Point of VIEW.
A purely analytical perception...
Japan today is in debt in excess of
500 trillion Yen, which is in excess of the Country’s gross domestic
product. Thus, Japan is by far
the biggest debtor nation in the world ()
and owes 114% of its annual gross domestic product, surpassing the United
States, which owes only 60% of its GDP. ()
Japan’s debt service eats up approximately 22% of their budget while,
thanks to a booming economy the United States has been able to pay its
budget down a tad and has very optimistic expectations on this score for the
However, the Japanese have always
shown an inner toughness that is best exemplified by their craving for Fugu.
“Fugu is a blowfish, having an organ containing a toxin so deadly that
only specially licensed chefs are allowed to prepare it” ().
Supposedly, it is the delicious flavor, not the macho thrill that draws
consumers. Three hundred people a year are killed by this concoction and it
is not a very pleasant way to go. The Fugu, paralyses the muscles while the
victim is totally conscious, and gradually suffocates the epicurean by
stopping all movement in the lungs. Imagine going to a trendy New York
restaurant for fish and not knowing whether you are going to get out alive
or not. It has been said that if you can handle Fugu, you can handle
anything and we would certainly be the first to agree.
This is the same country, which
discovered that Ginko Seeds are edible. This takes took an awful lot of
courage because at best because the ripe fruit of the Ginko smell somewhat
akin to that a drunk who has had too much to drink and has just thrown up
all over himself. However, if you can get by the horrible stench, Ginko
tastes great and is especially good roasted. Another tasty dish is mountain
potato, “a root that is eaten raw and grated, often with raw tuna and a
raw quail egg. When a mountain potato is grated, it secretes a translucent
slime that is the exact consistency of mucus, yet is totally without
Then there is the ever in demand, natto, which in reality means nothing more
than fermented beans.
Strangely, even the Japanese think
that natto is disgusting and in better company it has been described as
vile. However, seaweed, which is regularly served up in Japan, has
substantial nutritional value and is quite tasty. And the Japanese have a
tendency of eating their food raw, there is nothing worse than Shiokara,
probably squid which many have said tastes even worse than natto. In
addition, special from Shimpei Yamashita of Stanford University is the diet
of the first Japanese Women Astronaut. She is going to take along, “fish,
newts, jellyfish, frog eggs, sea urchins, fruit flies and worms.” You can
certainly see why she is so anxious to be lifted off for part unknown. Other
great Japanese delicacies are Ungai, a fresh-water eel, Uni, urchin roe that
are small eggs, which are said to taste like low tide if they are not fresh
The global economic environment has
grown more volatile in nearly every respect, including exchange rates,
interest rates, and private capital flows.
While banks have gained economic importance in many developing
countries, they haven’t expanded their capital base to reflect their
increased size and the changed nature of the game.
Sadly, most lack expertise in evaluating credit risk, and state-run
or state-influenced banks, often disregard it and are more interested in the
political implications than sound banking practices.
“‘The new finance is like a
highway’, says Deputy U. S. Treasury Secretary Lawrence Summers.
‘It’s more efficient, It gets you to where you are going better,
but the accidents are worse.’" as quoted in the Wall Street Journal
(5/7/97). The Japanese and Thai debacles demonstrate that the accidents are
particularly devastating when there is an insufficient separation among
economic sectors and a lack of transparency within those sectors.
The Japanese system is built on symbiotic relationships among
insurance, banking, service and manufacturing companies.
Interlocking directorates and credit arrangements make this system
highly effective in good times and vulnerable at the infrastructure level in
After World War II had ended, the
then dominant Japanese industrial groups became commonly known as
"keiretsu,” which translates as exactly that, "industrial
groups.” These were offshoots
of the conglomerates known as "zaibatsu" (financial cliques) that
predated the war and were composed of the likes of Mitsubishi, Sumitomo and
Mitsui. Each keiretsu-zaibatsu
had as an integral element of its makeup, a trading company (sogo shosha)
that was in reality, an intelligence-gathering network for the group.
