basically betting that the failure rate of the refrigerator is less than 1.25% per year. On other words, they are betting that they will only have to pay out on less than 1 our of 80 contracts.
So, I absolutely recommend buying products where this insurance is offered, since you can know that the company is confident that the product if reliable and will last a long time on average.
On the other hand, though, I don’t recommend actually buying the insurance. They are offering the insurance at the price they are because they are confident that they will “win”. Just like at the casino, the house always wins (on average at least).
Sure, you could get “lucky” and your refrigerator could break – but you’ll lose on average. The important question here is “Could I afford to cover the price of a new refrigerator?” This isn’t a $250,000 house, it’s a $500 refrigerator. If you can cover the cost, then you should. If you can’t, then you should take a hard look at your finances and bolster your insurance fund.
The same thing is of course true with computers, phones, and other items. If you’ve just bought a new computer to start your small business and you couldn’t afford to replace it, then by all means, buy the insurance – but your priority should be to get yourself into a place where you don’t need insurance.
I know it’s not what anyone wants to hear, but if you couldn’t afford to replace your iPhone Pro Max 16, then maybe you should look into buying an iPhone SE instead? If you pay 1,740 JPY per month, that works out to 20,880 per year. You can get a slight discount by paying for 2 years upfront, but either way, you are looking at around 40,000 JPY. That’s money that could have gone towards a new phone, but it is gone instead.
If you have a pet, then it would make more financial sense to start saving for medical expenses, instead of paying for pet insurance. If you can’t afford it now, then pay insurance while saving up.
Extended warranties are still the territory where one might say “It makes sense for some people”, because it’s something that has some value, even if it generates a profit for the companies selling it.
Insurance and Investment
This is where things get bad. While you should expect to lose money on extended warranties on average, financial products that mix insurance and investment are almost always in rip-off territory.
The first reason is because of lack of financial literacy. Many people don’t know what investment opportunities are available to them.
A supermarket Example
The second reason is because it’s hard to compare when you mix products.
Quick – Which is a better deal?
800g of rice for 1,000 JPY
1,100g of rice for 1,400 JPY
Most people would have a hard time guessing without calculating it out. Often people would assume that the larger package is cheaper, but that’s not always the case (and not the case in this example).
This is the reason many countries have laws where prices must be listed in cost per gram or cost per 100 grams.
Comparing Insurance policies
It’s easy to compare two insurance policies if they have the same coverage amount and restrictions, the cheaper one is a better deal. For example, if you want to insure your house against fire, and one company wants 5,500 per year while another will charge you 7,000 per year – well you should go with the 5,500 JPY policy.
It’s also easy to compare two insurance policies with the same premiums and restrictions – the one with the larger coverage amount is a better deal. For example, if two life insurance policies that are otherwise have identical terms, but one covers you for 10M JPY and the other only covers you for 9M. Obviously you want the 10M policy if everything else including the monthly premiums are the same.
In real life, since the restrictions, terms, and conditions vary, it might be difficult in practice to compare two insurance policies from different companies. For example, perhaps the 7,000 policy above is more expensive because it also covers floods. Is that worth another 1,500 JPY? It’s hard to tell unless you can find a flood only policy to compare it with.
Comparing Investment Products
Comparing investment products can also be simple in theory, but is often difficult in practice.
For example, if you are comparing two S&P 500 or TOPIX index funds, then it’s relatively easy. What they do is very well defined, so just choose the one with the lowest fees.
Comparing two REIT or High Dividend Index funds might be more difficult, though. The one with higher prices might have higher returns (and risk), or may just charge higher fees. Even here I would usually choose the one with lower fees, but the point is that the composition may be quite different for two supposedly different funds.
Mixing and Matching
Simple “Throwaway” Life Insurance (掛け捨て保険)
If comparing insurance policies and investment funds can already be difficult, then imagine how much harder it will be if you mix them into one product!
This is, of course, exactly the point. The fuzzier things become, the easier it is to rip off unsuspecting consumers.
Example:
You have a simple $1 million life insurance policy that charges you $100 per month. You start paying when you start working after graduating at 23 years of age, and you can continue the policy until you reach the retirement age of 65. That’s 42 years of paying $6k per year. The insurance company will have collected $252k from you by the time you are 65. Assuming you don’t die during that time, they don’t have to pay out anything. Meanwhile, they were investing that $252k and earning money on it, so they have, say $500k from the money you gave them.
They have determined that only 5% of people die before the age of 66, so if they sold this policy to 100 people, they would have collected $25.2 million that is now worth $50 million. They have to pay out $1 million claims to an average of 5 people from that group, so they pay a total of $5, leaving them with a profit of $45 million.
In reality, the insurance market is more competitive than that, so you would pay more like 15,000 JPY per month or so. In addition to that, most people would opt for something like like 20,000,000 JPY, not $1 million USD. As such, in reality, in Japan 10 year term life insurance rates range from ~4,000 JPY for people in their 20s to ~13,000 (females) ~23,000 (males) for people in their 60s.
Savings Life Insurance – Insurance as an investment (貯蓄型保険)
“Throwaway” insurance is all well and good. You pay for as much insurance as you need to cover your mortgage or expenses for any potential survivors above and beyond that and government programs such as survivor’s pension would provide.
But then the insurance salesperson gets a gleam in their eye, as they say “Or… you could choose our savings life insurance. You see, with the throwaway policy I just explained, you put in all that money over the years, and then it’s just gone. With the savings insurance, it’s an investment into your future. By paying just a bit more, you get life insurance and money will be left over. It is also great because you will earn more than the banks would ever pay you if you put that money into a bank account!”
Everything they say is technically true – but before you say “That sounds great, sign me up!”, let’s review a few things.
The disadvantages are so numerous as to boggle the mind:
Returns below the rate of inflation – Japan has been in deflation for decades, but recently returned to inflation again. The “Assumed rate of Return” for these policies is often below 1%, while inflation is now above 2%. This means even if your money “Grows”, it will be losing ground to inflation.
Assumed vs. Actual Rates – You might assume that since the rates are so low that they are at least guaranteed – but you would be wrong. Despite the marketing, the “Assumed Rates” they list are not a guarantee. Much of the profit comes from Japanese government bonds, and this yield fluctuates. Some insurance companies will invest in foreign bonds in order to earn a higher yield, but then currency exchange risk comes into play.
Low Surrender Value – In order to keep you from cancelling your policy, the refund you would get from cancelling is much less than what you have paid in – especially for the first 10-15 years.
High Costs & Fees – While insurance companies charge fees and take profits on normal throwaway life insurance, they are usually reasonable about since consumers can easily compare plans. With savings insurance, they go crazy. They take money for Agent Commissions (indeed, selling insurance can be very lucrative!), administrative costs, the insurance cost (obviously), and more. It’s very hard for your money to grow with all these fees eating away at it before it has a chance to hit critical mass!
Rigid Fixed Payments – You are locked into a fixed premium payment schedule. Missing payments can cause the policy to lapse and cause you problems. Having money in a savings account at the bank or invested in stocks at a brokerage would help during a time of financial distress, but having to make insurance premium payments when you can’t afford it will make your situation worse!
Inaccessible Funds – Your money is locked away. Unlike a bank or brokerage account, you can’t easily withdraw your own money! Sometimes you can take a loan against the value, but that means paying interest on something that was supposed to be making money for you.
Savings vs. Death Benefit – This is where many people have the most critical breakdown in understanding. The way it’s explained, many people believe that savings life insurance is basically normal throwaway life insurance that also comes with an additional savings component. What really happens is this: When the policy holder dies, the beneficiaries receive the death benefit only. The “savings” is the death benefit. Basically speaking, the savings is simply how the insurance company funds the death benefit in this type of policy. To put it another way, if you die before the surrender value break-even period, then your relatives will receive less than the premiums you paid!
