Japan's public heavily indebted, bankruptcy & suicide rates on rise

Personal debt is overwhelming an increasing number of Japanese as higher interest rates and the rising cost of living bite, according to The Japan Times.

Consumer loans are rising at the highest rate in 16 years. Household borrowing exceeded incomes for the first time last year. And government officials are worried that many people accustomed to rock-bottom rates will struggle with their mounting loans.

While Japan is by no means alone in confronting a debt problem, salaries are the lowest of Group of Seven countries, and the central bank is raising borrowing costs while its peers cut them.

Lawyers estimate that personal bankruptcies — already the highest since the pandemic — are on track to reach the most since 2012 this year. And in a tragic turn, suicides related to debt are also climbing.

The problem is all the more remarkable given that the country is better known for savers stashing cash under the mattress rather than piling into debt.

Yet average household debt rose to 6.55 million yen (US$42,000) in 2023, higher than incomes, government data showed.

Take the case of a Tokyo-based medical worker who filed for personal bankruptcy last year after her consumer loans reached about 11 million yen.

The woman in her early 60s said she fell into a spiral of paying back debt, borrowing money from one lender in order to return money to a previous one, and then taking out another loan to pay that back. She asked not to be identified given the social stigma of bankruptcy.

Most outstanding consumer loans have an interest rate of 14%-16%, according to the Financial Services Agency (FSA). The woman said she was paying as much as 18% on some of her borrowings.

The surge in consumer debt underscores Japan's delicate balancing act as the world's fourth-largest economy emerges from decades of deflation and economic stagnation. While people are getting more confident about the future and receiving loans for house purchases and other spending, in some cases they're borrowing as inflation drives up prices.

The ratio of household debt over average disposable income in Japan hit a record 122% in 2022, according to the latest comparative figures compiled by the Organisation for Economic Co-operation and Development. That's in contrast to the U.S. and the U.K., where it's fallen over the past decade.

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