The foot soldiers of an economic empire in decline plod on, writes Andrew Higgins
Electronic panels flashing orange-coloured numbers crack the calm of the salaryman, dispirited foot soldier of an economic empire in retreat. The figures, on display in Tokyo’s financial district, relate not to the collapsing share prices of Japan’s brittle banks but something far more fundamental – 18-hole golf courses.
The figures are provided by Eagle Golf, a broker of country-club memberships just down the corridor from a branch of the defunct Yamaichi Securities. They signal Japan’s economic malaise. The prices of what was a fail-safe investment and status symbol are in a nose-dive.
“The price keeps going down. Nothing goes up any more,” groaned Masami Fukushima, a life insurance manager and weekend golfer. “The golden age of the golf club is over. It is finished.” His membership is now worth only 500,000 yen – less than 10%of its peak value of 7-million.
The despair of Japan’s golfers reveals the rotten core of its economy and helps explain why its financial system is groaning under the weight of bad debts officially calculated at more than $200- billion, but thought to be far higher.
The immediate cause for gloom is the death of Yamaichi Securities. A string of banks has gone under, and others will follow. Foreign deposit-takers report brisk business as Japanese shift money into what they hope are safer hands.
The roots of the crisis lie in a failure to control the boom or deal with the bad debts that have built up since the bubble burst.
The calculations based on bubble-era prices are finally coming unstuck. Bookshops hawk self-help crisis primers and how-to bankruptcy guides. The bombast of boom-era tracts has given way to self-flagellation. Typical of the mood is a collection of essays: Vanishing Japan, and Lazy Japanese. For bankers seeking solace there is The Sun Will Definitely Rise Again.
The government has changed its vocabulary, too. The director of the economic planning agency announced a long-overdue shift in official nomenclature last week: “It is appropriate to say that the economy is at a standstill, without adding such phrases like `in the process of recovery’, as the government used to do,” said Kohi Omi. Eureka! After spending 60-trillion on fruitless “packages”, Japan’s mandarins finally accepted that the country is in recession, with growth expected at around 1% this year.
But Japan as a stumbling shadow is as alarming as the old caricature of an omnivorous Godzilla. It remains a potent force, but perceptions matter, particularly those of the Japanese themselves.
Amid the hype about Asia’s tigers it was forgotten that Japan was the powerhouse. Its banks’ loans, of $250 billion, dwarfed the $40 billion from the United States.
The old confidence has gone, and there are fears that a more inward-looking Japan could mutate Asia’s sickness into a global contagion. A sign of the virus spreading would be any move by Japanese banks and institutions to unload their $210-billion of US treasury bonds.
So important is Japan to the world economy that a wrong step could bring catastrophe. During a visit to Tokyo last week, the head of the International Monetary Fund, Michel Camdessus, spoke exuberantly about the travails of South Korea, Russia and Indonesia. Asked about Japan, though, he referred repeatedly to notes, measuring his words.
The demise of Yamaichi came as a shock – not because anyone had any illusions about its health. What traumatised the financial industry was that the government let Yamaichi go under. After denying there was any problem until the last minute, authorities stopped trying to plug the dike with artful legerdemain and statistical obfuscation. They had little choice. Keeping Japan’s banks and brokers afloat had been the “convoy system”, under which strong firms, guided by the Finance Ministry, rescued the weak in times of turbulence.
But solidarity is crumbling. Last month Sanyo Securities sent out an SOS to the convoy. The government urged brokerages to rush to the rescue, but none came. Sanyo sank. The question now is just how far insolvent banks and brokerages will be left to fend for themselves. Ryutoro Hashimoto’s government has already made clear it is pressing for taxpayers’ money to be used to compensate customers.
While Eagle Golf struggled this week to sell country club memberships that nobody wants to buy, a branch manager of Yamaichi Securities was presiding over the wreckage of his career and, he said, his life. He laboured to keep up appearances, posting two staff at the door to greet customers with deep bows and numbered slips to fix their place in a queue of people eager to get their money back. It was a very orderly wake. “The customers don’t get angry with us. We often even get their sympathy,” said manager Noriaki Kohama. “But I’ve lost my job. I have no future now. I feel very angry and very sad.”