Taxes – Some small amount of deduction can be made for life insurance policies, but the amount is truly trivial. Often salespeople will talk about tax deductions, without going into the details. Either they honestly don’t know, or they just don’t want you to know.
There is someone who will get rich if you buy savings insurance – it just isn’t you!
In summary, if you enjoy high fees and a low rate of return, then Savings life insurance is for you! I won’t look down on you – after all, I own stock in insurance companies, and I thank you for your patronage! All joking aside, savings insurance policies might possibly be a good idea for some super wealthy people who have already maxed out NISA and iDeco or company sponsored 401k accounts, in some situations.
Cultural Context
So why do people do it? Well everything explained have said above is true – but Insurance is especially popular in Japan.
If you ask your friends and co-workers about this, they might say “Oh you should sign up for savings life insurance. I do, everyone does – and you should too!” Before you take them too seriously, you should realize the factors in play. Their decision is almost certainly not based on calculations they have done, but social norms.
There are several deeply rooted cultural, historical, and social factors that contribute to the high rate of insurance ownership in Japan, even when the products may not offer the best financial returns. It goes beyond simple financial logic and is tied to a societal mindset.
Here’s a breakdown of the key reasons:
The Pursuit of Peace of Mind
This is a central concept in Japanese culture and a powerful driver for buying insurance. Anshin (安心) means peace of mind, security, and a sense of being free from worry. For many Japanese people and families owning a life insurance policy, especially one that combines protection and savings, is seen as the ultimate way to achieve peace of mind. It’s a psychological comfort, a tangible symbol of financial responsibility and preparedness for life’s uncertainties. The value is placed on this feeling of security, not just on the financial return. (Never mind that this peace of mind is a mirage).
This is not just a reason why people sign up for savings life insurance, but also for other types of insurance such as extended warranties, etc. Consumers get peace of mind, the companies get profits.
High Risk Aversion and a “Safety-First” Mentality
Following the devastating experiences of World War II and the “Lost Decade” of economic stagnation in the 1990s, the Japanese population developed a strong aversion to risk. This cultural trait is reflected in financial habits.
Preference for Stability: Japanese investors and consumers often prefer low-risk, low-return products over high-risk, high-return investments like stocks. They tend to favor savings accounts and government bonds, which offer stability even with minimal interest. Sadly, this means they often miss out on great returns they could be getting from their extra money. Even worse, savings life insurance policies aren’t just low return, but low flexibility and not really so low risk.
Fear of Failure: The cultural aversion to risk and failure is also a factor. In a society where lifetime employment was once the norm, leaving a stable job for a risky entrepreneurial venture carried significant social penalties. Similarly, a failed investment is viewed with much more severity than in some other countries. Insurance provides a “safe” way to “save” without the perceived risks of the stock market. (Again, savings insurance policies are often not nearly as safe as they may seem, but it is the perception that matters here).
Historical Context and Post-War Savings Culture
It’s important to understand that the history of Japan’s economic recovery after World War II played a crucial role in shaping financial habits for the previous generation.
Savings as a Virtue: Post-war economic growth was fueled by high rates of household savings. Saving money, whether in a bank or through an insurance product, was promoted as a virtue and a patriotic duty.
Savings Life Insurance as a Savings Vehicle: In the past, especially during the high-growth era, savings-type insurance offered attractive returns, making it a competitive savings tool. That’s no longer the case due to decades of low interest rates, the perception remains, and old habits due hard.
Government Policy: Historically, the government and financial institutions encouraged savings, and insurance companies played a significant role in absorbing these small individual savings to fund post-war economic growth.
Although these ways of thinking are a bit tempered among the younger generation, they have of course picked up habits and ways of thinking from their parents.
Aggressive Sales Tactics and Distribution Channels
Despite the poor financial returns, savings life insurance products are still widely and effectively sold in Japan.
Agent-Dominated Sales: The insurance market in Japan is heavily dominated by a vast network of agents who sell products through in-person meetings. High commissions for selling complex savings-type policies are an incentive for agents to push these products over simple, low-cost term life insurance. Insurance companies can afford to pay high commissionssince they are charging rip-off level fees.
Bank Retail Windows: Japanese banks also sell insurance products to their customers. This channel is a powerful sales engine, as consumers trust their banks without evidence and don’t scrutinize the products as much as they should. Honestly, don’t ever buy anything at a bank window! This is one of the best pieces of advice I can ever give. The megabanks charge high fees for everything they sell this way to make up for the low profit in their core business. This is true not just for insurance, but mutual funds, etc. – you name it, and they have a rip-off version of it. They have to fund those fancy offices somehow.
Misleading Marketing: The products are often marketed with an emphasis on the “savings” aspect and the “peace of mind” they provide, sometimes without a clear explanation of the low returns, high fees, and the fact that the cash value is typically not paid out in addition to the death benefit. In some cases, sales scandals involving high-pressure tactics have also been a problem.
Social Obligation and Conformity
In a society that values group harmony and conformity, doing what your family or peers do is a powerful motivator.
Following the Norm: If friends, family members, or colleagues buy life insurance, there is a social expectation to do the same. It is seen as a sign of being a responsible adult and family provider. In short – it can’t be wrong is everybody’s doing it, right? This is the most likely reason someone might recommend you sign up for savings life insurance. Bear in mind that people have a psychological bias to believe that what they are doing is correct. Put simply – nobody wants to believe they are wrong.
Company Mandates: Some companies have group insurance schemes, further embedding the practice of having life insurance.
Cultural Context – Summary
In summary, while from a purely financial perspective, buying savings life insurance is not a logical strategy in Japan’s low-interest-rate environment, the deeply ingrained cultural values of peace of mind, risk aversion, historical context, and powerful sales channels make savings life insurance a common choice for a significant portion of the population. They are buying peace of mind and a sense of security, which they often value more than maximizing investment returns. Sadly, because of opaque fees and poor financial literacy, most of these people don’t actually know how much they are giving up to follow this strategy – and peace of mind doesn’t come cheap.
The Alternative
So what to do?
The Superior Alternative is throwaway life insurance + actual investing
In Japan, the more cost-effective alternative is almost always a throwaway term life insurance policy, plus a separate investment account.
Buy a “Throwaway” Policy: This is pure insurance. You pay a very low premium for a fixed period (e.g., 10, 20, or 30 years) and get a high death benefit. The cost is a small fraction of a savings life insurance policy, and if you die in the meantime, it will pay out the full benefit.
Invest the Difference: Take the significant amount of money you save on premiums and invest it separately in a tax-advantaged account like a NISA (Nippon Individual Savings Account) or iDeCo (Individual-type Defined Contribution pension plan).
Why this is better in Japan
Higher Investment Returns: With a NISA or iDeCo, you have access to a wide range of investment trusts and funds that can offer much higher returns than a life insurance policy, especially over the long term. This can be done while preserving the level of safety that the investor would like, for example:
Index funds like S&P 500 and TOPIX – You can choose funds that follow the market and produce the highest average returns over the long term.
Government Bonds – Low risk, but still higher returns than savings life insurance policies generally return. This makes sense, since savings life insurance policies usually earn most of their returns from government bonds, but then take a hefty premium, leaving less for the policy holders.
High dividend stocks – Stocks with lower sensitivity to market conditions and higher dividend rates, which can be considered to be safer than index funds but more profitable than other options.
Domestic vs. International Mix – Investors can control what portion of the funds are invested internationally in order to balance currency exchange risk with domestic economy recession risk.
Tax Benefits: Both NISA and iDeCo offer substantial tax benefits on investment gains, which is a powerful advantage in the long run.
Control and Flexibility: You have complete control over your investments and can access them (under specific rules for iDeCo and NISA). Funds stored in New NISA accounts can be taken out at any time, and without taxation of the profits.