Until recently, competitors found
it impossible to penetrate the defenses of the keiretsu.
Japanese post war success stories that emerged independently of the
keiretsu-zaibatsu, such as Cannon, Honda and Sony that have emerged without
being part of a keiretsu-zaibatsu have primarily succeeded overseas.
The keiretsu, successfully lobbied for protective legislation, and
when that turned out not to be enough to keep local and foreign interlopers
at bay they added collusion among members of their group to their arsenal of
methods of keeping foreign interlopers off the playing field. The
government, which had its own intimate relationship with the conglomerates,
rarely raised an eyebrow.
Moreover, for many reasons, the
Japanese Government would not be foolish enough to oppose the keiretsu
simply because of the fact that they keep the taxes flowing into government
coffers, and they have made Japan’s balance of payments the largest in the
world. Although this is changing dramatically, until recently, Japan
also had the world's lowest unemployment rates (literally zero) and an
enviable social benefits system. Japanese
interest rates have been negligible for years, and literally, the only way
they can now decrease it is by having the lender pay instead of the
However, because of the lack of
flexibility within the Japanese Central Banking System, although it did not
work the way that it was intended, it was not only the regulations that
related to the conglomerates that had became written in stone. There
was no fiscal flexibility to reposition within the system. Social patterns
such as education, extreme immobility, fanatical chauvinism, religious
homogeneity and almost paranoid distrust also fell into an indelible social
blueprint: strong work ethic, massive savings rates, along with strong
distrust of foreigners.
With both the business side of
Japan’s equation and its social sector varying little over time, there was
certainly no reason to change the government, and Japan remained virtually a
one party system almost until the last decade.
Thus, it was expected that these three components would continue to
work arm and arm to perpetuate national economic success. Ultimately, however, Japan's complacency and inflexibly was
When one of the members of a
Japanese keiretsu has financial problems, the remainder of the
consortium has historically been expected to come to its assistance.
Thus, if the problem became too substantial, the result could be
catastrophic. Japanese banks
and insurance companies, however, are large holders for their own account of
substantial amounts of real estate and all have massive securities
portfolios. Each in turn lends
to others in both of these spheres. A
massive bank or insurance failure that results in the liquidation of these
assets could jeopardize other consortia, thereby affecting the entire
system. Japan has indeed
created the venue for the ultimate "domino effect.”
In another allied development which
graphically illustrates how dramatic the economic transformations in Japan
have been recently, the Tokyo Mutual Life Insurance Company which recently
went down the tube, paid its usual visit to their friendly banker for
supplementary funding, Daiwa Bank Ltd, who had been misguidedly keeping this
sinking monolith alive for decades. Daiwa Bank determined that literally,
the time had come where it was either them or us and intelligently came to
the conclusion that it had enough and turned them down. This in turn led to
the demise the highly regarded disaster, Tokyo Mutual.
This monolith with incomparably
poor management was surviving in the usual fashion; do things the old
fashion which we know doesn’t work, and when we run out of funds, go down
the block and see our friendly banker to have him bail us out. While
everyone knew that this was the way the system worked, nobody did anything
about it because it had become part of an “old boy” network, which made
everyone at the top comfortable. What happened in the insurance industry in
Japan is probably a test case for disaster anywhere. As any normal insurance
company will doing in adequately policing its portfolio is to invest the
money it receives from policy holders into various activities that it
believes will cause it to get a satisfactory return. The yardstick would be
to have enough total income coming in to pay for the company’s overhead,
to pay claims, and to show a profit.
