Small loans in Japan: rules and safeguards

Japan has one of the most tightly regulated small-loan markets in the world. After a period in the 2000s when consumer finance debt and aggressive collection became a serious social problem, the country rewrote its rules: interest rates were capped more strictly, a limit on total borrowing from moneylenders was introduced, and lenders were required to check a borrower's income and existing debts through shared credit bureaus. Small loans, often called "card loans" or "cashing", remain widely available, but within firm boundaries.

This page explains those rules, how credit information works in Japan and what alternatives exist for people under financial pressure. Mini-Pret.com does not lend money or refer anyone to a lender.

Who may lend: registration under the Money Lending Business Act

Consumer lenders that are not banks are known as moneylenders (kashikin gyosha) and must be registered under the Money Lending Business Act. Registration is with the Financial Services Agency, through a regional finance bureau, when the business operates in more than one prefecture, or with the prefectural governor when it operates in only one. Every registered lender has a registration number that must appear in its advertising and contracts, and you can check it on the FSA's search service.

Banks also offer small unsecured "card loans" and are supervised by the FSA under banking law. Credit card companies provide cash advances, which count as money lending.

Interest rate caps

The Interest Rate Restriction Act sets the maximum interest rate according to the amount of principal:

• 20% a year for loans under 100,000 yen;
• 18% a year for loans from 100,000 yen to under 1 million yen;
• 15% a year for loans of 1 million yen or more.

Before the reforms took full effect in 2010, a "grey zone" allowed moneylenders to charge rates between these limits and a higher ceiling under another law. That grey zone has been abolished. Many borrowers who paid grey-zone interest in the past were able to claim refunds of overpaid interest, though such claims are subject to time limits.

Total volume regulation

A distinctive feature of Japan's system is the total volume regulation (soryo kisei). As a rule, total unsecured borrowing from moneylenders may not exceed one third of the borrower's annual income. Lenders must check income documents for larger loans and query a designated credit bureau to see existing moneylender debt before lending.

There are exceptions, for example certain loans that clearly benefit the borrower, such as some debt consolidation loans on better terms. Bank card loans are not covered by the statutory rule, but banks have adopted voluntary limits and income checks after criticism of rising bank card loan balances.

Credit bureaus in Japan

Three credit information bureaus are central to consumer lending:

• CIC, used mainly by credit card and consumer credit companies;
• JICC, used mainly by moneylenders;
• KSC, the Japanese Bankers Association's credit information center, used by banks.

Late payments, debt arrangements and bankruptcy are recorded and remain visible for several years. Each bureau allows you to request disclosure of your own record, online, by post or in some cases at a counter, for a small fee. Checking your record before applying helps you understand why a lender might refuse.

Compare the real cost

Lenders must state the annual interest rate in contracts and advertising. Card loans usually advertise a range; the rate you receive depends on the limit granted, and smaller limits tend to sit at the top of the range. Many lenders offer an interest-free period for first-time borrowers, but interest applies afterwards. Calculate the total repaid under the minimum repayment plan: revolving repayments can stretch a small balance over a long period.

Checklist before you borrow

• Does the lender show a registration number, and does it appear in the FSA search?
• Is the interest rate within the legal cap for the amount?
• Would the loan take your moneylender debt above one third of annual income?
• Do you know the repayment method and the total amount you will repay?
• Have you checked your CIC, JICC or KSC record?
• Is there a public support program that would avoid borrowing?

Illegal lenders and scams

Unregistered lenders, known as yamikin, ignore the rate caps and often use intimidation. Warning signs include:

• no registration number, or a number borrowed from a real company;
• contact through social media, flyers or unsolicited messages offering loans "with no checks";
• demands for a fee or "guarantee money" before the loan is paid;
• requests to send your bank card, passbook or mobile phone;
• "salary factoring" or schemes disguised as the purchase of goods, which are in substance illegal high-cost lending.

Contracts with lenders charging grossly excessive rates can be void, and borrowers should contact the police or a lawyer rather than continuing to pay. Our guide to online small loans covers further checks for lenders found on the internet.

Public support and debt solutions

• Livelihood Welfare Fund Loans: municipal social welfare councils provide low-interest or interest-free loans for living costs and emergencies to low-income households, often with support from a counsellor.
• Self-reliance support centres: local consultation services under the system for supporting people in need help with housing, employment and household budgets.
• Japan Financial Services Association counselling: the moneylenders' industry body runs a consultation service for borrowers.
• Legal help: the Japan Legal Support Center (Houterasu) can provide free legal consultation for eligible people.

When debts are already too large, Japanese law provides voluntary arrangement with creditors (nin'i seiri), individual rehabilitation (kojin saisei) and personal bankruptcy (jiko hasan). A lawyer or judicial scrivener can advise which fits. Taking a new loan to repay an old one rarely helps; see our page on consolidation of small debts. To compare neighbouring markets, read our overviews of Korean small loans and Chinese small loans.