Depositors Scramble Amid Rumors of Bank Account Freeze

August 4, 2003

During fiscal 2004, the Bank of Japan plans to issue new bank notes for the 10,000, 5,000 and 2,000 yen denominations. Some people are nervously recalling 1946, when the government froze all bank accounts at the same time it issued new bills.

As a defense against a similar occurrence, a financial consultant tells Shukan Shincho (July 31) there's been a run on safety deposit boxes at banks.

"I inquired at banks in Kojimachi, Akasaka, Toranomon and Ginza," he says. "They told me every single box had been rented out. The situation is the same at bank branches located in residential areas. I thought it a bit strange and asked a bank employee what was going on. He lowered his voice and confided that self-employed people and company owners had been converting their yen to dollars and hoarding them. Some boxes are crammed with thousand dollar bills, the equivalent of 500 million yen."

The banker refused to go into further detail, but a company owner was more forthright.

"If you include local government deficits, the government is 700 trillion yen in the red; tack on the debts by special corporations like the Public Highway Corporation, and it's probably closer to 1,300 trillion. Even if the consumption tax were doubled to 10%, it wouldn't be enough to erase these deficits. The only measures left are freezing of accounts, followed by devaluation of the yen. The International Monetary Fund made the same conclusion in its report."

"If the government were to freeze accounts and permit only withdrawals deemed sufficient to maintain one's livelihood, they could impose an 'asset tax' on depositors holding over a certain amount," the owner of a small company tells Shukan Shincho. "At the same time, they could also devalue the new notes by 30%."

With the "juki" national registration system in place, the next step is for a system to track the names of all account holders.

"For a while, travel agencies were organizing tours abroad for people who wanted to set up foreign accounts," says the abovementioned company owner. "But after 9/11, measures were tightened up to prevent money laundering. Now, the way to go is dollars in safety deposit boxes."

But a former Bank of Japan executive brushes aside such acts as pure paranoia.

"The bank freeze just after the war was necessary to deal with rampant inflation," he says. "It's different from the deflation that's taking place now."

Maybe so, says Shukan Shincho. But shouldn't the horrendous fiscal deficit alone be enough to cause rumors of a freeze on bank accounts to fly?

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