However in spite of totally
incompetent management, Tokyo Mutual Life Insurance didn’t do anything
particularly different than any other company of its kind in Japan. Life was
rather simple; Tokyo Mutual took in insurance premiums from its customers
and used the funds to purchase stocks and bonds. In addition, it lent money
for mortgages and dabbled in real estate for its portfolio account. This
would have been an excellent scenario anywhere else in the world with the
exception of Japan. Stocks, bonds and real estate have subsequently
The Japanese stock market is
currently at a 17 year low and if it was adjusted for inflation, it would be
even more of a disaster. Bonds, which at one time, were paying satisfactory
returns are now returning literally nothing as Japan is straining to get its
economy humming again by dropping interest rates to near zero. The collapse
in their real estate holdings has been even worse, because of the fact that
many of the properties were mortgaged, most may be worth less than Tokyo’s
equity, thanks to a moribund real estate market all over Japan. Thus, with
stocks, bonds and real estate all in the tank, it is not at all surprising
to see Tokyo Mutual go under. However, in spite of this awful scenario, at
another point in time, Daiwa Bank still would have gone along with renewing
and increasing the loan; not wanting to write their loans down to nothing.
In Japan, this is no longer that time and there are no funds left for
frivolous loans .
Tokyo Mutual is not at all an
isolated case and all banks in Japan are facing similar problems with many
of their clients. All major corporations in Japan, because of their
interlocking relationships own stocks, bonds and real estate. However, although this has created substantial blood letting,
the fact is, that for the most part, these corporations are investing their
own money in these varying instruments. In the case of the insurance
companies, they are investing policyholder funds. Thus, as the value of the
portfolio goes down, they are less able to pay claims creating a situation
where the insurer is left with nothing but red ink on his balance sheet.
While corporate Japan is an accident waiting to happen, a hit-and-run driver
who has left the scene without leaving his name has already hit insurance
problems of Japan’s companies and those of its banks are indeed
intertwined. The banks have lent 353 trillion yen, or $2.79 trillion at
current exchange rates, to Japanese companies according to data from the
nation’s central bank. They have extended a further 8.4 trillion yen, or
$66 billion, to local governments, most of which are effectively bankrupt.
Of course, not all those loans are troubled, but the number of bad loans is
increasing. And many are collateralized by assets whose values are now
shrinking. Research by David Atkinson, a banking analyst at Goldman Sachs
Japan, found 85 percent of problem loans are in the construction, retail,
real estate and financial services sectors, which accounted for 62 percent
of Japanese companies and 56.1 percent of all domestic loans, as of last
September. At current earnings levels, Mr. Atkinson estimates that it would
take those businesses 150 years to repay their loans.” ()
Japan is already virtually
insolvent, in spite of their highly touted "balance of payments"
surplus. Its trade balance is
not the great panacea that it is trumpeted to be, due to a highly bloated
bureaucracy that has caused general and administrative expenses to escalate
out of sight. While the
Japanese balance of payments runs substantially on the plus side, the
margins that it generates are hopelessly thin.
Were the profits generated from exports to be subtracted from capital
losses incurred in foreign investments in the last several years, the
balance sheet would bleed blood red ink.
By contrast, the United States runs
a significant deficit balance of payments, a substantial part of which is
derived from inter-company transactions.
Were we to subtract these transactions from the deficit, the figure
would amount to a fraction of a percent of Gross Domestic Product.
The profits that have resulted from these trades have been
substantially in the black for recent memory.
Therefore, while we shudder each month when the trade figures are
released, we must comprehend two things: first, the trade deficit in
relation to the GDP is lower now than it has been for many years; second,
the so-called deficit is a function of our purchases of low margin imported
items and the our sale of exported high margin items.
(For example, let us say that pre-tax margins in the United States
were 30% and in Japan 5%. Let
us say that we send Japan $5 billion in goods and they in turn send us $25
billion in goods. In this example, the United States would show, in theory at
least, a profit of $250,000 on the transaction). While this example was not
meant to be statistically accurate, it is certainly more right than wrong.
When bank loans go sour in the
United States, packages of similar assets are securitized and resold to the
highest bidder. The lending institution receives at least something
for its non-performing assets and knowledgeable people who may be better
equipped than the seller to make the package perform have the opportunity to
earn money on it. This, in
fact, is how the U.S. Government solved the Savings and Loan crisis.
Uncle Sam sold enormous packages of savings and loan assets to developers,
who frequently made the assets perform by investing more money in them.
