Japan may finally be saying ‘no’ to itself
By Jeff Ogrisseg
YOKOSUKA, Japan — Business at Japan Inc. was still pretty good when Shintaro Ishihara published “The Japan That Can Say No” in late 1989. The bubble of the asset-inflated economy had already burst, but no one seemed to have noticed.
Ishihara’s book, along with most everything else printed in Japanese at the time, hit the bookshelves with little worry about what America would think. The author-turned-politician and Sony Corp. Chairman Akio Morita candidly outlined what Japan needed to do as a rising world power, and that it should assert itself as an equal to the United States. It was intended to be a mere political fundraiser for Ishihara and his cronies. But that changed in 1990, when the Pentagon circulated a pirated translation around Capitol Hill.
Long before the release of the authorized translation the following year, America was perking up and taking notice of their “little buddies” in the Far East. In the storm of attention that followed, Morita refused to allow his portions of the Japanese version to be included in the English edition, afraid of adverse publicity or business damage to mighty Sony. Interestingly enough, Ishihara’s ultimate message was that U.S.-Japan relations should be based on mutual respect and trust. Open and direct dialog. Equals. No more second-fiddle. For some reason, this upset more than a few Americans.
About this same period of time, the speculators that had been surfing carefree atop the booming economic wave suddenly crashed to the sand when the bottom fell out of the soaring real estate market. Commercial property prices had been rising at a rate of more than 40 percent per year, loans were practically interest-free, and investors were banking everything on this. And the people borrowed, and borrowed — loans so large that their children’s future incomes were promised as collateral.
In the midst of this craze, the “jusen” or mortgage lending companies flourished. The jusen firms were founded by banks in the 1970s largely to evade regulations that prevented them from cashing in the burgeoning market for home loans. Their business practices were virtually unchecked through the bubble years — “virtually” because retired senior officials from the mighty Ministry of Finance were given lofty executive positions at these lenders as “advisers” for their operations.
Someone should have been checking more closely. Someone, namely the Ministry of Finance, should have noticed the $400 billion-plus black hole of bad debt. In fact, someone (read Ministry of Finance) did notice it more than four years ago, but failed to take action, afraid of the negative impact on the Japanese banking system. Or, were they afraid of something else?
The government’s solution is rather cloudy, agreed upon in varying stages behind closed doors, and designed from an exterior view to keep the entire Japanese financial system from crashing. In a nutshell, the major creditors of the jusen will write off about $35 billion in their loans and infuse some additional money into a corporation that take over the mortgage lenders. So far, so good, But the citizens, who were taxed miserably on their land purchases in a failed attempt to hold down prices, will see anywhere between $6.8 billion and $10 billion of their public funds — about $60 for every man, woman and child, or about $175 per wage-earning taxpayer — tossed into the rescue plan pile, with no one being held accountable. And this has a lot of folks hopping mad.
For those who don’t understand the political climate here, Japan has a parliamentary system of government, which allows the party, or parties in today’s situation, with the most elected representatives to hold the prime minister’s office. The Liberal Democratic Party (actually conservatives) held the reins for nearly four decades until Morihiro Hosokawa’s Japan New Party formed a coalition with four other parties to oust the LDP in the summer of 1993. Hosokawa resigned the following April under pressure over some previous stock dealings, and was succeeded by then Foreign Minister Tsutomu Hata, himself a former LDP who bolted to form the miniparty Shinseito. LDP loyalty was running fairly low in those days.
Hata’s government was doomed from the start. The Social Democratic Party, who’s president Tomiichi Murayama had stood with Hata and other coalition leaders on April 23, bailed out three days later, leaving the new prime minister with a minority government. Political analysts had given him 60 days. They were close; He lasted until June 25. By June 30, Japan had its third prime minister for 1994 when the Socialists joined with the LDP (longtime archrivals) and New Party Sakigake on the condition that Murayama be given the nod for prime minister. The LDP was all too anxious to get back in power and could not have gained a majority any other way, so they went along. Interestingly enough, it was during this political free-for-all that Ishihara became disgusted with the state of things and resigned his Diet seat.