In conclusion, while savings life insurance may be marketed as a “safe” way to save, Japan’s long-standing low-interest-rate environment has effectively stripped away its primary benefit. After all, opening a NISA and investing in Japanese government bonds would have an almost identical risk profile as a savings life insurance policy, but with tax advantages, more profit, and the ability to sell at any time without penalty. For the vast majority of consumers, a throwaway policy for protection combined with a dedicated investment plan like a NISA or iDeCo is a far more effective and financially sound strategy.
Personal Experience
Investment & Insurance
I personally have experience with iDeCo and 401k accounts in Japan, having invested these for over 10 years.
Shin NISA has only been around since 2024, but I have an account which I am actively contributing to. If you are familiar with the old NISA accounts, the new Shin NISA accounts are much better in every way.
With both of these iDeCo/401k and NISA accounts, the accounts are just buckets. This means you can invest in whatever you prefer. While I personally invest in index funds and high dividend stocks, the more risk adverse can choose to invest mainly in government bonds instead.
To put it another way my “peace of mind” is the balance in my NISA account.
I don’t have any private life insurance, as it’s simply not necessary for me.
I know numerous people who work in the insurance industry and make quite a bit more money than myself! – and my pay isn’t bad. That alone should tell you something. My hope is that everyone reading this will make themselves wealthy instead of making the insurance companies rich.
Self Insurance
SBI Sumishin allows you to open multiple “sub accounts”, which means you can easily set up separate accounts for specific purposes. Even better, it lets you set up automatic transfers so you don’t forget. For example:
I have a “Pet Insurance” account that I put 2,500 JPY per month into. This account has over 150,000 JPY in it now.
I have a “New Phone” account that has around 200,000 in it now. I put 4,000 per month, and haven’t replaced my phone in about 4 years.
I have an “Emergency” fund, which I used to have set to 50,000 per month, but I have lowered to 10,000 per month once it hit 1,000,000 since there haven’t actually been any emergencies. (Any more than that is a waste to keep in a bank account earning basically no interest). Occasionally when an appliance dies, I spend some money from this account to replace it.
As an insurance for my sanity, I also have a “vacation fund” set up as a separate account. I’m sure I’ll use it eventually.
The advantage is that you can stop transferring in money once the amount reaches what you would consider a reasonable maximum. You can then redirect that money to another account, or just invest it (or spend it) instead.
Property investment in Japan is very different than in many other countries.
Differing Expectations
One difference is that property is generally expected to lose value. The land may hold its value, but the buildings are normally depreciated over 30 or 50 years. This is just for accounting purposes, but the actual market value of the property generally falls as well.
This makes sense when you think about it. Would you rather live in a 40 year old building? Or a 5 year old building? If it was the same price, most people would choose the newer building. As a result, rents for older buildings are generally lower, all else being equal. If rents are lower, then purchase values will also trend lower. Another reason that property values fall is that older buildings generally cost more to maintain. For apartments and condos, this is in the form of a higher monthly maintenance and repair sinking fund fee. For stand-alone houses, this means needing to spend more money for water proofing, and repairing things like the roof, cracks in the concrete, etc.
You would expect buildings to hold their value better because of inflation, but remember that Japan didn’t have inflation for several decades.
This is in stark contrast to countries where the buildings are often expected to increase in value.
A preference for Shiny and New
Many people in Japan have a dream to own their own home, but it’s always a new home. The housing market is something like 90% used homes in many countries, but in Japan, everyone wants something new and shiny. There are historical reasons for this, but it’s ingrained into the culture at this point. This means that as soon as you buy a house and live in it, it becomes “used” and the value drops overnight. Buying a new house is therefore, almost always a bad idea from a financial point of view.
Cheap Money
Interest rates have been extremely low over the past few decades, to the point that loans were as close to free as they could get. Even now, there are home loans available for less than 1% annual interest.
A preference for Renting
Many people in Japan have a strong preference for renting. If you rent, you can move whenever you want, and generally stay as long as you like. Landlords can’t unilaterally raise your rent, and tenant protections are very strong. Alternatively, you can move to a new place every few years if you like.
In general, the DIY spirit is weak, and the service economy in Japan is strong. Many people simply prefer to pay a pro to do things for them, and housing is no different.
This is again very different from the attitude you will find in China or the United States, where people religiously believe that buying is always better, without bothering to do the math.
Loan Payment vs. Rent Balance
The combination of low interest fees and a preference for renting means that it’s possible to get a loan where the monthly payments are less than the rent you will receive. Sometimes the rent will even cover the loan payments plus the management and repair fees. If you’re lucky, you can even cover property tax payments with the rental income as well. What’s more, you can even claim the loan interest and other expenses when you file your taxes.
This means that instead of having a negative cash flow until the property is paid off, you can have a positive cash flow from day one. Of course once the loan is paid off, your net income will increase substantially since you’ll be able to use most of the rent for whatever you want.
Even suppose that by the time your property is paid off after 30 years, the value of the property has dropped to half of what it was, and the repair expenses have doubled – you’ll still have something that was paid off by the tenant’s money that you can live in or sell.
Therefore, investing in property in Japan can be a good deal if you are good at finding places below market price in areas with growing populations, and renting them out at a profit.
Scams
Sadly, whenever there is the smell of money, scam artists tend to enter the picture. Japan is no different in this respect.
Over-Valuation
The first and simplest scam is to simply over-price a property. Let’s say a real estate company has taken possession of a condo that they know has a market value of $800k. They may approach you and sell it to you for $100k, assuring you that it is a good deal. Since most people don’t have a good feel for the market, this may be easy to do.
They may compare the property to other properties nearby with similar prices – even if there are reasons for the price to be different that you don’t know about.
They may assure you that they are giving you a special deal because they want your future business.
They may assure you that the bank wouldn’t sign off on a deal that wasn’t at market value. (In reality, the bank doesn’t care as long as they think you can pay for the loan).
In this case, if they bought the property for below market value and sold it for above market value, they earn profit from doing essentially nothing.
Loan Scams
There are basically two types of loans: Investment Loans and Home Loans. Home Loans are strictly for when you will live in the home yourself. The cheapest of these is the so-called Flat 35 loan, which is backed by the government. Investment loans are, as the name suggests, for investment properties. Investment loans generally carry higher interest rates.
The Cash Back Scam
Loans in Japan can typically be made for up to 100% of the price of a property, sometimes even including certain taxes and fees. This means you can often buy a property with very little money down.
It starts becoming a scam, however, when the real estate company inflates the value of the property they display to the bank above the price you are paying. They will frequently advertise it like this “Pay off your debts and become a property owner!”
If works like this. The company will sell you a property for $100k, but they will tell the bank that the loan is for $150k. The bank disburses $150k, and the the real estate company keeps, say $20k and gives the buyer $30k. This is bad for several reasons. First of all, the buyer gets $30k in cash, but they now have to pay interest on an extra $50k, $20k of which the real estate company pocketed. Secondly, lying to the bank is obviously fraud.
The Lease Back or Guarantee Scam
The second common scam is called the “Lease back” scam, or the “Guarantee” scam. This is when the real estate company works to convince you that real estate investment can be made risk free, if you just pay a small premium.
Real estate can be a great investment, but it comes with risks.
Interest rates can rise
Repair fees can rise
Occupancy rates can fall
Natural disasters such as earthquakes can happen
Rents can fall
etc.
Of these, one of the most often cited is occupancy risk. What is nobody wants to live in your property? If you can’t find a tenant and nobody wants to rent from you, then you will be stuck making loan payments out of your own pocket every month. Japanese people are risk adverse as a group, and so in order to close the sale and take even more money, the real estate company may “guarantee” the rental income. They may also introduce a related “lease back” company that will lease the property from you. The idea is that they will keep paying you the rent, even if the tenant moves out and they can’t find a new one.
It stands to reason that if this was such a fool proof idea, then the real estate company should just keep the properties instead of selling them. Of course the reality is that these companies can’t magically find tenants willing to pay the rent you desire.