The same method of operation keeps the entire credit card
industry churning along. Every day, banks put their non-performing
credit card debt out for bid. Professional collection firms take on
the bad accounts and historically have been able to generate a tidy profit
for themselves. Most importantly, the inventory moves.
Stale goods are not sitting on shelves waiting for some obscure buyer
to walk in and say, “that is exactly what I have been looking for.”
Goods are sold not purchased in the real world, but in Japan, they
lay in inventory getting moldy because the system is more interested in its
own preservation than being fiscally responsible.
Here, seller holds a fire sale if need be, and the proceeds are used
to buy more better inventory.
Not so in Japan. When Goldman
Sachs stepped up to the plate to buy non-performing Japanese debt, they
got a nasty surprise in the form of the yakuza, (gangsters) which
believe they have a vested interest in all Japanese property.
Unimaginably, there are some 81,000 Yakuza operating in Japan.
They are involved in "running drug-trafficking, gun-smuggling,
prostitution and illegal real estate dealings.” 
Even the United Nations is concerned about the yakuza, and Pino Arlacchi,
executive director for drug control and crime prevention, indicated that
"Japan has one of the most powerful criminal organizations in the world
and an absolutely inadequate judicial structure to fight it."
Goldman Sachs had entered Japan when the country let down some of its barriers to foreign companies doing business in that country. With a movement toward financial transparency gaining ground, Goldman felt that the opportunities in Japan could be substantial because the term, restructuring was not even part of the Japanese language and Goldman had cut their teeth on its execution. Goldman's instincts were both right and wrong. They were correct in anticipating that the market was ripe for their wares but they were wrong in that the yakuza wasn't the only thing relative to the territory that they knew nothing about. In the United States as in most other countries, if something isn't against the law, it is OK.
Goldman had always prided themselves in the United States for being very careful to both test the limits of the system and at the same time not bend the country's legal statutes. Their success in walking this tightrope has set them apart from most of their competitors. However, the rules of the game are vastly different in Japan. The attitude is here is that unless something is specifically allowed by the law it is illegal. Thus, Goldman's ability of finding gold lying unnoticed between the cracks nearly got them into a peck of trouble in Japan. When something has never been done that way before more often then not, there are no laws addressing the subject one way or the other. Thus, causing an aggressive firm, with new ideas would have substantial difficulty in assessing this virgin terrain.
However, it is obvious that Goldman was just doing too well at its game and for the new kid on the block to show up the regulars was not considered in good taste in socially conscious Japan. On numerous occasions the firm has been investigated by the country's parliament for a number of matters such as slow response time to government inquiries, questionable short sales and conflicts of interest. Many of these fishing expeditions were initiated at the behest of their competition or the political party out of office. Nevertheless, Goldman has gotten more than their fair share of business and has succeeded reasonably well against a stacked deck. But enough about Goldman Sachs and , back to our friends, the yakuza.
The yakuza deeply resent attempts
to collect "their" loans. This
resentment expresses itself as, for example, acts of arson against the home
of the head of the collection company. Many feel that the Japanese
banks have already dumped substantially all of their non-yakuza under-performing
loans. They are stuck with Mafia partners on a large part of what
remains. This makes a dreadful
situation substantially worse and bodes ill for any short-term solution.
In fact, the situation is likely to
get worse. Under normal circumstances, higher interest rates will
cause a currency to rise and lower interest rates will cause it to
fall. If Japan's currency were
not freely trading, this would not have such an enormous effect.
However, the Yen is internationally re-evaluated every minute of the day in
relation to all other currencies. At any given time it is selling at
approximately what people around the world believe that it is worth. The Japanese Government cannot influence the Yen's
movement unless it intervenes, that is, trades the Yen using central bank
funds. Assuming that intervention is only a temporary panacea, the
only way to make a currency fall is lower interest rates and is a very
difficult job when the rates in Japan are effectively already at zero.
This rigidity is a major chink in
Japan's ability to counter intense competition from the Pacific Rim in
currencies that several years ago were devalued as much as fifty percent.
