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Understanding Japan’s banking and health care systems

July 1, 2022
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Why this is important to Wisconsin businesses: Wisconsin companies considering business opportunities in Japan should be aware of how these systems operate.

Japan’s financial system has undergone a major transformation over the past several decades, allowing more privatization. Meanwhile, the country’s health care system continues to operate under a government-run plan and offers limited options for short-term visitors.

Wisconsin companies seeking opportunities in Japan or planning trips there would do well to familiarize themselves with these aspects of the Japanese economy.

Following World War II, Japan’s financial system was significantly different from those of Western nations, dominated primarily by banking, with securities playing a minor role. However, over the years, as markets have been deregulated, the differences have diminished. By the 1980s, Japan’s banks had become a major force in international banking, and the Tokyo Stock Exchange had evolved into one of the largest securities markets in the world in terms of capitalization. Much of the growth, though, was based on speculation in the highly inflated real estate market. When that bubble burst in the early 1990s, it resulted in a serious setback for both banking and the securities market. The prolonged recovery lasted into the early 21st century.

Meanwhile, laws regulating Japan’s financial system were gradually revised, allowing more flexibility in the way banks, securities and insurance companies operated.

The Bank of Japan, established in 1882, is the sole bank that issues the yen; it also plays an important role in determining and enforcing the government’s economic and financial policies. But the bulk of domestic banking is handled by commercial banks now. Since the late 1990s, regulatory reforms have broken down the barriers that traditionally segmented the Japanese banking system into different types of lending establishments. There are also a number of trust banks and long-term credit banks, several dozen foreign banks, and many mutual savings and loan banks and credit associations.

Some government financial institutions remain, as well, such as the Japan Bank for International Cooperation, the Japan Finance Corporation for Small and Medium Enterprise, and the Development Bank of Japan. One of the more significant developments in the early 21st century has been the 10-year privatization of the Japan Post Bank, which was completed in 2007. Japan Post Bank now has the largest deposit holdings of any bank in the country.

As far as Japan’s health care system, the National Health Insurance (NHI) program covers much of the cost of hospital visits for the Japanese people. NHI provides a fund created by workers’ insurance premiums, employer payments and taxes; it is designed to cover most of a patient’s basic medical costs. Health insurance is mandatory for all residents of Japan, regardless of job status. Enrollment in the NHI plan allows them to see physicians, dentists, pharmacists, nurses, midwives and other health care professionals for diagnosis and treatment, on a co-payment basis. Patients are required to pay 10% to 30% of their medical bills up front, depending on their age and income. The premiums they pay NHI help the national fund cover the remaining 70% to 90% of the costs.

Japanese health care providers do not normally accept private health insurance. That is only an option for tourists and visitors to Japan who stay less than three months. Some private insurers do work with special hospitals and can provide a list of those doctors and facilities. Patients are required to pay 100% of the cost up front and to work with their insurers for reimbursement.



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