There have been several scandals in the past decades where lease back companies have accepted payments equal to around 10% of the property’s value in exchange for a 20 year guarantee.
When they couldn’t keep their promises, they simply went bankrupt and ran away with the money.
Due to these scandals, they can’t get away with these scams anymore, so instead the lease back contracts will simply have clauses that make them effectively meaningless. To prevent them from running away with the money, you pay them monthly in the form of a margin on the rent instead of prepaying them a large sum. For example, if the rent you could get for an apartment is $800 a month, they might make a contract saying that they will pay you $700 a month for 20 years. The idea is that they pocket the $100 each month, and in the event a tenant moves out and they can’t find a new one, then they can use that margin they took to pay you back until they find a new one. This makes sense in theory, but it’s nothing you couldn’t do yourself. More importantly, if the market changes, there is not much the company can do about. To prevent themselves from going bankrupt, they have numerous clauses to soften the guarantee.
For example, a common clause is that they will only cover the rent at 2 months at full price, after which you will need to accept a lower rent. The existence of these kinds of clauses means that you are effectively paying guarantee fees for no guarantee at all. It’s clear that these contracts are designed to make people feel safe and enter into a real estate investment without understanding and considering the risks.
Loan Type Fraud
As mentioned above, home loans are cheaper than investment loans, so one of the simplest scams to pull off is to simply apply for a home loan, and then rent the property out. Instead of paying 1.7% for an investment loan, you take out a home loan for 0.7%, resulting in lower payments, and saving a large amount of money over the life of the loan.
This could obviously be done at a personal level, but sometimes real estate companies are knowingly involved. They may even give advice to buyers on how to avoid detection. For example, they may tell you to make sure to change your address to the new property for at least 6 months in case the bank checks, etc.
Obtaining a loan under false pretenses is again obviously fraud, and in cases where Flat 35 loans are involved, the government is actively searching for such fraud.
Combination
Of course some companies will combine these different scams together to increase their profit even more.
They buy a property at below market value from an unsuspecting seller ((Say $80k for a $100k property)
They sell the property for above market value (Say $120k for a $100k property)
They apply for a home loan instead of an investment loan
They apply for a higher amount than they are actually selling the property for (Say $160k for a property they are selling for $120k)
They encourage the buyer to sign up for an expensive and worthless leaseback program.
Personal Experience
I have invested in or been involved in investing in more than 6 properties. There are good deals to be had if you are patient and level headed – but you should do you research well beforehand.
Conclusion
Don’t believe anything any bank or real estate agent says without verifying it. There are lazy and dishonest real estate agents everywhere.
Be aware that you may be able to buy properties on the cheap, buy you should know the reason they are cheap and make sure you are okay with that reason. For example, if a property is cheap because it can’t be redeveloped, or because it doesn’t come with the land, you should know. It might still be a great deal, but you can’t make that determination if you don’t know the reason. Sometimes properties are cheap because the owner is in a hurry to sell, but if something seems to be true, it probably is.
You should also know that Real estate fees are typically 600,000 JPY + 3% of the sale value. This is quite expensive, but it can be more if multiple companies are involved. If you buy direct from a seller and go to the government office to transfer the title yourself, then these fees aren’t necessary.
Be aware that a single mistake in area of property investing can set you back so far that you may not be able to recover.
This question comes up in online forums fairly often in different forms. One of the more common forms is something like “Is 250,000 JPY per month salary enough to live in Japan?”.
The answer isn’t so simple.
One way people might try to answer this naively is to simply use an exchange rate converter. There are two main problems with this:
The cost of living in Japan may be very different than other countries, so a simple number won’t help you understand if an amount is high or low just by comparing it to another number.
The taxes and social insurance schemes in Japan are also potentially very different than that of other countries you might be used to.
The first thing to do is to try to figure out how much would actually remain from your potential paycheck. You can use the site below to get an estimate:
That means you would have almost 65,000 left right?
Well, but this is an average budget for students. Housing is listed as 41,000 – but assuming you don’t want to live at a dorm, you could easily pay twice that for a one bedroom apartment. In fact, you could pay 4 times that much if you want a swanky apartment right next to a major station.
This budget also assumes 32,000 JPY per month for food. That is 100% doable if you are eating rice and drinking water, but I personally spend over twice that much.
It might be more useful to see how much things cost in relation to other countries. Numbeo is one site that is good for that.
You can see from the numbers on this site that Tokyo is 44% less expensive than NYC, and in particular the rent is 74% less expensive – this is despite Tokyo being a much larger city. What this really means you could live as comfortably in Tokyo as you could in New York on half of the New York salary.
Then there are the non-monetary differences:
Tokyo generally has nicer and cheaper public transportation than NYC
Tokyo’s trains and subways do not run 24/7
Tokyo generally is safer and has less crime than NYC
There are many cultural differences
Tokyo has many more colleges and universities than NYC
Gas and Electricity is more expensive in Japan
Internet is better and cheaper in Japan
Tokyo has a many more inhabitants, but has a lower population density since it is larger and more spread out
Tokyo is in general much quieter than other major cities. For example, honking is only for emergencies, blaring music is not tolerated, etc.
Rent and property prices are much cheaper in Tokyo
Tokyo is hot and humid much of the year compared to NYC
There is much less poverty and homelessness in Japan in general, including Tokyo
There is much less drug use in Japan
Interest rates are lower in Japan
etc.
Most of the above is also true when comparing against other major world cities in developed countries such as Hong Kong, London, Paris, etc.
On the other hand, Tokyo is of course expensive compared with cities in the developing world such as Delhi, Bankok, Manilla, etc. – although salaries are lower in those cities.
One official statistic I could find listed the average salary in Tokyo as 369,304 JPY per month in Tokyo. Assuming no dependents, this would leave roughly 286,719 JPY per month to spend. Assuming you spent 100,000 JPY on Food and sundries and 120,000 JPY on rent and utilities (including cell phone), it would leave you with over 66,000 for savings, going out, etc.
This is a reasonably comfortable existence in a city that is safe and convenient, but by no means “rich” in comparison with the average quality of life in other first world countries.
On the other hand, 10,000,000 JPY is usually what is considered to be “six figures” in Japan. This used to be more than $100k USD, but at current exchange rates it is considerably less when converted to USD – but this doesn’t matter so much if you are spending the money in Japan. If you make this much, you are earning 833,333 JPY per month. Since this puts you in a high earning bracket, your deductions for taxes, pension, and social insurance go up considerably, but you will still net about 600,000 per month.
If 250,000 is tight and 369,304 is average, then 600,000 after taxes and social insurance is huge. Granted, it doesn’t mean you are super wealthy – Tokyo is an easy place to blow a lot of money in a short time buy buying brand goods every month or partying every night – but you can easily live comfortably while still saving and investing a lot of money – or you can have a relatively lavage lifestyle.
All of this has been about Tokyo – but other places in Japan are actually cheaper, of course, and usually with lower salaries as well. Japanese people aren’t in general rich or poor, as income inequality is better in Japan than many places in the world – but the costs of many things are lower, so if you made the same salary as in another major city in a developed country such as NYC, HK, or London, or San Francisco, you might feel rich.
You can enter various city names into the sites below to perform comparisons. What you see might surprise you:
Furosato Nozei (Hometown Tax) is a system that allows you to donate tax money to cities and towns other than that of where you live. These donations can then be used as deductions when you file for taxes, just like any other donations.
Essentially, then, you could donate 100,000 JPY this year and claim it when you file your taxes. You would then receive some income deduction for your national income taxes in the current year, followed by a reduction in your local municipal taxes in the following year. (Municipal taxes always lag a year behind).
Why would you do this?
Advantages
You can choose to support your actual home town, or any city or town in Japan you like.
This allows you to support communities who have dwindling tax income as a result of many young people moving to the major cities.
You can specify how the donation is used in many cases.
Many localities will send you a gift as a thank you present. This can include rice, sake, fruits and vegetables, and more.