The Murayama regime lasted a year and a half — 555 days to be exact, or about 500 days longer than anyone expected. And in the end, it wasn’t the criticism of the government’s slow response after the Great Hanshin Earthquake, the lost sense of security after the Aum Shinrikyo doomsday cult nerve-gassed the subways, nor public outcry over the U.S.-Japan security relationship that brought about his resignation. It was a problem that his government had only scratched the surface on dealing with: rescuing the financial system from total collapse.
“I have gone beyond the limits of my abilities to tackle pressuring issues,” the 71-year-old prime minister said when announcing his resignation on Jan. 5. Indeed, “Grandpa Ton-chan” was tired. He also knew what was coming with the jusen scheme. The problems that occurred while he held the prime minister’s chair were mostly inherited, products of 38 years of unchecked LDP rule. Murayama bowed out with a clean record.
But what about Murayama’s successor, Ryutaro Hashimoto? Interesting question. Over the years, Hashimoto belonged to the LDP’s mainstream, always close to the center of power. He’s been health and welfare minister, transport minister, finance minister, and most recently, the tough trade minister who battled the U.S. over auto trade. It goes without saying that you don’t get appointed to positions like that without forging a few deep political ties — ties that could amount to betrayal if those responsible for the jusen debacle were actually held accountable. Few believe Hashimoto’s claim that those to blame for the collapse of the seven jusen firms will be brought to justice. Why should they? Even as attention to their problems grew in December, jusen firms handed out fresh loans totaling more than $260 million. So much for social responsibility.
This lack of accountability plays heavily into the uproar surrounding the jusen disposal plan. Ichiro Ozawa, the former LDP lawmaker who now heads Shinshinto, the largest opposition political party, has made this and a lack of disclosure a cornerstone of his party’s fight against the coalition’s plan. Ozawa and Hashimoto have long been at odds since the days of their inner-LDP faction rivalry. The opposition leader has decried the transfer of power within the coalition members and called numerous times for general elections.
Shinshinto’s outrage came to a head at the end of January when they stormed out of the Diet when their demands for an explanation of why the taxpayer’s money had to be spent for the bailout were ignored. The ruling coalition plugged ahead anyway, ignoring all including public rallies and taxpayers who entered $110 protest deductions on their tax returns.
Finally, in unprecedented resolve, Shinshinto formed a round-the-clock human barricade in front of the Lower House Budget Committee room on March 4, stalling deliberations, and demanded that the government delete its jusen scheme from the fiscal 1996 state budget. Fully aware that the public was angered by the planned use of taxpayer money, the ruling coalition, which comprises the Liberal Democratic Party, Social Democratic Party and New Party Sakigake, was reluctant to take any forceful action to remove the barricade and pass the budget and jusen spending measure.
Both the ruling and opposition camps refused to budge before a March 24 Upper House by-election in Gifu Prefecture — played up by both sides as being the definitive measure of public support for the government’s jusen bailout. Tsuyako Ono, a candidate backed by the three ruling parties, won 50.4 percent of the low-turnout vote, defeating the Shinshinto-supported candidate.
“All opinion polls before the election showed that roughly 70 percent of the electorate would vote with the jusen issue in mind,” LDP Secretary General Koichi Kato said the following day, claiming that “public understanding of the jusen issue has increased somewhat with our candidate getting the majority.”
Not surprisingly, neither coalition nor Shinshinto lawmakers wanted to comment on Kato’s remarks. In addition to demands for dropping the jusen outlay in the budget, Shinshinto had also demanded sworn Diet testimony by Kato about a shady $100,000 donation from Kyowa Co., a defunct scandal-ridden firm that borrowed heavily from one of the moribund jusen. Of course, the LDP has dismissed this as an option.
The Shinshinto blockade ended March 25, after reaching a vaguely worded compromise with the ruling coalition over continuing debate on the 1996 budget bills. Because of the prolonged Diet stalemate, Japan started fiscal 1996 on April 1 without a state budget and was forced to pass a 50-day stopgap budget March 29. In the end, the jusen outlay was still in the budget that passed the Lower House on April 11 with the large coalition majority. Under law, it takes effect 30 days later (May 11).
Shinshinto Secretary General Takashi Yonezawa, whose party voted against the budget, vowed that the opposition would continue its efforts. But until there is a change in government, how much good will that do? The protest has to come louder and deeper for it to have any effect, for the government to stop taking advantage of public indifference.