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.