Disadvantages
As with any donation, there is a time lag between when you donate the money and when you get it back in the form of reduced taxes.
You need to file a tax return (kakutei shinkoku) or use the one stop program. If you forget completely, then of course the money will not come back.
The first 2,000 of your donation is not eligible as a deductible.
The amount you can claim on your taxes depends on your income and what other deductibles you are already claiming. For example, if you make 10M JPY per year, you can possibly claim up to 200,000 JPY, but if you only earn 5M JPY per year, the amount you can claim will be significantly less. Many of the sites have calculators that let you estimate the amount you can contribute. You should check this before making any donations.
This program makes taxes less efficient overall, since any amount the local governments spend on gifts and processing fees lowers the amount that actually goes towards revitalization, education, infrastructure, etc.
Personal Experience
I have donated around 50,000 per year to my actual hometown, and received rice in return. I have included this when I files for taxes, so my taxes are reduced by 49,800. I have not used the one stop program.
This account seems to come up more often than one would think, so I will cover it here for reference. Note that the situation may change over time, so I will update this post as necessary.
Many Japanese banks only support Japanese language on their apps, web sites, customer support, etc. This is to be expected because:
Over 98% of the population in Japan is Japanese.
Most non-Japanese residents do speak read, and write the language. (Bear in mind that the majority are from Asian countries, and learn the language before coming. There are also many Japanese-born Koreans).
Most people in Japan that don’t speak the language are tourists and business travelers who don’t (and aren’t eligible for) need a bank account here.
So, there really isn’t a strong demand for English language banking services in Japan, and in general it isn’t profitable to do so. Therefore, banks that target foreigners typically either charge more for that privileged or offer related profitable services such as overseas transfer services, etc.
To be honest, if you are living in Japan, I strongly recommend you learn the language because it will make life easier for you in every way. Having said that, I do realize that some people may be here for just a few years, suddenly assigned for their company, or may not have had a chance to learn the language for other reasons. Most importantly, as a practical matter, you need to open a bank account to get paid by most companies.
Also, since Japan has a “working holiday” program, people from various countries can come here and legally work for 6 months at a time – and we can’t expect someone learns the language just for that.
How it was
It used to be the case that English speaking foreigners could use Citibank, and Chinese speaking foreigners would often use HSBC. Both of these have closed retail banking operations in Japan now.
The current situation
With Citibank and HSBC gone, you’ll have to rely on a Japanese bank. To get an account, you’ll need to prove residency.
Choosing a bank
JP Post / Yucho Ginko
If you are on a short term student visa or working holiday, and your stay is less than 6 months, then most banks will refuse you. In this case, your best option is probably JP Bank. They are also known as Japan Post Bank, or Yucho Ginko. As the name suggests, this bank is basically run by the post office.
Apparently many foreigners don’t love this bank because it is a bit light on features – but JP Bank is safe and stable. It is the 4th largest bank in Japan by market cap in 2025. They hold over 20% of all deposits in Japan (For a total of over 129 trillion yen), and have 120 million active accounts – which means basically everyone in Japan has an account there.
In addition to the above, they have the largest number of physical branches in all of Japan. This means if you need to go to a window to talk to someone, you will always find a branch nearby – after all, you only need to go to the closest post office! (Whether they speak English will depend on the person you get).
JP Post was created to offer accounts to everyone back when many private banks only wanted wealthy customers, so even today they are one of the easier banks to open an account with.
You can apply for an account online or in person, though applying in person may be simpler for many people. Make sure to bring your Japanese ID card.
JP Bank accounts are free to set up and have no monthly fees.
Some employers will say they don’t support JP Bank for payments. This is because JP Bank used to not be part of the “Zengin” (All bank) system. Recently, they have joined, so you just need to convert your bank information to the common branch + account format used by other banks when giving it to your employer if they don’t support JP Bank directly. There is a link below in the references section that allows you to input your account information (as it appears on your cash card) and have it converted to the Zengin format to allow transfers from other banks. The financial institution code for Yucho Bank is “9900”.
Yucho has an online banking service, Yucho direct – though note it is only available in Japanese.
The standard cash card issued by JP bank is a card that can be used at ATMs only, and it does not expire. You can apply for a Visa Debit card that will allow you to do online shopping, etc. – but this card will have an expiration date, and they are fairly strict about approvals. Either way, you need to apply for the standard cash card first and then apply for the visa debit card once you receive the normal cash card.
JP Bank is a good “first” account to set up, and a good account for those staying in Japan only between 3 and 6 months.
If you don’t speak Japanese, you may find the service a bit difficult to navigate.
Prestia / SMBC Trust
When Citibank folded in Japan, their Japanese operation was acquired by SMBC Trust. They re-branded it as “Prestia”.
Prestia accounts charge a monthly fee (2,000 last we checked), unless you have a maintain a relatively large account balance.
The Prestia web site and app are available in English.
Prestia has few branches, so if you need to visit in person, there may be travel required.
Prestia ATMs are not so common, but you can use normal SMBC ATMs for free.
Prestia has a “MultiMoney” account which allows you to store both Yen and Foreign currency. This also allows you can also receive foreign currency directly.
Prestia can issue you a “GLOBAL PASS” visa debit card which supports payments in multiple currencies, and also “tap” payments using iD (in Japan) and Visa Touch (overseas and Japan).
Prestia will also allow foreigners to apply for home loans without having a permanent resident visa, and even in English if they don’t speak Japanese! Note, however that you will be paying an “English Tax”, since their rates aren’t as good as other banks.
Prestia is a reasonable option for those who travel a lot overseas and don’t speak Japanese.
Sony Bank (MoneyKit)
Sony Bank has a been around for a long time, and is an internet only bank. This means they have no physical bank branches (anymore), and no ATMs.
You can use ATMs from the following list up to 4 times per month for free:
7-11 ATMs
Aeon bank ATMs
e-Net ATMs (Mainly in convenience stores)
Lawson ATMs
JP Bank ATMs
MUFJ ATMs
SMBC ATMs
Unlike Prestia, they have no monthly account maintenance fees, and their interest rates on loans, etc. are among the best.
Like Prestia, they offer multi-currency deposits.
Their web site is mostly available in English, and of their two mobile apps, the simpler one (Sony Bank WALLET) is available in English.
They offer a multi-currency account that supports 12 different currencies, and a Sony Bank WALLET Visa Debit card that also functions as a cash card – though iD isn’t supported. (You can also opt for the MoneyKit cash card if you don’t need the Visa debit functionality and don’t want to worry about expiration dates).
If your banking needs are simple and you need an account you can access in English, then Sony Bank is not a bad choice.
If you can understand Japanese, you may want to expand your search to include some of the best net banks like JRE Bank, Rakuten Bank, and Sumishin SBI.
Seven Bank
This one seems to be missing from many lists compiled in English, even though 7-11 specifically markets their accounts towards foreigners.
The difference is that while Prestia markets to posh Expats from the US and UK who don’t mind paying a monthly fee to stay in their English bubble, Seven Bank markets more to migrant workers who want a low cost account with easy ATM access, and an easy ability to send money to their family overseas cheaply.
This becomes clear when you realize that they support not only Japanese and English, but also Chinese, Vietnamese, and Indonesian.
Unlike the other banks, you can open an account at the ATM!
They will issue you a JCB Debit card that you can use for online shopping, etc., as well as at the ATM.
They also have a money transfer app for international transfers, and special support for sending money to the Philippines using BDO bank, and other countries using Western Union.
Seven Bank has at times refused to open accounts for American Citizens. This is not limited to Seven bank, and is not surprising, given the unreasonable demands by the US government for foreign banks to comply with US laws like FATCA.
Fees:
Seven bank charges no monthly account fee, though there are fees for things like reissuing cards, etc.
You can use any 7-11 ATM between 7am and 7pm for free. (There is a 110 JPY fee for transfers outside these hours).
