TOKYO — Until very recently, Japan was a banker's paradise.
Interest rates for both loans and deposits were pegged by the government and, although the margin between the two was narrow, the government saw to it that the banks had nothing to worry about.
Regulation and self-regulation were so strict that all a bank could do was to be more polite or more convenient than its rivals. Every major bank in the country operated its cash-dispensing machines during precisely the same hours. Even the size of the paper used to print calendars given to customers when they opened accounts was regulated.
All the same, the average Japanese saved more than 20% of his disposable income and put almost all of his savings in the bank. Japan's large companies needed big loans and only the big banks could provide them.
In the last five years, however, the comfortable world of the Japanese banker has fallen apart. The average profit of the big 13 so-called "city banks"--which, despite their name, operate nationwide--plunged from $771 million in 1980 to $288 million in 1984.
Japan is showing signs of turning into what is increasingly being called a "casino society." Housewives now leave their extra money at cozy shops operated by securities firms near suburban railway stations, and corporations have become their own bankers.
Japanese, however, still are showing little enthusiasm for going into debt, thus depriving Japanese banks of the opportunity to expand their services into consumer loans.
The handwriting is on the wall for Japanese bankers. As Osamu Sakurai, president of the Sumitomo Trust Bank, told the Yomiuri newspaper: "Service at banks has been characterized by uniformity--like the hamburgers at McDonald's restaurants. From now on, we intend to use all our assets to provide financial services to compare with dishes served at Maxim's."
Although the menu of services is still to be determined, the desperation of the bankers to keep their enterprises going has become apparent.
Between 1970 and 1974, the average Japanese corporation relied on bank loans for 82.5% of its financing needs. By 1984, the banks' share of corporate financing plunged to below 40%.
But not only have the banks lost their corporate borrowers, they also are being abandoned by individual depositors.
Savings Pace Slows
Ten years ago, 66.4% of personal savings went into accounts either at banks or at the government-run postal savings system. By last year, that figure had dropped to 58.6%.
People still are leaving huge sums in their accounts, but the Japanese population is aging and the average Japanese is more anxious about his retirement now than he was 10 years ago. Increasing numbers of savers are looking for high-risk, high-yield instruments, which city banks are prohibited from offering.
Moreover, many Japanese families have saved so much they have exhausted the legal limit for tax-free bank deposits.
To add to the banks' difficulties, Japan's whole financial system is coming under pressure, both at home, as a result of a growing market in national bonds, and from abroad, where Japan's strictly controlled financial market is seen as giving Japan an unfair advantage in trade.
In the years after the 1973 oil shock, when petroleum prices soared upward, the Japanese government, previously relatively debt-free, began a series of massive issuances of national bonds.
Today, about $722 billion worth of national bonds are in circulation and a secondary market has begun to develop in which investors can obtain higher interest rates than the legal limit the banks can pay on their deposits.
So far, banks have managed to keep the wolf from the door by making sure that national bonds are offered in such large lots that individual investors effectively are prevented from obtaining them.
But now securities firms have started wooing away individual investors with mutual funds based on medium-term national bonds which are not only low-risk but also higher-yielding than bank deposits.
Pressure From Foreigners
Pressure also is coming from foreigners. The United States has been asking the Japanese government to open up its financial market, in general, and to issue, in particular, what diplomats have called "nice, clean" national bonds.
In other words, the bonds should come in small denominations and be available without red tape or a hefty withholding tax.
As David C. Mulford, an assistant U.S. Treasury secretary, put it during a recent trip here, "In the United States, buying a Treasury bill is as simple as buying a newspaper."
The U.S. motive in getting the Japanese to create simpler yen instruments is to make the Japanese currency attractive for investors around the world. The feeling in the United States and Western Europe has been that the yen was undervalued because foreign investors were discouraged from moving into yen. The low value of the yen, it was argued, gave Japanese exports a price advantage in foreign markets.