Japans more stable currency has permitted them to pay relatively
reasonable prices for raw materials, which they import at a higher volume
than any other country on earth (with the possible exception of China).
As an example, petroleum and construction products must all be
imported, so this minor advantage evaporates when held up to the light of
day. The more that is produced the more that must be imported.
Because of the fact that Japanese
companies work on historically narrow profit margins, enormous positive
imbalances within the import export figures are totally misleading. The
tighter the margins, the less competitive that the country becomes and even
worse, the easy it is for country’s with depressed currencies to compete
with the Japanese. Thus, additional disruptions such as what many see as the
inevitable devaluation of the Chinese currency could well
cause a run on the Yen unless the system’s excesses, that have gone
un-addressed for years within the Japanese Banking System are addressed.
Synthetically glossing over these serious problems as Japan has done
in the past would be a blueprint for a national and potentially global
One day after an announcement by bank regulators that the country’s banking problems were fading, the Financial Times reported that Tokai Kogyo had become Japan’s first listed construction company to collapse after its banks refused to make it more loans. This was not just an ordinary failure; it was the eighth largest bankruptcy filing in history of the country and the second largest in the construction industry.
Tokai Kogyo’s failure sent the
stock market into retreat because it was a harbinger of billions of dollars
in additional unreported non-performing loans.
Moreover, this case, more than others, reveals the frightening
consequences of a continued cover-up by bank regulators.
The amount of money involved is staggering; other construction
companies are in the same or worse financial situation,
and Tokai Kogyo’s prime bank, Hokkaido Takushoku, already has one of the
worst loan records in the country and may well be pushed over the brink.
Talk about transparency, inconceivably, after the failure was
announced and the investigation begun, it turned out that this loan was not
listed as in default at any of the many banks with which the company did
business. Japan has a
controllable problem; yet, their banks do not even write off the massive bad
debts of large defunct companies.
heart of the mess, which developed nine years ago after real-estate prices
collapsed, is the huge amount of bad debt that remains on lenders books.
Although banks have taken write-offs of $592 billion since 1992, new
bum loans pop up as fast as they write off old ones because weak borrowers
are going broke at a record pace. And
banks may have to pony up another $458 billion to cover shaky loans they
haven’t provided for, estimates credit analyst Koyo Ozeki of Merrill Lynch
& Company. The result is
that lenders still have more bad loans on their books than they did five
years ago. And when the banking
czars go home next month, Japan will still have a bad-loan problem larger in
scale than the old U.S. Savings and Loan crisis was.
Failing to fix it means the World’s second-largest economy is
vulnerable to a destabilizing crisis, like a wave of financial-institution
collapses here that had U.S. leaders sweating bullets two years ago. But even without a collapse, the undercapitalized banks are
cutting back on credit to promising young businesses, while keeping their
weakest borrowers alive with new loans to avoid taking even-deeper
write-offs. This avoids
short-term pain, but cripples Japan as a whole by allocating capital where
it is least productive.”
One can only wonder how the
Japanese Government will ever solve their other economic problems if they
can’t get over the simple hurdle of letting businesses that are
unprofitable close their doors. The
government of Japan has sent a loud, clear message that the system will
remain in chaos and is totally averse to transparency.
A series of financial scandals and corporate bankruptcies have left a
mark on both the economy and on the economic expectations of the Japanese.
Since World War II, a benevolent government employed and cared for
its citizens. Despite its
glaring inconsistencies, the system appeared to be viable and trustworthy.
Eventually, however, inflated
markets and bloated bureaucracies brought the Japanese economy down.
Interest rates on Japanese Government Securities hit record lows with the
benchmark 10-year bond selling to yield 1.435%. According the Wall Street Journal on May 4, 1998, new records
were set all over the place. "The
new yield, which compares with 1.560% in early January, is by some estimates
the lowest recorded globally in about 400 years, exceeded only by long-term
government-bond yields in Europe during the early 17th
century." Fear promulgated increased savings and the excess of
savings promulgated a very stagnant economy bordering on recession.
