Japan\'s Banking Crisis Rubber Rules

Japan's Banking Crisis

Rubber Rules

Origins

Same Story... Different Setting

Relating Reasons

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Accepting Responsibility

Sewing Up the Wounds

Rubber Rules

Money changes all the iron rules into rubber bands."

Kapuscinsk)

Japan's current, positive financial movements are touted to symbolic of the strength of the recovery and the end of a long and painful period.

In the article, "Japan's Back! After Its Lost Decade, Japan's Economy is Set on a Recovery Path," sources report the Japanese economy has revived and emerged from the banking crisis beginning in the early 1990s. The Japanese economy, headed for its longest expansion in the postwar period, at this point, lasting more than four years. "In 2005, Japan grew by almost 3% and, over the course of the year, was the fastest-growing of the Group of Seven economies (on a fourth-quarter on fourth-quarter basis)." ("Japan's Back!...") Exports initially stimulated the recovery, however, buoyant domestic private spending, consumer and investor, have led the latest phase.

During 1996, 10 years ago, the time of Japan's deep, extended postwar recession, private spending and economic activity countered structural problems in the banking and corporate sectors. Consequently, after the land and equity price bubbles burst in the early 1990s, high nonperforming loans and a declining value of banks' equity portfolios persisted. Following bank credit constraints voided businesses; and individuals' confidence. Additionally, debt, capacity, and labor burdened the corporate sector during the bubble period: period. (Ibid)

These imbalances, in turn, adversely influenced investment demand and household income, negatively impacting consumer spending. Due to the gradual approach to dealing with the problems, falling demand, along with declining prices, coupled with high nonperforming loans, erupted and began to repeatedly cycle and insured that Japan's banking crisis continued. (Ibid)

II: Origins

Same Story... Different Setting

Of course it's the same old story. Truth usually is the same old story."

Thatcher) mob psychology fed by Japanese investors and bankers' complacency and euphoria, as well as, their failure to apply basic risk management principles in evaluating investment alternatives, is blamed to be part of the reason for Japan's banking crisis, which began in the 1990s. The "same old story,' of trying to solidify concrete causes to the truth of the roots of Japan's financial challenges has also been attributed to include regulators failure to take preventive measures to curb the mania and "Specifically," they state, "Japan's speculative mania and the banking crisis were caused by a combination of the following factors:

The hyperliquidity created after the 1985 Plaza Accord, which provided the funds for speculation.

Deregulation of the banking industry, which intensified competition and provided the incentive for speculation. "The introduction of jusen, which provided the vehicle of speculation.

The lack of investment opportunities in the real sector of the economy, which prompted the nation's large corporations to shift their investments from productive to speculative activities.

The failure of investors and banks to apply the principles of risk management in evaluating investment alternatives.

The failure of the MOF and the BOJ to diagnose the bubble and take preemptive action to burst it earlier rather than later." (Arayama and Mourdoukoutas 78)

Other economic observers attribute Japan's prolonged crisis to insufficient deficit spending; noting that as Japan's government deficit is structural, and not cyclical, that economic stagnation, instead of the government's deliberate action to stimulate the economy is the cause. Still another group of observers contend that Japan's prolonged crisis evolved from the "lack of a sense of crisis," consequently attributing "to four taboos of the country's financial system:

1) Taxpayers are prepared to bail out banks; 2) Foreigners should not be kept out of the industry; 3) Certain banks are too big to fail; 4) Banks should preserve lifetime employment for their regular employees at any cost." (Ibid 5-6)

Prior to Japan's banking Crisis, between 1945 and 1973 during the post-war period, restrictions on other options of financing positioned Japanese banks to become prime financiers. As dependence on banks begin to decrease in the 1970s, when financial markets were deregulated and restrictions on the issuance of equities and bonds were somewhat, numerous major Japanese corporations shifted their interests to less expensive financing of bonds and equity. ("Banking Crisis... "1) In the late 1970s, when the secondary market for government bonds opened, the Japanese obtained opportunities to channel savings into lucrative bond markets, additionally decreasing banks profit potential. By the mid-1980s, due to the continuing increase of financial options for businesses,."...banks began to lose pre-eminence they once had experienced." (Ibid) As Japanese banking rules remained primarily the same, bankers continued to implement traditional tactics of advancing loans while receiving deposits.

