Pay-off

Is your money really safe? This is the question about the safety of your deposits just in the case of bank’s failures. The answer is yes at present as long as you keep your money in the deposits insured by the deposit insurance system such as ordinary or time deposits. Even though there is such a system as protecting your money, you may still be worried about it in banks. It’s because you may have seen the scenes on the TV screen that bank’s depositors rush to the bank branch to withdraw money. Your great effort would end up in vain due to the troubled banks if your money you steadily save disappeared all of a sudden in your assets. Indeed, there have been many bankruptcies in the banking sector in recent years. Another bank could go bankrupt in the very near future despite the government has been making efforts to stabilize the financial system. By certain date, the particular types of the deposits are saved regardless of how much money you save.

However, you may face the risks of losing your deposits in the case of bank’s bankruptcy from April 2002, when pay-off starts. What’s the pay-off? It’s a cap of the secured refund in the deposit insurance system. Although the system was supposed to start from April 2001, according to the revision of the Deposit Insurance Law, the pay-off was prolonged. The Japanese pay-off is that the insured deposits are secured up to 10 million yen when a bank fails. The protected amount of deposits includes the principal and its interests besides the 10-million-yen cap of the principal. From the starting point, the pay-off begins with saving type deposits such as time or saving deposits. And one year later(April 2003), the object will expand to settling type deposits like ordinary or current deposits. The secured amount of deposits is limited to a single bank. Therefore, even if you deposit into different accounts at one bank, the amount will be added up to 10 million yen and its interests. To deal with the risk of losing the money exceeding the amount, you deposit into different banks up to the amount. Your deposits will be safe as long as the system works.

Not to mislead you, even though a bank went default, you would not lose the 100% of the possibility that you money in excess is retrievable. Your deposits may return to your pockets, depending on how much liability the bank has, or how it’s legally dealt with.

Up to 10 million yen in the principal! You may think that you are not rich enough to worry about the protected amount. The 10-million-yen cap is sufficient to secure your deposits at all. Even though you are rich enough, you can clear the risk by depositing separately into different banks, or sending money back to your countries as soon as you save some money. Anyhow, it’s better to keep watching the finances of banks with those indexes as ratings or stock prices. Regardless of the amount of deposits, there is still some risk. The risk is that your account will freeze for a certain period after the default bank is applied for pay-off. Although there is a temporary payment up to 600,000 yen per one depositor, especially small businesses could get short of funds.

Until here, I'm writing about the certain level's safety of deposits on the presupposition that the value of yen does not change. At a risk of seeming to digress a little bit from the pay-off, what will happen to your deposit in yen if the value of the currency continues to depreciate against any other currencies? This is the fundamental risk any currencies have though. As far as the yen is concerned, its value has been depreciating. Especially against the key counterpart currency, the dollar, it's been weakening. This is mainly owing to the comparison of the major two economies. While the American economy had been in full swing, the Japanese one has not yet gotten its second wind. Furthermore, the second biggest economy has to brace for some pains for the time being in the process of the government's structural reforms. Particularly, serious is the accumulated amount of the country's dept exceeding the GDP. Among developed nations the worst. This element also affects the devastating situation of the Japanese currency. If the value of the yen keeps falling because of these factors as I mention above, the deposits in yen might not pay off so much than you expect.

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