I propose we form a subset of the Asia Foruum and post here messages of further decline. We should call this interest the Kamoshida Society. The society will honor the passing of the Bank of Japan chief enforcement officer who lately committed suicide in Tokyo. As Takayuki Kamoshida, an executive director of the Bank of Japan said in his last note, "I'm too exhausted. I've reached my limit."
In the days after "Golden Week" in Asia we are truly entering a new era. Believe this.
(C) The Sydney Herald For Private Use Only
JAPAN
Saturday, May 9, 1998
Cash and carry as banks buckle
By RUSSELL SKELTON, Herald Correspondent in Tokyo
SHE was slender, middle aged and impeccably turned out in a Fendi suit and matching shoulder bag. She had with her a dark blue briefcase full of freshly printed 10,000 yen notes.
As I watched she fed the entire contents of the case, bundle by crisp bundle, into the ATM machine outside Tokyo's Otemachi business district. After each press of the deposit button, there was a furious whirr and the machine would open and ask for more.
This went on for some 20 minutes. She may have paid in $2 million dollars, or even $5 million that afternoon. It is hard to count a briefcase full of money while standing metres away in a queue of impatient Japanese.
But one thing is certain, the woman was one of tens of thousands of jittery deposit holders who are frantically switching their personal savings - variously estimated at around $170,000 a household - from the nation's suspect Japanese banks into foreign banks, such as Citibank.
In one year individual accounts at Citibank have jumped 50 per cent to 850,000 and it is receiving 450,000 inquiries a month about new accounts.
The bank refuses to say what its deposits are, but it confirms that savings deposits jumped 38 per cent last year.
Suddenly the unthinkable in Japan has become the reality. The enigma that was Japan has now given way to a chaotic reality.
The rush to transfer life savings out of Japan's debt-laden banks - at last count they had some 77 trillion yen ($905 billion) in outstanding bad loans - is part of deeper radical change taking place in almost every sphere of Japanese society.
Japan's deepening recession - the first in a quarter of a century - has shattered all the cosy and largely unquestioned assumptions upon which postwar Japan was able to build an economy that cornered some 13 per cent of global GDP.
Five years ago, it would have been unthinkable in Japan for deposit holders to pull their money out of any Japanese bank, post office savings, credit union or agricultural co-op accounts.
The banks and financial institutions were the backbone of the postwar miracle economy.
Though many paid interest of less than 1 per cent, they were safe. The financial institutions were also a key component of the "convoy" system that drove the world's second-largest economy. Under the system, named after naval ships moving in formation at the same speed, the Finance Ministry controlled the market to ensure that all institutions - including the weakest banks and brokerage houses - stayed afloat.
This week the ruling Liberal Democratic Party's secretary-general, Mr Koichi Kato, a Harvard-educated intellectual with ambitions to be Prime Minister, officially pronounced the convoy system dead.
In what would have been a politically suicidal statement even a year ago, Mr Kato predicted more Japanese financial institutions would close their doors, merge or go bankrupt.
He said said the collapse of the Hokkaido Takushoku Bank, one of the nation's top 20 banks, and Yamaichi Securities, one of the four largest brokerages, late last year showed the convoy system was finished.
"The end of the convoy system means that any decision on survival will basically be in the hands of the market," he said.
Similarly, Japan's system of governance is visibly disintegrating.
The so-called "Iron Triangle", the furtive and collusive partnership between elite bureaucrats, big business shoguns and power brokers in the ruling Liberal Democratic Party, now seems fractured beyond repair.
The influential standing of Japan's two greatest institutions, the Bank of Japan (BoJ) and the Ministry of Finance (MoF) is badly dented. Last weekend a BoJ official who led an investigation into widespread corruption at the bank committed suicide.
Takayuki Kamoshida, an executive director, left a note which read: "I'm too exhausted. I've reached my limit."
It was the seventh suicide in the bureaucracy in as many weeks.
A total of 98 bank officials, including five top executives, have been charged with accepting bribes in the form of excessive wining and dining from commercial banks.
A similar scandal at the MoF, staffed by the best and the brightest of Japan's elite universities, has also diminished its influence, so much so that its stranglehold on economic policy has been broken by politicians who were previously happy to parrot its proclamations to an accepting public.
MoF officials are openly lamenting the fact that they had very little say in the Hashimoto Government's 16 trillion yen stimulus package, largely drafted by the ruling Liberal Democratic Party.
The roots of MoF's decline can also be traced to its failure to read the impact of the Asian economic crisis, its complacency about the bank debt which remains the single biggest impediment to economic growth and its rigid adherence to economic austerity policies that sent the economy into recession.
Big business has also broken off from the iron triangle.
Rather than being an unsanctioned third arm of government, business has become a fierce critic of Prime Minister Ryutaro Hashimoto and his unpopular Cabinet.
Giant corporations like Mitsui, Matsushita and Toyota have all announced that they are doing away with the traditional employment system based on seniority and lifetime employment for one based on merit.
More than half the major companies polled in a recent Labour Department survey said they were switching to a merit-based system. Only 3.8 per cent said they would stick with the old system. Apart from the recession, restructuring is also pushing Japan's unemployment rate to a post-war record of 3.9 per cent.
As pessimism mounts - more than 72 per cent of Japanese surveyed by the Prime Minister's Office believe Japan is heading towards a bleak future because of the recession - the demand for change is growing in and outside the country.
Like the woman at Citibank's Otemachi branch frantically transferring her family savings into a US bank, many Japanese are opting for radical solutions and seeking new ways of doing business.
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