Consequently, as financial markets' deregulation significantly decreased the need for bank financing, Japanese bankers shifted their banks' lending priorities to more risky clients, primarily individuals and the commercial real-estate industry. The high economic growth and near zero inflation during this time (mid-1980s) which raised asset prices to extraordinary levels, coupled with extreme competition, prompted Japanese aggressively loan money in attempts to secure market shares. Collateral for loans, primarily overvalued real estate, created "the Asset Price Bubble." (Ibid) As Japanese banks and corporations ventured outside Japan during the late 1980s, particularly to Europe, East Asia, and the U.S., Japanese banks' unprofitable lending patterns continued. In 1989, however, when Nikkei 225 reached a peak of 38915 and collapsed, the banking bubble burst. The sharp decline of real-estate prices which ensued radically reduced collaterals' values. To attempt to counter the banks' huge non-performing loans, the Japanese government introduced the big-bang reform, which aimed to remedy the financial system's problems and create a stable financial environment. Right after the stock marked crash, however, the economic slump, which began right at the dawn of 1990, stagnated what the Japanese had hoped would be the beginning of a recovery process. (Ibid)

Ding the Japanese banking crisis, banks remained bound to old rules prohibiting them from securitizing their loans or entering into new business practices, such as fee generating activities. Even as late as 1998, banks could not offer loan commitments to collect fees. Consequently, banks continued to depend on generating revenue through traditional means such as making loans. (Ibid) Along with their normal lax accounting practices, Japanese banks employed little or no provisions for losses. This eliminated any safeguards to counter potential non-performing assets. And proved to hasten their downward financial spiral. When the Gulf War erupted in 1990, hopes that the Japanese stock exchange would be revived dissipated. As no immediate, potential remedies by governmental or financial institutions to counter this crisis were initiated, further financial chaos erupted. (Ibid 2)

III: Relating Reasons

More Nets More

Trouble brings trouble upon trouble."

Sophocles)

During September 1998, in Sapporo, Japan, with a population of 1.7 million, fallout from Japan's banking crisis was noted. A factory in Ryoichi Hirata which manufactures custom kitchens, 60 workers were furloughed, while machinery remained idle. Business was reported to be dead at the Therme International resort hotel where swimming pools had been drained. Restaurant business was down more than 50%. Most construction work had ceased, while housing construction fell 14% during July 1998.

Department stores were without customers. New cars sales skidded to a halt. Approximately 100 companies went bankrupt each month. (Zielenziger) Japan reportedly once promised lifetime jobs to citizens, however, as Japan's gross domestic product fell at an annual rate of 3.3% during the second quarter 0f 1998, with unemployment reported as 4.7%, the Japanese government said Friday things would worsen. (Zielenziger)

Bad Loans and Crippled Banks

None of Sapporo's 20 leading city banks went under until November of 1997 as Japan's quasi-socialist financial system none of Sapporo's 20 leading city banks had ever gone under as the nation's powerful Finance Ministry effectively guaranteed them. However, the Hokkaido Takushoku Bank, the island's oldest and most prestigious financial institution, declared bankruptcy with debts exceeding $6.4 billion, when a potential partner did not follow through with planned merger. (Zielenziger)

Business is Business

During 1998, Zielenziger recommended that in order to secure long-term recovery Japan must:

Permit its bad banks to die,

Force the sale of distressed office buildings and hotels

Tolerate short-term financial pain

If not, Zielenziger stressed, Japan may not work out from under a barrage of bad loans, at that time, deemed to exceed $1 trillion. Japan, however, was reportedly unprepared is to endure the pain of free-market capitalism. In Japan, personal relationships constituted the collateral for loans; many companies' financial records of were confidential; accounting standards were insubstantial; paternal banks determined (unsuccessfully) to insure troubled customers stayed in business. One prime example: "Hokkaido Takushoku not able to say 'no' to companies that should have quit business a long time ago," said Iwao Takamuki, executive vice president of North Pacific Bank. "North Pacific cannot be as kind." (Zielenziger) Takamuki's second-tier bank, due to government pressure, acquired the Hokkaido Takushoku "good assets." Consequently, Takamuki had to decide which of the nearly 9,000 troubled companies Hokkaido Takushoku had tried to prop up would receive new loans, and which companies would lose operating funds. Takamuki had to replace personal preferences with business realities.

The Japanese economy stagnated since 1990:

when real Gross Domestic Product (GDP) grew at an average of just 1.2%.

Since 1995, growth was extremely slow averaging less than 0.7% on year-to-year basis." ("Banking Crisis... "5) During the last quarter of 2003, however, the GDP increased 7% (Annexure 2), the most since 1990, demonstrating growth rate of 2.7%, for the entire year. Some economists argued, however, this 2003 growth did not reflect a complete economic recovery but signifies a short-term phenomenon, not a long-term reality.

