Credit in Japan

By Sakamoto, Ken | Business Credit, July-August 1992 | Go to article overview

Credit in Japan

Sakamoto, Ken, Business Credit

The Japanese economy has slowed to a snail's pace since its high point in 1990. The stock market remains weak and volatiel. Trading volumes stay far below 500 million shares a day, and only a few brokerage houses posted profits at the end of March 1992.

Land prices went down about one-third, and the banking industry is still in trouble. Non-performance loan amounts are huge due to the collapse of the stock and real estate investment markets. Some financial institutions are undergoing debt restructuring, mostly at the sacrifice of the major banks.

The government has announced special measures to stimulate the economy by accelerating public investments. But the private sector still holds its fists tight, and there is no sign of upturn in equipment investments.

Despite all of the above, the Japanese economy is still strong compared to other nations. Even within the banking industry, which is heavy with potential bad debts and facing more regulation by the Bank for International Settlements, major failure is not a threat. There is no fear of country risk, nor the possibility of defaults in letters of credit opened by Japanese banks. The bullish commentators predict the Japanese economy will turn the corners sometime this summer, while the bearish say it will not show an upturn until the end of the year. Regardless, within the next 12 months, there should be signs of recovery.

Failures Stress Importance of Credit Management

Japan enjoyed good financial times for several years until 1989, when the Bank of Japan started to raise the discount rate. Due to the speculative hike of land prices, the Japanese government installed a special measure to control the flow of funds into the real estate investment market. According to Teikoku Data Bank, the prominent Japanese reporting agency, both the number and the liabilities of failures for the fiscal year, which ended March 31, 1992, increased tremendously. The number of failures was 11,767, 64.4 percent higher than the previous year,; the liabilities were 62.2 billion dollars, 122 percent higher than the previous year.

The failures continued to increase following the rise of discount rates and the effects of the control of funds to real estate investments. While it may look like Japan is suffering a heavy depression, that is not true. The performance of the Japanese economy is poor compared with preceding years, but still remains on a high standard, even among the industrial countries.

The causes for failure are heavy speculative investments in marketable securities and real estate. The bad debts are mostly born by financial institutions, and so far, chain reactions have not been seen. Normally, during recessionary periods, many failures are seen in manufacturing and distribution industries. Last fiscal year, we did not see the conventional failures, though in recent months, more casualties were seen among the non-speculative areas. The repeated cuts in discount rates have not shown visible improvement for the economy. It will take a few more months until the low interest policy will take effect on the fundamentals of business. So for the coming months, recession-type failures will increase among marginal businesses.

Special Features of Credit Management in Japan

The normal payment terms of trade credit are much longer in Japan than in the U.S. Again, Teikoku Data Bank's financial analysis shows the turnover of trade receivables averages to be 145 days for industry, 166 days for manufacturing, and 155 days for wholesale. While there are some differences between industries, turnovers average 150 to 200 days. At the Finance, Credit, and International Business (FCIB) Globl Conference in November 1991 in New York City, many participants seemed astonished by this turnover rate. But through 20 years experience as credit manager at a large Japanese trading firm, I learned its reality.

An example of conventional payment terms is closing on the 20th day of each month with promissory notes being payable within four months. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)


1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited article

Credit in Japan


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.