The International Institute for
Management Development holds itself out as the global expert relative
to national competitiveness. In its 1998 survey, Japan almost dropped
of the chart. This was the
bottom of a five-year slide from 2nd to 9th to 18th
place. The United States
maintained the top slot along with Singapore and Hong Kong.
Parenthetically, Russia came in last out of the 46 countries
analyzed, contested in its incompetence only by India and Brazil.
Corruption, bureaucracy and lack of reforms were the key drags on
success, according to the World Competitiveness Yearbook
As Japanese companies began
failing, the entire scenario began to receive larger than life publicity
because the prosecutor's office began to make arrests of high-ranking
Japanese officials. As the
number of arrests increased, the populace began to realize just how listless
and corrupt the system had become. Reality soon took a harsher tone.
There were layoffs, not only of temporary workers, but also of permanent
workers, an economic sacrilege in the Japanese culture.
Not knowing whether they would continue to be employed, people began
saving even more of their money, and Japanese domestic goods went
un-purchased sending the economy into a recession.
As this vicious cycle spiraled out of control, The Japanese
Government presented an economic package that, they believed would restore
much of the former optimism. The
program, which was considered by many economists to be both too little
and too late, was tinkered with and presented to Parliament repeatedly
without becoming accepted. When the chips were down, Parliament found itself
unable or unwilling to forge a compromise.
The number of people employed in
Japan plunged and the number of people unemployed increased.
The ratio of jobs to applicants fell to its lowest point in over a
decade. Unemployment hit an all time record in February of 1998 and
has continued to rise ever since. Even
these grim statistics did not accurately reflect reality. Like our own
unemployment figures, the Japanese do not even count the workers who have
given up looking for a job. However, as bad as things are, they could always
get worse. In order for the country to avoid bankruptcy, save their banks
and become economically competitive again, the jobs sector will have to take
the big hit, but without national unemployment insurance, this will cause
substantial dislocation. “Andrew Smithers, Chairman of Smithers &
Company, a fund management advisory service, goes so far as to argue that
the effect of fundamental corporate restructuring would be so devastating
that it is not a practical solution to banking problems. He contends that to
achieve internationally competitive rates of return on their capital,
Japanese companies would have to reduce employment costs by 40 percent.
Financial experts all over the
globe began to worry about what was going to happen to Japan and what was
the meaning of the dire statistics that were being produced. Whatever the
data may be, the country’s unemployment is at its highest in measured
history, raises are almost non-existent and overtime is a thing of the past.
Moreover, consumer confidence has been measured by pollsters to be at
an all time low and as a result, Japanese capital spending is taking the
proverbial gas pipe. The incentive programs enacted by the government have only
resulted in increased savings rates. The
people of Japan seem to believe that stormy seas are lying ahead and have
battened down their financial hatches to better ride out the inevitable
economic storm. This year, as
been the rule lately, Japan almost certainly faces another negative growth
of its GDP.
has given to the single biggest culprit in the growing debt problem: falling
tax revenue. The Ministry of
Finance anticipates about 50 trillion Yen in tax receipts this year, 16%
less than the government collected in 1991, when the economy began slowing.
That has led to increasingly large spending deficits: This year’s
should top 8.5% of annual output. The
shortfall has been funded with borrowing, and the result is a ballooning
“In many ways it resembles the U.S. government’s during the 1980s – only far worse by many measures. Evan at its peak, the U.S. debt never surpassed 100% of annual economic output. Japan’s gross liabilities – what it owes without considering government assets, including local-government debt that the national government might have to honor – is 130% of annual output.”
Asher, an economist with the American Enterprise Institute in Washington,
figures that the U.S. debt was about four times annual tax revenues at its
peak, around 1992. This year,
Japan’s debt will be 15 times revenues, “It’s off the charts,” says
Mr. Asher.” 