Nakamae contends that the BOJ's reaction to the Japanese weakening economy only weakened the economy further and that doing nothing would have been better than the steps Japan took and further argues that.".. central banks react to economic bubbles by creating further bubbles....

Amid the economic and political fallout that descends when a bubble bursts,... In an effort to boost demand and thereby reduce the fallout from the bubble's bursting... such intervention only creates another bubble."(Nakamae)

Japanese bankers, Arayama, and Mourdoukoutas (6) argue, do not possess the aptitude, the facility, and the motivations to manage banks as for-profit business, consequently failing to save themselves or their customers. Additionally, a final contention they (Ibid) present in their work is that an American-style rescue package could not cure for Japan's banking crisis as Japan's banking system radically differs than that of the United States. Neither will merely cleaning balance sheets from non-performing assets, although necessary, cure Japanese and banks afflictions, as the condition requires:

Japanese... managers must behave as for-profit institutions where managers are accountable to the owners and stockholders.

Japanese... managers must be freed from government directives (China) and guidance (Japan) that control their day-to-day operations and must restrict their freedom to develop new products and businesses.

Japanese... bank managers must learn to behave as true bankers (i.e., learn how to manage financial risks and function as public trading corporations, especially how to deal with transparency and full disclosure rules and regulations, as is the case with their Western counterparts)." (Ibid 7)

During the early 1990s, the Ministry of Finance created a three-step plan, more troubling efforts, to attempt to respond to Japan's banking crisis:

For the first step, funds totaling 60 trillion yen.".. were set aside for banking sector, which roughly formed 12% of GDP."

From the 60 trillion yen,.".. 25 trillion yen were set aside for recapitalizing the weak banks, 18 trillion yen for dealing with insolvent banks, and 17 trillion yen for deposit protection." (Ibid) Attempting to help banks stabilize, the Japanese government tried to infuse this money into the system.

The second step was.".. To accelerate disposal of non-performing loans." (Ibid)

The third step focused on selling restructured loans. ("Banking Crisis... "3)

In 1992, in efforts to reach the second and third objectives, the Cooperative Credit Purchasing Company was created to purchase and then resell the financial institutions' real estate loans on behalf of the banks. The Financial Supervisory Agency (FSA), a new supervisory agency, which was designed to monitor financial institutions' and banks' performance, was permitted to also of supervise the Cooperative Credit Purchasing Company's asset disposals, monitoring the recovery process. Other inadequate recovery attempts included:

The Jusen Companies, which incorporated strong connections with the Japanese mafia, also known.".. As Yakuza, proved to be one of the major hurdles in the Japanese banking reforms... Later, it was also revealed that some officials in the Ministry of Finance had strong links with Yakuza." (Ibid)

The Deposit Insurance Corporation (DIC), was another avenue the banks attempt to take shelter in to overcome the cash crunch. Although the DIC contributed substantial amounts of money into the banks, their resources were not adequate. (Ibid)

Big-bang reforms, introduced by the Japanese government in 1998, intended to rectify and stabilize the financial system.

The Keiretsu System, or industrial groupings (banking; steel; trading; gas; etc.), contributed to the collapse of the banking sector. This common practice among the Japanese industries interlocked shares where the banks held percentages of firms' shares within keirets, and firms also owned a percentage of bank shares. This cross-holding pattern enabled firms to easily secure bank loans and afforded protection from aggressive take-overs. Mitsubishi, Mitsui and Sumitomo were part of the Keiretsu system.

Shinsei, a Japanese word which means "a new beginning," formerly known as Long-Term Credit Bank (LTCB), collapsed in 1998.

The Japanese government spent nearly seven trillion yen or $66 billion trying to restore LTCB's 20 billion yen to restore LTCB." (Ibid 4) This 2004 "deal" notes the first time a Japanese bank had been sold to a foreign company.

In their focus on bank rescue packages, as well as, troubled banks' behaviors related to rescue packages, Corbett, Mitchell, and Winton (474) state, "Despite the frequency with which banking crises occur, relatively few formal analyzes of regulatory responses to crises have been undertaken... Much of the literature on bank regulatory policy suggests that bank rescues are inefficient and can worsen banking-sector problems." As prompt-corrective-action type regulation tenor attempts to avoid bailing out poorly capitalized banks, this is recommended to be a first-best response policy. As in Japan's case, however, efforts proved too late for this type and other policy responses.