Transfers to other banks are 165 JPY.
If you need an account with convenient ATM access for free and don’t speak Japanese, Seven bank might be a good option.
If you need to make a lot of international transfers to family back home, then Seven bank has you covered.
Being a minor bank, Seven bank might not be supported by all companies (Such as credit cards) for direct debiting.
Shinsei Bank
Often considered the most foreigner-friendly, Shinsei Bank offers extensive English online banking, mobile apps, and customer service. They generally do not require a hanko and have a relatively straightforward application process.
Conclusions
If you want English speaking physical branches, 100% English support in apps and phone support, and a wide Range of services including loans, etc., then Prestia is your option – but you will pay a premium for this support.
If you just need a basic bank account with basic app & web site service available in English, then Sony Bank or Seven bank should be fine for you, and cost less than Prestia.
Of the accounts listed, JP Bank and Sony Bank are popular even with normal Japanese people. JP Bank is seen as being reliable and safe, while Sony Bank has some of the best rates around.
People often confuse “Best account for foreigners” with “Best account for English” – but these are two different things. In actuality, most foreigners in Japan do speak Japanese, and most banks in Japan will allow foreigners to open accounts provided they are medium or long term residents. This means that if you are okay dealing with Japanese, then there is no need to restrict yourself to the banks listed here. You can choose the bank with the most benefits for you, including local and regional banks, net banks with the best features, best interest rates, etc.
Even if your Japanese isn’t great, you can try to use browser plug-ins such as “Rikai-kun” to help you understand Kanji you don’t understand on Japanese web pages while learning.
Understand Japanese?
Other Requirement
Best Bank
No
3 – 6 months residency
JP Post / Yucho
No
Most Physical Branches
JP Post / Yucho
No
English online banking & App
Sony / MoneyKit Seven Bank Prestia / SMBC Trust Shinsei Bank
No
Might need home loan
Prestia / SMBC Trust
No
English Speaking Physical Branches
Prestia / SMBC Trust Shinsei Bank
No
Need 24/7 English phone support
Prestia / SMBC Trust
No
Multi-Currency Account
Sony / MoneyKit Prestia / SMBC Trust
No
iD debit card
Prestia / SMBC Trust
No
Easy International Transfers
Seven Bank
No
Unlimited Free 7-11 ATM use
Seven Bank
No
Support in languages other than English and Japanese
If you’ve been around Japan Rail stations in Tokyo this weekend, you may have seen the “Suica Renaissance Vol.1” posters around.
Since pretty much everyone in and around uses Suica (or PASMO) at least to ride the train – and often for much of their shopping – this seemed like something to investigate.
The Original System – Past and Present
Originally Suica was introduced to replace paper tickets. Tokyo Metro had mostly migrated from paper tickets to magnetic cards called Passnet. Passnet cards were cheap, and could only be used a limited number of times. They worked much like the old public telephone cards, and needed to be fed into the ticket gate machines.
Japan Rail had the idea to use more expensive “IC Cards” that could be read wirelessly and could be “tapped” on the ticket gate instead of being fed through them. This meant they could be used without taking them out of your wallet or case, and they could be read and processed much more quickly. The goal was a card that could be read in 0.1 seconds. That may sound incredibly short, but imagine you have 60 people in front of you trying to get out of the station. If every card took an entire second to read, people would be pausing and waiting as they exited, and it would take an entire minute of standing in line. There are often way more than 60 people, so you could imagine people needing to wait several minutes at the ticket gate. Of course you could add more ticket gates – but ticket gates take up space and are expensive. JR wanted to operate with fewer gates, so they needed a faster “ticket”. Sony came to the rescue with their IC card technology called “Felica”. JR used this as a basis and released their “Suica” branded cards around 2001.
Suica cards are encrypted and the value is literally stored in the card, which means there is no internet needed for the ticket gates to verify the balance, etc. This is one reason why Suica cards are much faster than contactless credit cards, f.e. Visa Touch, etc. – There is no need to contact any type of central server in real time.
There are basically two ways that Suica cards can work:
There is a stored monetary value (“Stored Fare”, often abbreviated to “SF”).
There is a stored commuter pass (The ticket allows commuting between two stations for a limited amount of time. This can be from 1 month up to 6 months.
Commuter pass usage
When you enter a train station, the ticker gate can check whether your card has a commuter pass that includes that station. If so, it beeps once, records your entrance on the card, and does not deduct any value.
When you exit at your destination, the ticket gate at that station performs a similar check. If that station is also within the range of your commuter pass, then it lets you exit – again with a single beep and without deducting any payment.
Stored Fare Usage
If you enter a train station that is not on your commuter pass (or you don’t have one), then the ticket gate emits two beeps, deducts the minimum fee, and records where you entered.
When you exit at your destination, the ticket gate there will check where you got on, calculate the remaining fare, and deduct the balance required form your card.
All of this happens lightning fast, and again without requiring central servers or the internet. This also makes it very resilient to service outages.
Shopping
JR started allowing you to use Suica to buy drinks at vending machines inside JR stations, and before long, you could use Suica to pay for everything at any store inside any JR station. Suica is also accepted today at most convenience stores and many major retailers, taxis, etc.
SF Charging and commuter pass purchase
Before you can use a Suica card, you need to charge it or purchase a commuter pass. Typically, when you buy the physical card, it costs 2,000 JPY, and it comes with a 1,500 JPY charge. 500 JPY is a “deposit” (which is the cost of the card itself). Charging can be done at ticket machines, convenience stores, and many ATMs. The maximum balance you can store on the card is 20,000 JPY, though you can charge it and use it as much as you like within a month.
You can opt to just charge the card with cash, which well let you ride anywhere you like, so long as you have enough money. You can also of course make as many purchases as you like.
If you ride the same route a lot (to school or work, for example), you can get a commuter pass, which allows you to pay a set amount for unlimited travel between two stations. This is typically significantly cheaper than paying via SF, assuming you are commuting 5 days per week.
Cross Service Compatibility
Before long, JR stuck a deal with Tokyo Metro and other train and bus companies to allow the use of Suica cards on the Metro, Keio line, and many busses. In exchange, PASMO could be used on Japan Rail trains, as well as Tokyo Monorail, etc.
Further, Japan Rail East made a similar compatibility deal with Japan Rail West, allowing the use of ICOCA in Tokyo and Suica in Kansai.
This was possible because everyone was basically using the same Felica technology from Sony.
My Suica
Since you don’t need to show any ID and can charge with cash, Suica cards are totally anonymous. There is a serial number to identify each card, but if you don’t tell JR who you are, then they don’t know. This means that unregistered cards have the same characteristics as cash. If you lose your card, anyone can pick it up and use it. This is great for privacy – but not so great if you lose your card. JR allows you to register even non-commuter cards with your name and phone number as an option, so that if you lose the card, you can report it to JR. They can deactivate and re-issue the card for you in that case.
(Although we mentioned above that a central server is essentially not necessary, there are in fact central servers that communicate with the ticket gates in the background to do things like fraud detection, statistics gathering, and blacklisted cards can be synchronized to ticket gates as well to prevent the use of lost or stolen cards).
View Card
Japan rail introduced “View Card”, which is a credit card with Suica functions. The card functions like a normal JCB or Visa card, and also as a normal Suica card. A new special feature was introduced – the card can be configured so that whenever the balance drops below a certain value, it will be charged next time it passes a JR ticket gate. For example, you can set your View Card to charge 5,000 JPY every time the value drops below 1,000. (You need to pass a ticket gate for the charge to happen, since the ticket gate is what is charging your card). You can configure the charge amount to be higher if you often use your card for things like grocery shopping, or lower if you only use it to ride the train.
