Saving the Sun: Japan's Financial Crisis and a Wall Stre (English Edition)

Saving the Sun: Japan's Financial Crisis and a Wall Stre (English Edition)

I often came across this book at bookoff which is Japanese largest old book store chain. This book depicts Japanese bubble burst and banking industry in Heisei era. Since I am interested in history of Japanese economy and recent poor performance, I bought it. It was cheap. About one dollar.

In addition to above reasons , I bought this book because Ms Gillian Tett wrote it. I enjoy her articles on Financial Times .

As the independent Journalist, she analyzes and depicts bankruptcy and resurgence of long term credit bank of Japan. 

There were three long term financed banks, which are the industrial bank of Japan , long term credit bank of Japan and the Nippon credit bank , in Japan. 

Shortly after Japan was defeated at world war 2, Japanese government created banks, which are for offering long term finance to largest companies which needs long term loans for large capital investments in 1950s. At that time, corporations are short of cash and were willing to make investments because Japanese economy were growing at rapid pace.  

In 1980s the growth of Japanese economy slowed and corporations were matured , long term credit bank of Japan was forced to change business model. In 1980s historic purpose of three long term financed banks finished. 

Simultaneously the bank of Japan loosened monetary policy. As a result of this policy, bubble of real estate occurred. Many bankers , including bankers of long term credit bank of Japan , rushed to lend loan to the corporations recklessly to get interest earnings.

Without showing historic example, the bubble economy collapses sooner or later. 

There is no exception, but burst of Japanese bubble was really huge. Asset value of the GDP equivalent to soviet union, disappeared. This decline asset value hit balance sheet of long term credit bank of Japan very hard. On top of this balance sheet issue, visibility of financial condition was very unclear because J-GAAP allowed the entity not to recognize allowance for doubtful accounts for subsidiaries. There was no requirement to prepare consolidated financial statements at that time and many banks transferred bad assets to subsidiaries so that shareholder cannot notice problem.  It was called "Tobashi" (Transfer bad assets to somewhere else.)

Management believed that real estate market recovers in near future because asset value in Japan had been increasing after world war 2, but it did not happen. In 1997, there was credit crunch in Japan. The government let them go bankrupt. Regardless of the west or the east, helping financial institution is always political issue. Politicians decided that they cannot help long term credit bank of Japan because of their reckless management.

Ripplewood holdings , which is foreign owned private equity firm , acquired 
long term credit bank of Japan. Because they exercised warranty clause so often and Japanese government poured tax payers` money so a lot. Furthermore, because fund registered address was outside Japan, the government could not tax them when they sold stocks on the Tokyo market. Therefore foreign owned bank was very unpopular and foreign investors were criticized on the media very harshly.

However , long term credit bank of Japan, which was renamed "Shinsei bank" offered new service such as 24 hour ATM at free. They gained popularity and increased assets from depositors.

Ms Tedd investigated and wrote the relationship between the Nippon credit bank and Japanese yakuza . I felt how strong her spirit of journalism is.  The roots of the Nippon credit bank stems from Korean peninsula.  Because they are discriminated from Japanese society, they tend to become Yakuza compared to ordinary Japanese. It is said that some of borrowers were related to Yakuza.  Finally, the CEO of Nippon credit bank committed suicide. I have to feel how dark and deep Japanese society is. 

I just would like to explain subsequent status of aftermath three long term financed banks.

The industrial bank of Japan is merged into Mizuho , which is one of biggest bank in Japan. Although this bank failed to consolidated system a few times, they are currently completely portion of Mizuho. I cannot confirm any Samurai spirit to help or offer loan to the large corporation for development of the nation and the Japanese corporation as the industrial bank of Japan did in 1950s and 1960s.

Long term credit bank of Japan, which was renamed as "Shinsei" , cannot pay back loan to the government still. Currently largest shareholder is Japanese government.  I do no know helping this bank was beneficial to Japanese economy.  SBI , which is internet based financial institution and run by financial entrepreneur Kitao, may purchase and control this bank.  They integrate further anyway, I expect.

On the other hand, the Nippon credit bank, which was renamed as "Aozora" , paid back capital to the government and runs bank independently. They offer one of the most attractive interest rate to depositors and management making progress about paperless. Although banking industry is very conservative, their management is progressive , I feel.

This book is very informative and insightful. I recommend strongly.