At times, ironically, policy authorities present bank rescue plans' offers, yet banks hesitate to accept them. Japan and Thailand, in recent years, illustrate examples "where government offers of recapitalization have been received unenthusiastically by private banks. Yet the failure to get banks to recapitalize, and to restructure and write off nonperforming loans, has been one reason for poor performance in the real economy in both cases." (Ibid) More positive examples, on the other hand, include Norway, Sweden, and Korea, where recapitalizations served as solutions to banking crises.

A crisis often stimulates reform.

During 2001, Rowley reports that the Japanese banking system has not yet qualified as full-blown crisis but that the crisis was growing. Japanese financial authorities, who had avoided radical action for almost a decade, were offering solutions "... nearer to the root of Japan's massive bad debt problem by enabling the official resolution and collection corporation (RCC) to purchase problem loans from banks on a meaningful scale and at realistic prices." (Rowley) Previous unsuccessful attempt to rescue Japan's banking system from its troubles after the bubble economy collapsed in 1991 included:

Decision to inject public capital, as amounts provided paled alongside the actual problem's size of the problem

Prime minister Junichiro Koizumi's promise to compel Japan's 16 leading banks (during two - three years) to write off [yen] 11,700bn of nonperforming loans (NPLs). Once more, not enough. (Ibid)

Compelling banks to write off bad loans and recapitalizing them will not work, Rowley argues, as he cites some analysts to state: "Injecting fresh capital is like stopping just one hole in a dyke behind which the build-up of flood water is quickly rising." Writing off bad loans not only threatens to devour nearly all of major banks' profits during the next few years, it would force most likely net bankruptcy for tens of thousands of dramatically, indebted small businesses. (Rowley) One solution, according to Rowley, that appears inevitable, is to remove hefty debt problem segments from banks' balance sheets.

During 2001, a number of primary Japanese banks considered tapping into their legal reserves to secure dividend payments' funds. By the end of 2001, the banks were to decide whether to follow through with this particular plan.

Although rare for banks to tap their legal reserves, part of shareholders' equity, several years prior to 2001, approximately eight leading banks accepted some [yen]9000bn of public capital injections and issued preference stock to the government. If banks have to pass a full year's dividends on these stocks, the Japanese government may convert to equity, becoming a controlling shareholder, and in turn nationalizing the banks.

Mizuho Holding, Mitsubishi Tokyo Financial Group and UFJ Holdings, three of Japan's mega banking groups - issued loss warnings during 2001. Nikkei 225 share index lost 25% during the first half 2001(lowest level since 1983). At the end of September in 2001, according to Daiwa Research Institute's estimates,.".. latent losses from stockholdings at Japan's top eight banking groups were around [yen]5lOObn.." (Ibid)

Arayama, and Mourdoukoutas (6) argue that nurtured under a fast-growing economic environment, "main bank" keiretsu relations, and tight government regulation that virtually controlled bank management behavior, eliminated competition, and rationed credit, according to MITI and MOF priorities, Japanese banks have grown up as abacus bankers." The Japanese banking system, these authors purport, functioned as a record keeper of the course of money; not as a genuine banker, one who manages investment risk. Currently, the use of ATM machines to replace abacus-calculators in monitoring money in; through; out of the banking system, is the primary difference from then to now.

Japan's prolonged banking crisis demonstrates policy limitations dealing only with nonperforming assets. Japan, such as China and several other Asian countries, take the approach toward globalization, which emphasizes:.".. social over individual values, relations over market efficiency, and evolution over revolution." (Ibid 169)

Since the early 1990s, when Japan's economic performance collapsed:

Real GDP growth fell from 6.1% in 1988 to 3.8% in 1991, falling into negative territory by 1994. After a 3.5% rebound in 1996, it slid into negative territory again in 1998 and expected to grow by 0.6% in 1999. In the meantime, the Nikkei stock average dropped from 40,000 in 1989 to below 13,000 by 1998 before returning to 17,000 by mid-1999, while real estate prices returned to their pre-1985 levels." (Ibid 2) prolonged banking crisis, manifested in billions of dollars of non-performing loans, not yet written off in 1998, was reported to be the core of Japan's economic woes. Despite government packages, Tokyo Mitsubishi Bank, DKB, Sumitomo Bank, and Sakura disposed of less than half their non-performing assets. (Ibid 2) A credit crunch also mirrors Japan's banking crisis as it neutralized monetary policy. Since 1990, the Bank of Japan (BOJ) "launched an unprecedented expansionary monetary policy, lowering the discount rate from 5.5% to 0.25% without avail." (Ibid) The bad debt problem Japan's banks faced led to paralysis where survival becoming the entire focus, negating attention to existing businesses' ongoing financing needs or, or even more vital, needs of start-up enterprises. (Ibid 4) The Japanese banking system absorbed billions of yen in taxpayer money; without returning ant improvements. During 1998, Japan's economic growth spiraled downward.".. from sluggish to negative, pushing the country into a true recession and diminishing the recovery chances for Asia's allying economies. The recession also claimed a major political casualty, the erosion of the Liberal Democratic Party's (LDP) power in the fall of 1998 elections that led to the resignation of Prime Minister Ryutaro Hashimoto." (Ibid) As late as September 2003, Japanese banks continued to hold numerous non-performing loans.

