Suicides force Japan to face loan-shark menace

OSAKA, Japan -- By the time Akiyo Nishihira squatted on the tracks with her husband and her elderly brother in the path of an oncoming train, the loan shark had been calling nightly, demanding payment and sometimes threatening to kill her. He had been calling the takeout lunch stand where she worked, and the factory where her husband mopped floors. Calling her neighbors, profanely insisting that they must pay in her place.

"Every night, I am scared of the telephone. My husband and my brother feel sympathetic and have decided to die with me," Nishihira wrote to a neighbor from whom she had borrowed more than $2,000. She applied neat Japanese script to her pink, lined stationery, then wrote the address in calligraphy.

"I cannot pay you the remainder. Please forgive me, truly. I cannot apologize enough. I will apologize with my death."

The triple suicide last month at a rail crossing in Osaka, Japan's second-largest city, has riveted public attention on the increasingly widespread crime of loan-sharking -- usurious lending, at annual interest rates in excess of 6,000 percent.

Such predatory finance has grown dramatically during Japan's years of economic malaise, fueled by spiraling debt loads and the expansion of organized crime syndicates into the lucrative trade, according to police and lawyers who handle such cases.

Bankruptcies quadrupled

For such lending to be happening at all in Japan seems perverse. Over the past several years, the central bank has cut interest rates effectively to zero in a bid to revive the world's second-largest economy.

Growing reliance on loan sharks highlights how millions of households have fallen so desperately into debt that they have been left out of this low-interest bonanza. Personal bankruptcies have quadrupled over the past decade as wages have fallen, bonuses have been cut and businesses have closed their doors.

Many households have such poor credit that no legitimate lender will extend a loan, yet they are suffering such a crunch that they are willing to take on absurd rates of interest to stave off collapse.

Last year, more than 122,000 Japanese called authorities for help after borrowing money from loan sharks or turned up on customer lists when police raided lending operations, according to the National Police Agency. Experts estimate that the real number of victims exceeds 1 million, with most failing to report cases out of fear and embarrassment.

In Tokyo, more than 900 people ran away from jobs and families last year to escape the terror of collections by loan sharks, according to city police.

The fear reflects who is involved. Roughly one-fourth of the lenders are linked to violent crime syndicates known as yakuza, according to the National Police Agency, but a Tokyo-based lawyer who heads a group that advises victims of loan sharks nationwide, Kenji Utsunomiya, puts the number far higher. "They are behind the scene," he said.

Cracking down on lenders

The triple suicide in Osaka on June 14 has injected urgency into the debate over a bill in Japan's legislature, the Diet, that would tighten the registration process for lenders while imposing penalties of up to $1 million on anyone caught exceeding legal interest rates.

The proposed law would also increase the maximum prison sentence from three to five years. Police in major cities, including Tokyo and Osaka, have established task forces to investigate and prosecute violators.

Loan sharks have become the last resort for a society already saturated with legal lending institutions for those with bad credit.

"Consumer lenders," who dispense cash using automatic teller machines, can approve loans within an hour by telephone, with the interest capped at 29 percent. As wages have fallen in Japan in recent years, consumer lenders have proliferated in every city.

Once a borrower defaults on payments to a consumer lender, his name lands on a blacklist that circulates among other such institutions. The lists are then sold covertly to loan shark operations and shared among them, according to police and lawyers. The loan sharks also comb lists of personal bankruptcies published by the government, adding to their databases. They use these lists to target people in need.

A phone call from a legal aid group on behalf of a victim is generally enough to stop harassment by lenders. Sometimes advocates are even able negotiate settlements in which the loan shark returns money rather than face the prospect of a lawsuit or prosecution.

"They don't want to be raided by the police and lose all their customer information," said Toshio Yamazaki, a volunteer at the aid group. "What they are doing is outrageously profitable and they would rather not waste time. They can find numerous other suckers so easily."