This is a guest post from Steve in Bibai, Japan. He’s offered, several times, to send some interesting tidbits about how money is handled differently in Japan. Our recent discussion about stashing cash finally prompted him to follow through on his “threat”.

One Japanologist said a mouthful when he tried to point out the quintessential difference about Japan — every country knows it is unique from other countries, but the Japanese pride themselves on being uniquely unique.

I’m not sure what that actually asserts, but anyone who’s spent more than a few days here, gotten to know more than a couple of people here, will be quick to agree that Japan is different than other places, and proud of that fact.

Credit cards
When it comes to handling cash, short books could be written to show the differences between (North) Americans and Japanese.  I don’t know the actual statistics, but Japanese are well back of the curve when it comes to using credit cards habitually.

One 1988 movie had a swanky night club owner pointing out to his apprentice how to tell the difference between the truly rich and the merely affluent at his club: rich people always paid in cash, but anyone with financial limits would pay by credit card.  Several 40-something civil servants (upper middle class) in my office have never even owned a credit card.  Those who do have a credit card nearly never buy things on credit.

Cash-advance machines
Maybe one reason for this is the ubiquitous cash-advance machines — once you step off public transportation (much more common here than in North America) at any largish station, you’re never more than a minute or two walk away from cash-advance machines, operating 24/7.

Once you’ve contracted with one of the many instant loan companies (for which you need never actually make human contact) you can use your ATM card to hand yourself a cash advance.  They can even make it painless by automatically deducting your minimum monthly balance (with your authorization, of course) from your salary so that only the borderline obsessive type would notice the difference in salary deposits.  Minimum balances here are often only one or two percent of the outstanding balance, and when coupled with 18% to 29% APR, a small purchase might never get paid off.

These quickie loans made it so easy to spend a huge pile of money during Japan’s bubble, and there were many stories of young office workers who got too deeply into debt when these cash advances were the “cutting edge” of personal finance.  We don’t hear nearly as many of these stories in the papers or on TV any more, but I know of several people who’ve dug themselves into pretty deep holes.

Recent waves of swindles, stings and outright fraud have made the government order the ATM owners to lower the amount you can withdraw on a single date from 5 million to 1 million yen.  That’s right, until recently, you could write yourself a quickie loan for well over $40,000.  With the yen strengthening recently, even this new, lower limit of 1 million yen has gone from just under US$9000 to nearly 11K.

This just makes me wonder about the financial wisdom, from the consumer side, of course, for the whole cash-advance system.  Why would I willingly write myself a $10,000 cash advance if I had the credit to pay that amount using plastic?  Did that movie make an impact on the night club patrons’ psyches, I wonder?

A different culture
Every ex-pat in Japan has a favorite story about Japanese money handling.  I was only here 3 weeks when I first saw a very elderly man walking out of a bank into noon rush sidewalk traffic, serenely oblivious to what was going on around him, and basically counting the Japanese equivalent of hundred dollar bills.  ”Thirty nine, forty, forty one, forty two…”  Right out loud!  The Japanese have a word for this: anbiriibabou!

J.D. recently mentioned that he thought the average amount of cash that Americans carry to be on the high side.  Well, if you’re carrying one or more credit cards (I hear the average credit customer has nine…!), one or more debit cards, the odd ATM card and whatever other items that you can use nearly the same as cash, then walking around with $175 really does seem like a lot to me, too.  But then I’m still operating with a sense of cash values from 1989, when I last lived in the US.  Back then, the only people who regularly saw US Grant’s picture were 19th century historians.

Prepaid cards
The government here did a lot to encourage responsible money use long before the real estate speculation got out of hand in the late 1980s.  Before cell phones, you knew you were in the boonies if you could only see two public phones from where you were standing.  Some time after 1980 or 81, these phones all accepted prepaid cards, which were sold in all sorts of denominations — anywhere from 500 yen to 10,000 yen.  Businesses often gave them away as freebies or door busters — before the bubble, 500 yen was only a couple of bucks.  My wife has an unused phone card with a (young) Hideo Nomo‘s photo, a present for buying cosmetics, and this is her version of a rookie baseball card.