One estimate put the figure at 21.5 trillion yen for which Japanese banks did not make any provision." (Ibid)

Along with this concern, banks continuing as components of keiretsus, even with diminishing continue to exert extensive clout in the Japanese industry. Jusen companies, also concern to contribute concerns, even as the yakuza, believed to be more a socio-cultural quandary, also continues to disturb the Japanese banking sector. ("Banking Crisis..." 5)

Ibid 6)

Ibid 7)

Rosenbluth, and Thies (23) contend that the Japanese banking collapse in 1990, "exposed a rat in the banking system." The Liberal Democratic Party (LDP) government, opposite their usual practice, forced banks to absorb e large loses instead of taxpayers bailing them out. In the end, however, a hint of optimism evolved, that more public goods-oriented politics in Japan would begin the end of the banking crisis. (Ibid)

Chapter IV: Recommendations

Accepting Responsibility

There are plenty of recommendations on how to get out of trouble cheaply and fast.

Most of them come down to this: Deny your responsibility."

Johnson)

Reform of the Japanese economy, Nakamae recommends, can be obtained through vast market pressure. A central bank's basic function is to support a healthy market and bound moral peril, however, this is a challenge.

Not only could it be idealistic to suppose the BOJ will provide the solution, expecting it to cease being part of the problem could also be unrealistic.

Nakame's not so optimistic predictions for Japan's banks relate to the fact that ss Japanese exports fall, related to global effects of the United States' slump, Japan's investment income starts to decline. In turn, the current account surplus declines, and is expected to continue to do so.

While private capital outflow continues to accelerate and more individual investors are aware of the relative to zero-interest deposits of overseas securities, private capital outflow will soon cause the current account surplus to disappear. When this occurs, Nakamae states, despite BOJ intentions and reactions, interest rates will rise. In addition,.".. The yen will weaken and the JGB bubble will burst, causing a full-blown financial crisis."

Numerous, more positive outlooks for Japan's banks, however, outnumber the pessimistic ones. Currently, the Japanese economy, particularly in banking and corporate sectors, stands strongly contrasting the record from 10 years ago, as indicated by:

Healthier banks. By end-September 2005, the ratio of nonperforming loans at major banks had fallen to below 2 1/2% from a peak of 8 1/2% in early 2002; the situation at regional banks improved as well, although more modestly. With banks having less need to make provisions against impaired assets and bad loans, their profitability also recovered, although it still remains low by international standards. On the whole, Japan's banks are now less vulnerable to shocks and better able to support economic activity. Whereas corporate restructuring and the economic recovery helped reduce the overhang of bad debts, heightened government efforts in supervision and other areas played a vital role in restoring the banking system to health.

Stronger companies. Firms have largely succeeded in tackling the excesses of the 1990s by trimming costs, reducing unused capacity, and using increased profits to reduce their indebtedness. The focus has been on the following issues:

Improved profits. With persistent efforts to cut labor and other costs, the exit of inefficient producers and suppliers, and stronger demand, firms of all sizes have enjoyed a surge in profitability. Indeed, the ratio of current profits to sales stands at the peak levels of the late 1980s for both the manufacturing and non-manufacturing sectors

Improved balance sheets. Strenuous efforts to reduce debt burdens have paid off, particularly for medium and large firms. The nominal value of corporate debt has been slashed by [yen]125 trillion since 1996, and debt-sales ratios are back down to historical pre-bubble averages in manufacturing, with steep declines in the rest of the economy as well (see Chart 3). As a result, firms' cash flows have been freed to upgrade physical and human capital and to reward both employees and shareholders with higher bonuses and dividend payouts.