While Japan desperately attempts to buy time to heal the wounds caused by a sort of national hubris, it continues its global over-reaching, exporting economic chaos in the process. Just as the schoolyard drug dealer "hooks" his victims with an inexpensive fix, certain Japanese elements of the global banking system create a dependency by making their product which is money, so inexpensive and so readily available that even though there may be no particular need for additional funds any particular point in time, this hyper-availability creates a borrower's euphoria that more is better than less and there will be no problem ultimately paying of the additional financing when the loan eventually comes due. Japanese bankers, when they enter their lending frenzy stage, have created an almost Satanical environment where reason seems to fly in face of a potential "better-life" with almost no thought as to how this money will be repaid and the penalties for default. However, this is the way success has been measured in Japan, by the gross number of loans made by lenders, not by the borrowers ability to repay. The competitive bank feeding frenzy when egged on by domestic cutthroat competition, creates an environment where logic is thrown to the winds and the potential to make profits is ceded to sales, not profits.
The Bank for International
Settlements reports that Japanese banks account for 34.7% of the $763.5
billion total bank lending in the Pacific Rim, excluding loans made within
Japan, but including loans to quasi-public institutions.
Japanese banking institutions extended $37.5 billion and 53.4 percent
of all foreign loans to Thailand, $22 billion and 39.6 percent of all
foreign loans to Indonesia, and $87.5 billion and 42.2% of all foreign money
lent to Hong Kong. The exposure
that they have admitted to in the Pacific Rim is close to $400 billion in
economies and currencies that have already collapsed.
Countries without the resources to repay the Japanese will have to
make good their debts in currencies that have depreciated substantially
against both the yen and dollar, the two currencies in which repayment is
usually made. The vast
disparities in valuation between the Asian currencies and the yen and dollar
have resulted in steep increases in the principal and interest of these
loans, making repayment virtually impossible.
 “Japan’s government debt as a percentage of national economic output is now the world’s largest, surpassing that of Italy.” Bill Spindle The Wall Street Journal, December 11, 2000.
 An interesting aside is the fact that while the United States has seen it ratio of debt to GDP decline every year for seven years, the exact opposite has happened in Japan.
 Ray’s List of Weird and Disgusting Foods.
 Lewis Tepper, Ray’s List of Weird and Disgusting Foods.
 Mike Khaw.
Keiretsu: system in which individual Japanese companies are linked
together through interlocking share holdings. They favor each other in
business dealing. In South Korea, the same relationship would be called chaebol.
 Although it is not well known, this happened in the United States for a short period during the thirties when people were becoming so concerned about banks going out of business that they wanted to own government securities under any conditions. During that period, the United States Government had what could be called a reverse interest rate on their bonds.
 Japan’s Corporate Woes Compound Bank Troubles, Stephanie Strom, The New York Times, April 3, 2001.
 Reuters, 2/4/99.
 If Japan spends so much money defending collapsing domestic industries that the central government and large corporations are forced to liquidate international holdings to shore up their balance sheets, the price of U.S. Government Securities could collapse under the pressure of these unrelenting sales. We will at that time , truly have a global catastrophe. However, the American economy has burgeoned substantially and the Treasury is no longer running a deficit, thus, this may longer be the worst thing that could happen.
 Japan continues to cut back on the massive public works projects, which these companies had become so dependent. That was brought to an abrupt halt when the Japanese Government was strongly advised by International Agencies that spending themselves into the black was the way to go, and once again, public works projects became the order of the day. Whatever theory is right or wrong does not matter, for the way the Japanese grant projects and monitor them only tends to allow political friends to pocket endless amounts of money and does little for the economy itself.
 The Wall Street Journal, Japan’s Massive Debt Bomb Ticks Ever Louder, Bill Spindle, December 11, 2000.
 “ Japan’s economic growth has averaged only a little better than 1.5% in the past decade, with several periods of prolonged contraction.” The Wall Street Journal, Japan’s Massive Debt Bomb Ticks Ever Louder, Bill Spindle, December 11, 2000.
Copyrighted Worldwide ©1997 Chapman Spira & Carson,