JRE Points / Suica Points
JR Introduced several point systems, for Suica, atre, etc., but they have all been merged into JRE points now. Basically, you can earn points from shopping in atre and other shops inside JR, points for paying for things with View Card, points for paying via Suica, etc. These points can be used to make purchases, or to charge your Suica. This is one of the better point services, since the points are as good as cash, and can effectively be used wherever Suica can be used.
Mobile Suica
Even before smart phones became popular, JR introduced the “Mobile Suica” app for Japanese feature phones. This app required that you have a Japanese phone that contained the hardware to emulate Felica cards, and as far as ticket gates know, such phones are just normal Suica cards.
Once you installed the Mobile Suica app, you could charge the virtual Suica card on your phone at the Convenience store and some ATMs (Some ticket machines too, more recently) – but now there was a new feature – you could charge the virtual Suica card via credit card as well. (The number of cards that could be used was originally very limited since obviously JR wasn’t going to pay fees to credit card companies for this).
This meant you could use your phone for shopping and riding the train, and charge it without carrying any cash.
Once Japanese companies like Sharp, Kyocera, Fujitsu and Sony started making Android phones, JR developed an Android version of Mobile Suica – Note that this was long before Google Wallet was released.
The first iPhones released in Japan could not support Mobile Suica since Apple refused to implement Felica technology. After Samsung, Google, and others started releasing phones supporting Felica (Now branded as “NFC Type F” for international use), Apple finally caved in since their market share would be limited in Japan otherwise.
One of the interesting features of Mobile Suica is that you can have multiple cards in one phone. Recent phones have support for 5 or so cards, which can be a mix of Suica, PASMO, ICOCA, etc.
Finally, there are numerous apps that will allow you to read Suica (and similar) cards using a phone. You can see the recent travel, charge, and shopping history. Note that shopping history only shows amounts, not store names or locations.
Current Limitations
Since you can only store a maximum of 20,000 JPY, basically Suica can’t be used for any purchases over that amount.
Since you need to charge before you can spend, it can be a minor pain for mobile Suica users, and a major pain for physical card users if they want to buy something over the card’s value. (I also see this as an advantage, since it is good for budgeting).
In order to accept Suica payments, you need to have the proper equipment. There are no private person-to-person payments.
In order to use Suica, you need to have a phone which has the proper hardware, or a physical card.
The New system – Suica Renaissance Vol.1
Basically, JR plans to introduce numerous new features. It isn’t clear whether some old features will disappear or not. For example, whether IC cards will be supported forever, whether Suica will remain anonymous, etc.
Local Services
Extension of Compatibility – JR wants to leverage Suica to other transportation providers such as ride sharing, on demand busses, etc.
JR wants to let you link your MyNumber card to allow additional services (presumably from local governments).
Let you track family members (There is already a service called Mamorail, which can send email notifications when your children enter/exit ticket gates – so this could be an extension of that).
Allow you to accept payments from localities. This may refer to municipal payments.
Payment Services
Revitalize localities through utilization of location limited value – I think this means creating balances like “Yokohama Money”, which can only be used in that area.
Allowing person to person payments for things like new years presents, etc.
Allowing purchases over 20,000 JPY. (It was mentioned that this would be through QR Codes, which is interesting – so they would have a new feature in their app which looks somewhat like PayPay and similar apps).
Transport Services
Ability to ride the train without tapping
It will be possible to use Suica anywhere within Japan Rail East area by using location information. (This implies that they will somehow use GPS information to let you pay with Suica even at stations that don’t have Suica compatible gates yet).
Ability to pay afterwards instead of charging ahead of time.
Note: It seems like these might not work with the current IC card setup.
Exceeding the Ordinary – Other Changes
JR says it will move from an IC Card based model to a central server based model. They don’t give details on how they would make this transition while still keeping the current response time and reliability. Since that seems impossible, it may well in fact be some sort of hybrid model.
Travel Subscriptions that are more flexible than the current commuter passes. For example, by paying 3,000 JPY per month, you could get a 50% discount for travel not only to your main office, but satellite offices and personal weekend excursions. Also mentioned are various other perks like discounts to certain attractions, etc.
By changing to central server architecture they will enable “walk through” gates where you won’t need to “tap” your phone or card, and use location info to allow usage of Suica at stations without IC card compatible gates. I remember a few years back about walk-through gates being possible with the current IC card technology just by using more powerful signals and sensitive antennas.
Service Area Expansion – They said it will be usable in Nagano, Sendai, Aomori, Akita, etc. by 2027, in such a way that you would be able to ride from Ueno to Sendai. Also, even in areas not currently supported by Suica, you will be able to buy a “Smart Phone Commuter Pass”. (This would obviously require a smart phone with Mobile Suica, and they mentioned it would require displaying the screen). It’s mentioned they foresee using location information in the future.
Post-Pay – No need to charge ahead of time. It is said that you will be able to link a credit card or bank account to allow post-payment. I don’t see this as a big change to how View Card works now. Technically, it is pre-paid, but when you pass the ticket gate, it charges and then takes the minimum payment – and the actual cash payment happens later, when you get your credit card statement.
Payment Enhancement – It is said that by Fall of 2026, the mobile Suica app will receive a major update, allowing payments over 20,000 JPY via “Code Payment” (I assume QR code?), and the ability to transfer money between family and friends. The same update will include coupons, local value (region specific money), and more. Their intention is to make it a universal payment service in Japan (more than it already is).
Region specific services like local gift certificate issuing and usage, etc.
Fancy features using location sensing – for example, you book a taxi to pick you up “when you arrive” at a certain station. JR coordinates this to make sure a taxi is actually waiting for you when you arrive at the destination, since they know where you are. They are also planning to allow service reviews.
Special “Welcome Suica Mobile” for Tourists. I suppose this makes sense given the recent increase in tourists, and lack of Suica card stock. This has already launched in March, 2025, in fact.
Proving all this technology to other transportation vendors. They discuss a commuter pass service they started with Tokyo Monorail in November of 2024, plans to roll out things more, and then eventually overseas.
They have a list of their goals, divided into what they plan to have complete by 2028, and which things will be done “within 10 years”.
Thoughts
Obviously some people at JR have big plans – but they are biting off so much at once. I think the App update will happen, and they will be able to easily pull off QR Code payments and person to person transfers. I think they could steal market share from PayPay since they will offer essentially the current features of Suica plus those of PayPay as well – but these features would presumably not work with physical cards, only the mobile app.
Things like regional currencies seem fairly easy too.
Using location information and such seems a little more pie in the sky. I don’t think most people will want to give the Suica app access to their location information all the time, and even if they do, how would it know when you are riding the train as opposed to just say, riding bike along the train tracks?
It’s amazing to me that people still fall for marketing ploys, but it seems that the word “Free” just activates parts of the brain that cause people to ignore common sense and forgo critical thinking.
The Old Scam
The old scam worked like this:
The carriers charged a high fee, high enough that they could offer you a “Free” phone, and still earn a profit. When you signed up for a new account, you committed to 2 years, and got a “free” phone, which was also paid off within the two years.
If you cancelled early, you could need to pay the remaining balance of your phone, plus a cancellation fee. At the end of your contract, you could cancel without penalty, but if you didn’t cancel during that month, then the contract would auto-renew for another two years.
Near the end of your contract, the carrier would usually send you a post card notifying you that you have a “special opportunity” to get a new phone again for “free”. Many people would take the opportunity to upgrade, at which point they are locked into a high priced plan for another two years. Even if consumers chose not to upgrade, they would still pay the same rate – the carrier would just get to keep more profit. Users could change to another carrier, but they would need a new phone, and the new carrier would use similar tactics.
As an example, say Docomo charged 8,000 JPY per month for a high end plan.
You could sign up for an iPhone, which cost 960,000 JPY, and they would bill it as 4,000 JPY per month. However, because you were “such a good customer” they would offer you a special support package, where they would discount your bill by 4,000 per month for two years. In effect, the phone is “free” as long as you commit to an 8,000 JPY per month plan for 24 months – that’s a total of192,000 JPY. Hardly Free!
