Political and Economic Research Council Releases Japan Credit Reporting Study

Chapel Hill, N.C. – The Information Policy Institute, an applied studies center of the Political and Economic Research Council (PERC), has released a study examining the economic benefits of a full-file credit reporting system for Japan. The report entitled ”On the Impact of Credit Payment Reporting on the Financial Sector and Overall Economic Performance in Japan” compares the differences in economic performance of the fragmented and incomplete reporting system found in Japan to a more robust one, consisting of complete records covering various sectors.

A Japanese translation of the key findings was released at the Financial Seminar at the U.S. Embassy in Tokyo. The project was made possible through a grant from the American Chamber of Commerce in Japan (ACCJ).

The report found that credit reform dramatically increases private sector lending. Should Japan implement a full-file credit reporting system, assuming a high participation rate, lending to the private sector could increase by as much as 20 percent of GDP.

Full-file credit reporting spurs economic growth. The increased private sector lending from credit reporting reform would boost Japan’s GDP growth by as much as 0.67 percentage points annually.

Credit reporting reform could increase the Japanese retail credit market. For a target default rate of one percent, an estimated 9.6 million creditworthy Japanese borrowers could be brought into the lending system if a full-file system was adopted.

Credit reporting reform increases loan portfolio performance. By implementing a full-file credit reporting system, Japanese lenders would reduce their default rate by as much as 26 percent.

The study used approximately one million actual credit files and a commercial-grade scoring model to simulate the impact of different reporting systems on access to credit and loan performance. The credit files and scoring model were provided by TransUnion.

“TransUnion is committed to helping businesses and governments around the world realize the benefits credit information brings to the marketplaces and economies they serve,” said Ralph Sorice, president of TransUnion International. “It is through important research like this that we are able to tell this story with quantifiable results, breaking down barriers that can lead to financial growth for all parties.”

The full report is available at http: www.infopolicy.org. A related study examining credit reporting in Latin America will soon be released by PERC.

About PERC:
The Political and Economic Research Council (PERC) is a non-profit, non-partisan think tank devoted to research, public education and outreach on public policy matters. PERC’s goal is to educate and engage policy makers, consumers, the financial/economic community and the larger public, in the firm belief that a better-informed public makes better decisions. Areas of expertise include information policy, credit access and the global information economy. PERC is funded by both for-profit and not-for-profit organizations that support PERC’s general mission.