Political Economy of Consumer Credit Market in Japan

In Japan, scholars’ interest about consumer credit market and increase of over-borrowing has been low partly due to the myth of Japanese households being high savers.  Until recently the Japanese consumer credit market’s backwardness was the origin of social and economic problems (suicide, crime, security, data privacy, overindebtedness, poverty, etc.). Japanese government’s response to scandals involving illegal credit business practices took almost three decades.

Many researchers described the Japanese consumer policy as the product of a close industry-state interaction. For a long time, industry was uniformly opposed to any consumer protection policy. Through a combination of industry lobbying, campaign financing, direct interaction with compliant government agencies and informal ties to elected officials, industry is said to dictate the outcome of national regulatory policy (Vogel, 1995).  

The Japanese consumer credit market is a particularly interesting case, and surprisingly less analyzed. Our presentation aims at identifying the coalition of interests that directly and indirectly shaped the market’s development. For example moneylenders were left almost entirely outside of the policy process for the first regulation in 1984 and for its revision in 2006. At the same period commercial banks developed their own offer of credit, taking market share from moneylenders.

Theory of consumer policy argues that in the Japanese regulatory policymaking, legal protection is relatively weak and access to legal recourse in case of injury proves difficult (Trumbull, 2012). However collective actions led by advocates at the local and national level, also highly covered by media, resulted on major institutional changes such as the revision of the Bankruptcy Law that eased the legal process and lowered the social stigma.

In this study of consumer credit regulation we test the theory of the industry-state coalition and to which extend the civil society influenced the policy process by increasing the legal protection of the consumer.

Key words: Japanese consumer credit, consumer policy, institutional change