The Japanese moneylending framework
Consumer finance companies, credit card firms and other non-bank lenders operate as kashikin gyōsha, registered moneylending businesses. Firms operating in more than one prefecture register with a regional finance bureau under the Financial Services Agency; others register with their prefectural government.
Every registered lender carries a registration number that must appear in advertisements and contracts. The FSA provides an online search tool to check it. Lending as a business without registration is a crime, whatever the rate charged or the size of the loan.
Interest rate ceilings
The Interest Rate Restriction Act limits interest to 20% a year for principal below ¥100,000, 18% from ¥100,000 to below ¥1 million, and 15% from ¥1 million. The Investment Act separately makes charging above 20% a criminal offence, closing the former grey zone.
The total volume regulation
Since the 2010 reforms, borrowing from moneylenders is limited to one third of the borrower's annual income across all such lenders. Bank card loans are not counted under this rule, although banks apply voluntary limits after criticism of excessive lending in the 2010s.
Overpayment refunds (kabarai)
Before the reforms, many lenders charged rates between the two legal ceilings. Borrowers who paid such interest, especially before 2007, could claim refunds. Most claims are now time-barred, so offers to recover overpayments deserve scrutiny regarding fees and genuine eligibility.
Cooperative and community lenders
Shinkin banks and credit cooperatives (shinyō kumiai) serve local residents and small firms, often with personal service and moderate rates. Labour banks (rōkin) lend to union members, and JA Bank serves agricultural communities, frequently offering education and housing loans with favourable conditions.
Public welfare loans
Local social welfare councils administer the Livelihood Welfare Fund loan system (seikatsu fukushi shikin). It offers low-interest or interest-free loans to low-income households, people with disabilities and older residents, usually with a guarantor and counselling from the municipal office.
Peer-to-peer lending in Japan
Japanese "social lending" platforms channel investor money through funds to businesses rather than consumers, because lending to individuals requires moneylender registration. Several platforms faced FSA sanctions after misusing funds, so consumer P2P borrowing is effectively unavailable in Japan.
| Lender type | Supervisor | Rate limit | Typical documents |
|---|---|---|---|
| Registered moneylender | FSA or prefecture | 15–20% depending on amount | ID, income certificate above set amounts |
| Bank card loan | FSA | Same statutory caps | ID, income proof |
| Shinkin bank / credit cooperative | FSA | Same statutory caps | Residence or work in area |
| Livelihood Welfare Fund | Social welfare council | Low or zero interest | Income proof, guarantor |
| Family loan | None | As agreed | Contract and repayment records |
Credit information bureaus
Lenders consult CIC, JICC and the bankers' association centre (KSC). Late payments over about three months are recorded as serious delinquencies and remain for several years. Individuals can request disclosure of their files online, by post or at counters.
Borrowing from family and gift tax
Loans between parents and children are legal, but the National Tax Agency examines them closely. Without a contract, a repayment schedule and actual transfers, a so-called loan may be treated as a gift and taxed above the annual basic exemption of ¥1.1 million.
Making a family loan credible
A written contract, repayments by bank transfer rather than cash, and a realistic schedule matched to the borrower's income are the essentials. A modest interest rate also helps distinguish a loan from a gift, though any interest is taxable for the lender.
Steps for borrowing from a private lender
Following a clear sequence helps borrowers in Japan avoid illegal lenders and keep total moneylender debt within the legal ceiling. It also makes sure cheaper cooperative and public options are considered before consumer finance, rather than after a first refusal or a missed payment.
- Request your credit file from CIC and JICC.
- Calculate one third of annual income and total existing moneylender debt.
- Search the lender's registration number on the FSA database.
- Compare the annual rate and total repayment in writing.
- Consider shinkin, rōkin or welfare fund loans first.
- Document any family loan with a contract and bank transfers.
- Consult the Japan Financial Services Association's centre if in difficulty.
Mistakes and warning signs
Illegal yamikin lenders advertise on social media and by fax or flyer, often targeting people already over the one-third limit. They demand extreme interest, threaten relatives and workplaces, and frequently use the victim's bank account for fraud. The patterns below are typical warning signs.
- Paying a "guarantee fee" or buying prepaid cards before a loan is released: registered Japanese lenders never take money in advance.
- "Salary factoring" schemes disguised as wage advances, which courts treat as illegal lending.
- Lenders without a registration number in advertisements.
- Handing over a bank card or passbook as security.
- Treating gift-like transfers as loans with no contract.
How can I verify a moneylender's registration?
Check the registration number on the FSA's search system for registered moneylenders, which covers both national and prefectural registrations. A number in parentheses shows how many times the registration has been renewed; a newly created number alone is not proof of legitimacy.
Does the one-third rule apply to all borrowing?
No. It covers unsecured loans from registered moneylenders. Mortgages, car loans, bank card loans and certain emergency loans are excluded. Lenders must request an income certificate when a single loan exceeds ¥500,000 or total moneylender borrowing exceeds ¥1 million.
Can a foreign resident borrow from a Japanese lender?
Many lenders accept foreign residents with a residence card, a stable job and a sufficiently long remaining period of stay. Applications are usually in Japanese, and lenders consider the visa expiry date when setting the maximum loan term.
Where can over-indebted borrowers get help?
The Japan Legal Support Center (Hōterasu) provides free legal consultations for those with limited means, covering voluntary settlement, individual rehabilitation and bankruptcy. Local consumer affairs centres and bar associations also hold debt consultations, often without charge.
Useful organisations and resources
- Japanese Bankers Association: credit information bureaus — English overview of Japan's credit information bureaus, including CIC and JICC, and how lenders share borrower records.
- Hokumon Shinkin Bank: credit information notice — Example of a shinkin cooperative bank's disclosure on how applicants' credit information is registered and checked for loans.
- E-Housing: credit cards, loans and credit scores in Japan — English guide for residents on how loans, bank regulation and credit histories work when borrowing in Japan.
Official and legal references
- Money Lending Business Act (English translation) — Official English translation of the law requiring moneylenders to register and limiting total borrowing relative to income.
- RegAlert: Japan lending and credit regulation — Guide to Japanese consumer lending rules, including moneylender registration, interest ceilings and supervision by the Financial Services Agency.