South Korea Up, Japan Down !

[Maciamo]

Newsweek International Edition

Learning From the Student

If Japan wants to stave off a banking crisis, it should look at the path taken by its former star pupil, South Korea

Oct. 14 issue - Ever wonder what makes Japanese financial markets succumb to near-death spasms every six months like clockwork? Why, each March and September, stock prices in Tokyo tumble, bankers sweat the latent losses hidden on their balance sheets, and analysts?sure that a crisis is nigh-issue dire pleas for reform?

Here is a brief summary of Japan's economic problems :

Japan Inc.’s long losing streak has shrunk the economy to its 1995 size and sent stocks plummeting to levels not seen since the mid-1980s. Property markets are in free fall. Bank lending declines by 2 percent each year, with most new credit going to so-called zombie companies—construction and retail failures kept alive with zero-interest loans.

The Korean and Japanese versions of capitalism now bear increasingly little resemblance to one another. Since its own bubble economy burst in the late 1980s, Tokyo has refused to change. The government has tried to bail out the economy with massive public works, banks have refused to cut off old clients, corporations have kept on deadwood in senior management. Now banks are plagued by growing portfolios of bad loans to industries sinking under the weight of overcapacity and weak profits.

Read the whole article to know what Japan is going to do, and more importantly, why Korean economy is the second fastest growing in the world (after China), while Japan's is doomed. The 1997's Asian crisis has allowed S. Korea to heal its financial system by nationalising 6 major banks and letting some of the largest chaebol go bankrupt, and growth has now taken over. Korean society's relationship to money has greatly evolved (money circulates more freely than ever), while Japan hasn't made any significant change since problems appeared in the late 80's.

Talking of Takenaka's reforms to come, Newsweek says :

One fear is that he will tighten the definition of what it means to be a deadbeat. Japan now allows debtors who can at least pay interest to dodge classification as “nonperforming,” while Korea and the United States requires debtors to pay both the interest and the principal. By the stricter measure, dozens of big domestic companies are in danger of going under, and Japan could face the biggest industrial shakeout the world has ever seen. Japanese bankers also now live in fear of getting canned in favor of foreign professionals, as has happened in Korea. “When we visit Korean banks we typically meet at least one foreign manager, and they’re usually in charge of credit assessment,” says Takamasa Yamaoka of Standard & Poor’s in Tokyo. “That would be impossible in Japan today.”

But with resistance among high officials, especially inside the LDP, reforms might not come as soon as expected (or needed). The 4 major Japanese banks don't want infusion of capital either.


I have previously voiced my concern for big Japanese banks going burst (I mentioned Mizuho, the world's largest commercial bank). Here is another article in the same issue about it :

Interview: No Bank Is Too Big to Fail

[thomas]

In the 80s and still in the early 90s a lot of books were published in the West praising the Japanese economic system. Tenor: "How can we learn from Japan?" Now Japan has to learn a lesson by looking at neighbours, funny.

@ foreign managers

Unavoidable, as they will pay little attention to old customers and harmony, and base their decisions on economic necessities. Again, change will have to come from outside.

Excerpt from the interview with Heizo Takenaka:

Q: Korea responded to its crisis by nationalizing banks and finding new managers. Should Japan consider such measures?
A: We have to study the experiences of Korea, Sweden and the United States.

Very Japanese answer.

[moyashi]

Japanese banks have got themselves in a position.

Q: Where did all the money come from originally to create the Bubble?
A: The Genie effect. Money was created out of thin air and passed out to anybody willing to accept 1+ million worth of low interest loans.

So, the banks are stuck with debts that they can't finanace since they created the money out of nothing and they are stuck with properties and un-payable loans.

Q: Kill the CEO's and Presidents.
A: Can't! Incoroprated Companies basically allow the top echolon to escape with Golden parachuets as long as they have left before any problems came to surface. A few have been tracked down, but those CEO's bailed at the last minute and blantantly accepted large payoffs for services well done and rendered.

Q: Construction companies are all unstable and hold large amounts of debts, why don't we just Chapter 11 and 13 them.
A: Can't! Too many politicians took bribes. Nobody is willing to rick a scandal in order to save the country. Politicians are worse than the Yakuza when it comes to racketering.

Q: What about the think tanks?
A: Who knows! They just don't have the political clout (spelling?) to influence anybody beyond reporters who need to make a name for themselves.

Q: Is Japan doomed?
A: According Moyashi Consulting, we think that Japan should just make more money out of thin air and just pretend that everything will be ok. The fee that we'll get for this advice will allow us to move to a nice PentHouse floor in Shinjuku. But, we'll probably just by beach front property in Malibu. But your advice is ridiculous and won't solve anything. Sorry, you are wrong in thinking like that! We suggested something so absurd because that is what our clients want to hear. They don't want to hear reason or be reasonable. So, please don't tell us how to run our business. That is why we get heard and you don't!!! sheshh study the market folks.

So, is Japan doomed? We think at moyashi consulting that Japan is headed the way England has gone. Sorry, to also say that we don't think Japan is up to change fast enough to make a full return to being economic monsters, their boys are weeker than their women and the men prefer buying used panties over buying stocks.


note ... Moyashi Consulting is being totally sarcastic and trying to make a joke out of the fact that, unfortunately, Japan is really in deep doo doo. To double clarify ... this scarcism is regarding "Is Japan doomed?" question.

The other questions are personal ideas and thoughts of Moyashi.

note ... why buy books when the answer is on the street in front of you? Turn on the TV and listen and watch what the news "isn't" telling you. That's were the answers are.

[thomas]

When will Moyashi Consulting finally move into its Shinjuku penthouse?

[Maciamo]

Hehe, I like when you play it cynical like that Moyashi. I think that you see clear in Japan's economic marasm. That was an entertaining interview !

[moyashi]

@ now I'm blushing !

@ moyashi consulting needs to invest in a spell checker before they get their penthouse in Shinjuku ;)

@ I was in a real bitchy mood this morning and all these blokes get big money to write up ridiculous reports ... hehe ... I should be getting the same cash for shooting off my mouth.

[thomas]

Hope you won't start to charge me for your posts, hehe...

[moyashi]

hmmmm, now that you put it that way ...
I'm definitely expecting a beer and sausage when I get to Europe ;)

[thomas]

Hehe, I'll glady introduce you to the real world of sausages!

Here's another interesting article comparing China and Japan:

The Race to Create a Market Economy

=> http://knowledge.wharton.upenn.edu/a...3&homepage=yes

[moyashi]

**** ... "William Overholt, a senior fellow at the Harvard University Asia Center" ... here I am a dumb **** that runs off at the mouth and gives it to you all at point blank while this bloke is friggin Senior Fellow.

hmmm, back in 1987 I thought that China would be one hell of a major economic power by 2007. Hell, I was a Senior in high school and this prediction was simple enough that any fool with out being a "Senior Fellow" would have thought the same thing.



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Seriously would anybody hire me?