Elimination of capacity overhang. Along with repaying debt, corporate restructuring efforts since the mid-1990s have involved slashing new investments to deal with excess capacity. As a result, the fixed capital overhang was eliminated; by 2005, capacity utilization had returned to its 1980-89 average range (see Chart 4).

Completion of adjustment in labor costs. Company efforts to shed surplus labor also appear to have borne fruit. After initially relying on more conventional strategies, such as cutting back on new hires and overtime work, firms have shifted to a more aggressive approach -- laying off workers and beginning to replace full-time workers with part-time ones or workers on fixed-term contracts. But with sales declining in nominal terms in a deflationary environment, unit labor costs continued to rise through 1999. The labor cost burden declined thereafter, however, and by 2005 had returned to early 1990s levels. Although some further adjustment may be forthcoming, just as the success in reducing excess capacity has been supporting investment since 2003, the improved labor cost position has supported employment and wage growth since early 2005. Job-offer ratios are at an all-time high, and full-time jobs are now growing faster than part-time jobs." ("Japan's Back!...")

During March, 2006, the Bank of Japan discontinued its unusual policy of "quantitative easing," which embodied a considerable provision of liquidity to banks during Japan's deflation problem and financial system crisis. (Ibid)

The IMF currently forecasts real GDP growth of close to 3% in 2006; more than 2% in 2007. Japan's "about face" followed increased regulatory pressure on banks to dean up their balance sheets, which improved the financial sector health, and consequently, basically reflected a gradual shift away from the past limited business and government practices.

Some structural rigidities, however, continue to hold back growth, albeit, the process of removal of labor and product market distortions is under way. (Ibid) Future considerations include a lengthy agenda, with steps to:

Improve labor utilization

Enhance product markets' competition

Liberalize the agricultural sector

Encourage foreign direct investment

Simultaneously, the high public debt will need to be decreased. Public endorsement of further reform, even though implementation may be challenging, has been confirmed in 2005 elections. (Ibid) While facing mounting demographic pressures, Japan's primary challenge is to ensure strong self-sustaining growth. Japan's birth rate, significantly below the population's replacement rate, along with the working-age population contracting since 2000, and the ratio of elderly dependency tops other industrial nations. To counter Japan's declining labor force, per capita growth will require greater productivity, more effectively utilizing resources and implementing technological advances. (Ibid) The Japanese government, expected to scale back its financial institutions activities. "Loans at such institutions other than Japan Post have already dropped by 20% since 2000, and deposits at Japan Post -- which largely fund suboptimal public investments -- are also down 20%." (Ibid) When Japan Post, the world's largest deposit taker, is privatized, this will remove some of the private banking system's unequal competition. Consolidation among Japanese city banks, which currently constitute three major banking groups, earned sizable profits in recent years. More profitability allows banks to repay public capital injections, while also strengthening their capital bases. Rising interest rates are also expected to bolster banks' profits by increasing net interest margins. The solution, however, to maintaining financial sector strength and evade future banking crises,.".. will be to continue credit growth, after eight years of uninterrupted decline, finally turned positive in February 2006.

Thoughts for Tomorrow

Insanity has been defined as doing the same thing over and over, and expecting different results. Japan's economic success will most likely depend on it doing something different, basically not repeating past mistakes. Healthy counters to repeating past imbalances include:

Maintaining healthy levels of debt ratios

Taking necessary action in regard to price signals

Keeping profits in proper perspective (Ibid)

At the crossroads for tomorrow's needed changes, Japan truly seems at a crossroads. Numerous market analysts academic observers and market analysts currently conclude that Japan's trend productivity growth has gathered speed; implementing sustained, overall GDP growth reaching 2-2 1/2%, despite a declining population. (Ibid)

V: Conclusion

Sewing up the Wounds don't dawdle. I'm a surgeon. I make an incision, do what needs to be done and sew up the wound.

There is a beginning, a middle and an end."

Selzer)

Even today, Japan's past banking crisis merits attention. Sixteen years after its "bubble" burst in 1990, Japanese banks still deal with the aftermath. During 2000, Matsuda (128) reports that the "last ten years have come to be known as the 'lost decade.' Most troubled banks have been shut down, but Japanese banks' problems are far from over, as evidenced by the recent bankruptcy of a well-known department store, Sogo." Readers may wonder Matsuda (Ibid), questions, whey they should care about Japan's economic problems. One reason, Matsuda (Ibid) stresses, "is that it is much easier to learn from others' mistakes than from our own, and Japan may offer some valuable lessons, especially when our own economy seems to be slowing down." Lessons Japan learn while, sewing up its wounds, include: