Anaemic exports, a struggling domestic economy and a dramatic plunge in summer bonuses could cause Japan’s version of the sub-prime mortgage crisis to explode, a leading think-tank has warned.

A housing loan default problem is looming and likely to begin in the next few weeks. It amounts to the detonation of a ten-year time bomb that, researchers at the Tokyo Foundation say, started ticking around 1999 in the immediate aftermath of the Asian financial meltdown. This is the result of flawed government policy, whereby the state housing loan agency offered mortgages to families that they knew were unable to pay. According to the think-tank, those loans were made on the assumption that the traditional staples of Japanese corporate life — seniority-based pay increases, constantly rising bonuses and lifetime employment — would remain as fixtures.

The impending meltdown, which the Tokyo Foundation believes could affect some hundreds of thousands of households, will be focused initially on the country’s industrial heartlands, where corporate bankruptcy rates are rising. The residential zones around Toyota’s home territory of Nagoya could become ghost towns, Kazuo Ishikawa, the think-tank’s senior research fellow, said.

The crisis will also be tightly centred on mortgages extended by the government through the Japan Housing and Finance Agency — the body responsible for 20 per cent of the country’s domestic housing loan balance of about 180 trillion yen (£1.1 trillion).

Osamu Nagashima, at the Sakura Jimusho housing consultancy, agrees with that analysis. Mr Nagashima said that the seeds of the crisis were sown in 1998 with the collapse of Yamaichi Securities. The Japanese Government of the time was desperate for pump-priming ideas and interest on mortgages extended by the state housing lender from 1999 was set at 2 per cent to entice borrowers. However, it was also set up to double to 4 per cent after a decade, during which it was assumed Japan would fully recover. The traditional requirement for a 20 per cent cash downpayment was waived — a decision that quietly created a class of sub-prime borrower in Japan, and which now, says The Tokyo Foundation, threatens to force thousands of Japanese into cheaper homes.

The alarming prediction comes amid clear signs of upheaval in the micro economies of Japanese households. With Toyota, Panasonic and other groups expected to finish the current financial year in the red, the system of company bonuses has been shaken. The Japan Business Federation calculates that June bonuses will suffer an almost 20 per cent cut across the board, and a dip from which there appears little immediate prospect of recovery. Because those twice-yearly bonuses amount, on average, to about a quarter of the annual salary package of mortgage-payers, the effect is likely to be severe.

Mr Ishikawa said: “The next six months are going to see a sharp increase in housing refugees. People are first going to try to defer payments, but then they will default and be forced to abandon their homes and head somewhere cheaper.”

One indication of how seriously the Government has underestimated the problem, is the lack of official data on the subject of mortgage defaults or any apparent urgency to generate it.

The most useful guide, say operatives at the Housing and Finance Agency’s branches, is to look at the number of houses being auctioned after defaults. The number of auctions handled by the agency per month doubled between September last year and March 2009.

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