So you still pay “only” 8,000 per month. Officially, your service is 8,000 and the phone is 4,000, making 12,000 per month – but they give you a discount of 4,000 per month – so you only pay 8,000 per month at the end. This only matters when you try to cancel half way through, because then they can say “Well you still owe us for the phone, plus a cancellation fee”. Say you cancelled after 12 months, you would owe 48,000 + 10,000 cancellation fee – that’s 58,000. That was enough to prevent most people from cancelling and being left with a useless carrier locked phone.
So – the answer to the question “Are free phones really free?” is “Technically, yes”. The phone is free in the sense that you don’t have to pay any money specifically for the phone – provided you commit to spending a large amount of money on service fees for the next two years. Is the phone free in the sense that you are getting something for nothing? Of course not.
With the rise of MVNOs, legislation requiring carriers to unlock phones, and the prohibition of “free” phones, the carriers had to think of a new scam…
The New Scam
In order to work around the changing times, carriers had to update their scam. The new scam is even more complicated, and in practice holds people hostage for four years!
Let’s use Softbank’s “Museigen” (Unlimited) plan as an example. We’ll ignore for the moment the fact that it isn’t actually unlimited.
Softbank charges over 9000 JPY per month for this plan. You can get small discounts for having more than one person on the plan, having their home internet, etc., and points, etc. – but that’s all noise, so let’s just consider the base case of 9000 JPY per month.
Let’s assume you want to use an iPhone with their service. First of all, if you buy the iPhone from them, it costs 145,440 for the cheapest 128 GB iPhone 16 (including tax). If you buy it directly from Apple, it costs only 124,800. This means you need to pay over 20,000 more for the privilege of buying the phone from Softbank – not a great start.
This is to be paid as 410 JPY for the first 24 months, and then 5,650 for the next 24 months. So it will take you 4 years to pay off the phone, and you will pay a total of 145,440.
Then they say “Ah, but if you change to a new phone in the 25th month, then we will waive the rest of the payments!” So, if you change to a new phone every 2 years (and hand in your old phone), you can essentially pay only 9,840 for each phone.
Of course, they have designed it this way because:
You need to keep changing your phone every 2 years to avoid paying the full cost.
Their service is so expensive that you are paying the cost as part of the service fee anyway.
Even after 2 years, they can say you still “officially” owe them over 135,000. This means if you cancel your service, they can ask you to pay the rest of the price of the phone.
When you upgrade to a new phone, they have locked you in at high service rates for another 2 years.
Even if you decline to renew your service and get a new phone, they can start charging you over 5,000 per month for a 2 year old phone, on top of your service charges.
Once you have contracted with them using this type of setup, getting a new phone is the cheaper option when your contract comes up for renewal. (For the next two years, at least).
So once you contract with them, you are basically stuck upgrading your phone every 2 years whether you want to or not, and paying over 9,000 JPY per month.
Even if you sign up for their home internet, etc., and get all of the discounts available, you will only be able to lower your bill to 7,500 JPY per month, and once you decide you want to get off the train, you will be stuck paying almost 13,000 JPY per month for the next 2 years.
They give you a phone that is very cheap for 2 years, and then suddenly costs more after that – unless, of course you want to renew.
Now, let’s say you “need” an unlimited plan – you can still choose a plan like Rakuten Saikyo Plan (Unlimited), which will cost at most 3,168 JPY including tax. (It will cost closer to 1,000 JPY on months when you don’t use much data).
You can then buy your phone from Apple directly and pay the cheaper 124,800 price. If you absolutely need a new phone but simply can’t afford to pay for it all at once, you can still pay 5,904 to Rakuten every month for 2 years, 2,952 JPY every month for 4 years, or 3,466 JPY every month to Paidy, JACCS, or whoever Apple is using this month.
Four year cost comparison
Carrier
Monthly Fee (Service)
Phone (years 1-2)
Phone (Years 3-4)
Total Service
Total Phone (Years 1-2)
Total Phone (Years 3-4)
Grand Total
Softbank
9,000
410
0
432,000
9,840
0
441,840
Softbank (No new phone)
9,000
410
5650
432,000
9840
135,600
577,440
Rakuten
3,168
2952
2952
152,064
70,848
70,848
293,760
Rakuten + Apple
3,168
124,800
0
152,064
124,800
0
276,864
The table above makes Softbank look better than it is for three reasons:
We rounded down the plan cost to 9,000 JPY per month.
We put 0 in the “Phone (Years 3-4)” column – but since you have to get a new phone to make this number zero, presumably you will be paying around 410 per month again on the new phone even if the old phone is 0. This will add around 9840 to the total for scenario 1.
The scenario is also unfair because we are trying to look at only 4 years here, but the top scenario assumes you have committed to spending the same 9,000 per month for years 5 and 6 at the beginning of year 3.
The difference between the last two scenarios is whether you buy the phone from Rakuten and pay it off over 4 years vs. whether you but it from Apple using a one time payment. There are other options (f.e. 2 or 3 years), but this is just to give an example.
The result is clear. Even choosing the worst scenario for Rakuten and the best scenario for Softbank, you save just shy of 150,000 over 4 years, which works out to 37,020 per year.
Caveats:
This comparison assumes you will keep the same phone for 4 years in cases 2, 3, and 4. If you really need a new phone every 2 years forever, then the rakuten + apple cost would be 76,032 service plus 124,800 for the phone = 200,832 for 2 years of service with a new phone. This compared with 225,840 for Softbank. This is only a difference of 12,504 per year which is possibly justified by other minor plan differences, such as the per minute rate for calls, definitions of “unlimited”, etc.
However, bear in mind that scenario 1 assumes you give up the old phone, whereas none of the others assume that. In scenarios 2-4, you can either keep the old phone or sell it, so they are even better than they appear.
As soon as you stretch your phone usage to 3 years, though, the difference starts to grow. The longer you can hold onto your phone, the worse Softbank gets.
This post isn’t meant to demonize Softbank, as au and Docomo aren’t much better in terms of the tricks they play. Likewise, Rakuten isn’t necessarily the best option for everyone, just a good point for comparison.
Personal Experience
I use an Sony Xperia phone, which I bought in one payment from Sony for about 100,000 about 4 years ago. It is still quite fast, works well, and is only half full. (The direct version has 512GB of storage and a Micro SD card slot).
I use OCN, which costs around 1,200 per month, but with taxes, fees, and a few voice calls, etc. it usually comes out to around 1,500 JPY per month in practice.
This means I have paid for the last 4 years: 36,000 in service, and 100,000 for my phone giving a total of : 136,000. I’ve saved over 300,000 JPY in the past 4 years compared with the cheaper Softbank option listed above. I can cancel at any time, and I don’t owe any money on my phone. Do I get the same service as the plans above? No, I only get 170 MB per day. Since I have WiFi at home and work, that is plenty for me. I would rather spend that 300,000 yen somewhere else.
When will I replace my phone? Maybe in about another year or so. It used to be that specs changed to rapidly people wanted to upgrade their phone as often as possible. These days things are already pretty good, so I feel very little incentive to upgrade. Given that my phone is still fantastic and changing phones is a pain, it’s more likely I will just get the battery replaced at some point.
Conclusion
If you are someone who needs a data plan with a very high limit, so be it. In some cases the major carriers may even be your best option – but buying a phone through your carrier with “discounts” or “support” is almost always a trap designed to lure in the unsuspecting victim and keep them paying high fees for both service and phones for as long as possible.
Don’t be scammed.
If you want a new phone, buy it direct from the manufacturer. If you can stomach a used phone, buy it from a place like Janpara, Sofmap, Backmarket, etc. Some of these places even sell “unused” phones, which will allow you to get carrier specific models.
Make a contract for the SIM card (or eSIM) only. Don’t contract with any carrier that won’t sell you service without also selling you a phone.
