Japan plans to raid dormant bank accounts to raise new revenue

Government resurrects proposal to help pay for welfare and education projects as the indebted country struggles to find new revenue

PUBLISHED : Tuesday, 21 January, 2014, 10:35pm
UPDATED : Tuesday, 21 January, 2014, 10:35pm

Infamously saddled with a public debt that is running at an eye-watering 214 per cent of GDP, the Japanese government is planning to raid dormant private bank accounts to boost its bottom line.

The ruling Liberal Democratic Party and its main ally in government, New Komeito, are planning to submit a bill to allow the government to access bank accounts that have not been touched for 10 years or more. The funds would be used for welfare and education projects.

Accounts holding some 85 billion yen (HK$6.3 billion) are classified as dormant each year, with depositors who are notified of the situation reclaiming about 35 billion yen.The new legislation would therefore free up about 50 billion yen each year.

It’s a very sensible way to use these funds as they have pretty much been forgotten

That however is dwarfed by the debt, which exceeded 1,000 trillion yen last year - that's a million billion.

The bill is likely to sail through the legislative process with the backing of the opposition as a similar suggestion was put forward by the equally desperate Democratic Party of Japan when it was in power. That plan never came to fruition as the DPJ focused its efforts on attempting to hang on to government. One stumbling block was the anticipated cost of managing the system, while questions were also raised by the powerful banking lobby about the propriety of using depositors' assets.

The banking sector is unlikely to be delighted that the plan has been resurrected as at present the contents of moribund accounts are listed as the banks' profits.

Their objections will be over-ridden, however, and the plan is for the funds from dormant accounts to be transferred to the government-run Deposit Insurance Corporation of Japan. A new body set up within the corporation will then scrutinise requests for financial support from education and social welfare organisations and allocate appropriate amounts.

"I feel it's a very sensible way to use these funds as they have pretty much been forgotten and is even a source of good publicity that the government is seeking to use them," Jun Okumura, a visiting scholar at the Meiji Institute for Global Affairs, told the South China Morning Post.

"And we must remember that anyone who finds a bank book that is more than 10 years old will still be able to go to the authorities and reclaim whatever was in the account," he pointed out. "The banks might not like it, but it's better to use it for the public good than simply letting the banks have it on their books as profit."

And he dismissed suggestions that the measure would go any way to solving the nation's debt problem. "This is peanuts in comparison with the national debt and I think it is very doubtful that the government would actually spend the principle - which they would be duty bound to repay if the owners came forward - but simply use the interest," Okumura said.

Critics could be forgiven for cynicism over the way in which the funds will be used, however, given the way in which some of trillions of yen earmarked for repair and recovery work in the aftermath of the 2011 earthquake and tsunami found its way into some questionable projects, including promoting the whaling industry and providing vocational training for inmates at prisons hundreds of kilometres from the disaster zone.