Japan’s security deposit field drawback | USAEMALL.com

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Japan has a safety deposit box problem. It is just not clear whose problem it is, exactly. For decades, safety deposit boxes have been where Japanese customers stashed hard cash, jewels, housing deeds and whatever else they wanted to keep secure or away from prying eyes.

But that practice has been disrupted. First, in the broadest possible sense, by macroeconomic reality, as inflation returned to the country and reminded people that cash could lose value. And second, more prosaically, by several grubby scandals at some of the country’s biggest banks.

Since last November, Mizuho Bank and MUFG have admitted that a rogue employee at each bank had been dipping into safety deposit boxes, in one case over four years and to the tune of ¥1.4bn, or $9.3mn, aided by easy access to spare keys. 

Unfortunately, the public fears the problem might be more widespread. The thefts have fed an atmosphere of growing distrust in the banking system, exacerbated by a former Nomura wealth management employee being charged last year with attempting to murder his elderly clients, rob them and burn their house down.

Significantly, while it is possible to put a figure on the amounts purloined in this instance, it is far less simple to estimate how much might have gone missing without the owners knowing and, more broadly, how much is being stashed in the massed safety boxes across Japan. Even the government admits defeat.

“No one knows the exact number [being kept in the safety deposit boxes] because it’s not necessary to reveal what is inside the box. That is the secret box. That’s the whole point,” said Satsuki Katayama, a politician with the ruling LDP and chair of the research commission on the finance and banking system.

However, Katayama said there was estimated to be ¥100tn ($670bn) of “drawer money” — the Japanese equivalent of cash under the mattress — stashed away, out of the taxman’s sight, by Japanese households. And within that, some ¥20tn might be in the deposit boxes.

Due to Japan’s long-held love of tangible assets, and deep-seated respect for privacy, there are still an estimated 1.5mn safety deposit boxes in the country, according to the Financial Services Agency, a key regulator. The three megabanks alone — MUFG, Mizuho and SMBC — boast 400,000 and they admit, privately, that it is customer relationships, not profitability, that keeps the business going. At SMBC, which has 130,000 of that total, you can rent a box for six months that is 14cm high, 28cm wide and 53cm deep for ¥23,100, or close to $154. For the smallest, cheapest version, you will be paying ¥11k — decent value.

But how secure are safety boxes in Japan? One of the most glaring issues for customers is that, as one bank analyst in Tokyo told me, it “turns out the guy letting you in can also take the money out, too”.

In a high-trust system, incidents such as the ones brought to light in recent months can have deep effects. “The thefts are very upsetting in Japan . . . The banks are high-status businesses and are expected to behave correctly. I think there is a profound sense of betrayal . . . it undermines the system,” said the same bank analyst.

For the government, and the banks, there are clear reasons to steer people away from safety deposit boxes. After all, the only people who seem to benefit most from the whole system are the customers. Everyone else has to bear the costs — literally for the banks and through foregone taxes for the government. And Japan is in the middle of a push to get its ageing population to invest more in the stock market to boost growth and fund retirement. Some Japanese banks are moving away from safety deposit boxes, including Mizuho, which in January said it had stopped accepting applications from customers since it did not expect demand to grow.

Why not speed up the process? The problem appears to be that the safety deposit boxes in Japan are not just the preserve of the rich. They are also used by middle-class voters that neither politicians, nor bankers, want to alienate. MUFG, for one, has said it intends to keep the business going.

So last week, the FSA moved both to reassure customers and take steps against the dark money that could have built up in the system. It suggested the banks crack down on security but, more importantly, it also proposed making it harder to deposit cash and other assets most often used to launder money. That seems as far as the government, and the banks, are willing to go for now.

david.keohane@ft.com