Disdain for debt

KAMAKURA, Japan — At a forest shrine lined with incense-burning urns, Japanese pilgrims enter a small cave where they stoop to wash coins and bills in trickling spring water.

Cleanse your money here, the tradition goes, and it will multiply.

The ritual dates back perhaps 700 years, and it says something about the Japanese view of money: an attitude far different from that of many Americans. Cash — cold, hard currency — is a precious, treasured commodity here, something to be treated with reverence.

“I pay for everything in cash,” says Shu Nagaye, a 23-year-old student, as he meticulously scrubs both his paper money and coins — 11,720 yen, worth roughly $105 — all placed carefully in a woven basket.

“When I don’t have money, I control myself and don’t buy anything.”

Like most Japanese, Nagaye despises being in debt. And unlike most Americans, he assiduously avoids it at all costs.

He has used the single credit card he owns only for travel abroad, and took care of that charge in one payment. The only money he has ever borrowed was in tiny amounts — from friends — and he made sure to return the money quickly.

Such cautious, almost fearful attitudes toward debt are common in Japan, the world’s second-largest economy. While Americans pile up mortgages and credit card debt, Japanese are reluctant to borrow at all, creating the problem of economic stagnation. And while the United States sells U.S. Treasury bonds to cover its expenses, Japan, China and other nations buy them.

On a personal level, hoarding cash is so common among Japanese, from bills stuffed under mattresses to bars of gold in safes, there’s a phrase to describe the practice — “tansu yokin” or “savings stashed in a chest of drawers.”

Import bag-makers like New York-based Coach Inc. have to design wallets and coin purses especially for Japanese, who like to carry large wads of cash. American billfolds need more room for credit cards, less for paper money and coins.

The Japanese government has tried to encourage business borrowing, and thus break a decade-long economic slowdown, by keeping interest rates at virtually zero for four years. But even though this policy prevents Japanese from earning much interest on their bank savings, relatively few have been lured into playing the stock market or buying up the equivalent of mutual funds.

The Bank of Japan says Japanese have $13 trillion in assets — 55 percent of it in cash and savings, and only 9 percent in stocks. Of Americans’ $36.5 trillion assets, only 13 percent is in cash and savings, and 34 percent in stocks.

Another notable statistic: America has twice as many people as Japan but 23 times as much credit card debt — more than $800 billion.

For decades, credit card companies have tried to woo Japanese with little luck. A recent study by JCB International Co. Ltd. found only about 8 percent of transactions here involved credit cards, with the rest carried out in cash.

The recent data leaks in the United States that exposed millions of cardholders to identity theft, including thousands of Japanese, have only intensified the deep distrust of credit.

A recent survey of credit-card holders by Japan’s top business daily, Nihon Keizai Shimbun, showed 46 percent of the respondents were seriously considering getting rid of their cards, reducing the number of cards they have or using cards less frequently because they don’t think the risks are worth it — especially when they use them mainly to get bonus miles and discounts.

“Japan has always been a cash-oriented society,” says JCB spokeswoman Wakaba Kamimura, adding that the company has been offering trips to Disneyland and easy ways to pay utility bills as enticements. “There’s this common idea that credit should be used only for very expensive purchases.”

Muneaki Fujii, a 49-year-old schoolteacher with a 25-year loan on his home, is in a borrowing minority — just a third of Japanese households have mortgages. And even for Fujii, the loan is a rarity. “I don’t buy things that I can’t pay for in cash,” he says. Nearly all American homeowners, by contrast, take out mortgages because of the tax breaks alone.

Japanese also almost never use checks. They have their rent, utilities and other monthly bills automatically deducted from their bank accounts, and such transactions require no extra fees.

Some have proposed cultural explanations for the two nations’ spending patterns. The “American dream” emphasizes entrepreneurism, while the Japanese equivalent stresses stability and lifelong employment with a single company.

Others point to government policies. American tax law provides substantial breaks for home mortgage interest; Japanese policy does not, although there are some tax refunds for loans. Also, the Japanese government has focused its development efforts on big business, and major banks’ rules are written so that small businesses and individuals have a hard time qualifying for loans.