When the underworld became tech-savvy enough to counterfeit the more expensive cards, Japan’s Ma Bell stopped allowing any denomination over 1000 yen to be used in any phones.  Anyone who needed to spend more than that on a call could buy more cards and use them in sequence, so the new system was quite adequate.  I understand some counterfeiters still make a go of things with the lower denominations, but since cell phones came along, the number of public phones has dropped to nearly nuisance scarcity.

The national railroad has also sold prepaid cards for over 25 years, and because it’s much more difficult to counterfeit these, there are still 3000 yen denominations for sale today.  I keep several (used) 10,000 cards in my scrapbook for nostalgia sake.  Even 7-Eleven used to sell 3000, 5000, and 10,000 yen cards.

The big draw for most prepaid cards was that they came with a users’ value higher than the price paid.  During the bubble days, railroad cards gave you 8% and phone cards had premiums up to 10.5%.  The Sapporo subway lines kept tight control over their computer processing system, so they still offer 10% premiums on 1000, 3000 and 5000 yen cards, and a whopping 15% on their 10,000 yen cards.  But nowadays you’re lucky to get 1% anywhere else — it’s better than nothing, but I get nostalgic…

Some cell phone users buy IC chips that operate like prepaid cards for their cell phone bills.  There are recent attempts to make IC debit cards, used in the same way as prepaid cards, the basis for electronic money.  Automated highway toll deductions are also available, but tolls here are so outrageous (often more expensive than the price of public transportation!) that the sensors didn’t make the splash here that they did in the US.

What’s in your wallet?
Just to see how I stack up with other GRS readers, I took stock of the assets I was holding in my wallet.  We had just gone shopping last night, so the results are a little skewed.  I make a habit of carrying less than $20 (2000 yen) with me, but last night I’d grabbed $150 from the family cookie jar before heading out the door.

I spent a total of $90 or $91 on our monthly sushi dinner, educational magazines, Halloween costume materials, breakfast cinnamon rolls, 4 DVDs (again, educational, from the dollar store) and a 500 ml bottle of mineral water, my first in over a decade.  (Good sushi should make you thirsty…)  I find I’m now carrying $74 or $75 cash (one third of that in coins!) because I forgot to return the banknotes to the cookie jar.

So this may be an interesting insight into how one physically handles money in Japan.  Banknotes are 1000, 5000 and 10,000 yen denomination, while coins range from 1 to 500 yen.  (One yen is very close in value to one penny.)  Little wonder that the lady at the register will triple count the bills before handing you the change.

What was perhaps more interesting was what else I found: point cards from 14 stores (book stores, used video shops, grocery stores, second hand shops, a convenience store chain, and Mr Donut) currently worth just over $200 even though I try to keep these assets to a minimum.  I have my prepaid cards for public phones, railroad tickets, books (a present), worth just over $100 total.

Finally, I have my debit card for a different convenience store that also tallies points — currently $62 debited and $29 in points.  Toss in my credit card (brand new, never been used for credit but it doubles as a point card at a local chain store, plus it accumulates air miles) and I figure I’d lose well over $400 in real value if someone were to steal it all.

I was a little surprised that I was carrying around that much value, but I’m not going to worry a jot, or change my behavior — this is Japan, where people don’t steal wallets.  Or if they do, police make (very) public announcements for months afterwards, cautioning people to be careful with their purses, etc.  I’ve heard no announcements in the past six years, though.

Extreme honesty
Most ex-pats will be happy to share their favorite stories of Japanese extreme honesty, too.  More than one of my non-Japanese friends have left wallets or purses containing over $2000 in a public restroom or on a train seat and had their possessions returned to them, intact, very shortly after losing them.  And the national railroad’s lost and found service is the stuff of legend.  Whenever any of my friends lost or forgot their wallets or purses anywhere, no one has ever lost any of the money in them, as far as I’ve heard.  I network extensively here, so this is certainly an enviable record.

But personally, I seem to be have found the other side of Japanese society — I bought my first bicycle here in 1991, rode it out of the shop, padlocked it in front of Sapporo’s busiest train among hundreds of other bicycles, and had the seat stolen off of it within 6 minutes.  Most Japanese won’t believe this story, but most Americans I know here budget for bicycles as an annual purchase.

Thanks to Steve for sharing his story. This is the first of three posts I’ll be sharing this weekend about personal finance in other countries. Cash machine photo by bato93. 10 yen photo by sirqitous.