Banks in Japan enter a new era today when full deposit protection is abolished for time deposits and other similar savings accounts. In the event of a bank failure, the maximum refund per capita will be limited, in principle, to 10 million yen plus interest. And beginning April 1, 2003, the same limit will be placed on current accounts such as demand deposits.
For depositors, this means that they must choose banks more carefully and deposit money at their own risk. A bank collapse will not necessarily lead to refund limitation, depending on how the crisis is handled. Still, the possibility remains that depositors might end up losing money if they make the wrong choice.
Most Japanese have savings accounts to meet their long-term financial needs, such as buying a home and preparing for retirement. For those holding more than 10 million yen in a bank, the minimum defense against loss would be to split their accounts into smaller units of less than 10 million yen and keep them in two or more different banks.