THEWORLDTODAY.ORG NOVEMBER 2008
JAPAN AND THE ECONOMIC CRISIS
Jeff Kingston, DIRECTOR OF ASIAN STUDIES, TEMPLE UNIVERSITY, JAPAN
Japan is an abject lesson in how
not to handle a major banking
crisis. During the 1990s, its banks HEN A BRITISH FINANCIAL EXPERT
were technically insolvent in Tokyo confided recently that
only Japanese banks stood
following the bursting of the late between the global banking
system and the abyss, I could not
1980s bubble and the implosion of help replying, ‘that’s a scary
land and stock prices. Since land thought.’ Having had ringside seats for Japan’s lost decade of
the 1990s, and recalling its bumbling bankers frittering away
was the collateral for many trillions of yen, it is hard to imagine the gnomes of Tokyo
loans, banks were saddled with playing Saint Bernard, but flush with cash and few obviously
dodgy assets on their balance sheets, it is an appealing story.
massive bad debts. This festered as Damage from the tsunami wreaking havoc in global
financial markets has been severe and the toll is climbing.
banks and the government Japanese pundits initially thought the country would escape
dithered and temporised for nearly significant harm because its banks avoided exposure to
sub-prime loans and indeed, with plenty of cash, they have been
a decade when the country was in picking over and buying up distressed assets, including some
collective denial about the severity units of the defunct Lehman Brothers. However, since then the
Nikkei stock market index lost a quarter of its value in one week.
of the bad loan debacle. Myopia Other Asian markets have also tanked, indicating the extent of
Wall Street’s sub-prime collateral damage.
was facilitated by fuzzy accounting Alas, there is no magic US-style $700 billion wand, no
practices and the government’s quick-fix and it is now dawning on investors and taxpayers
around the world that this is merely the downpayment on a
failure to exercise proper oversight. systemic crisis that may drag the global economy down for
Sound familiar? several years. As the United States comedian Jon Stewart of the