Tokyo's new American-style debate

International Economy, The, Wntr, 2003

It looks as though one economist, Heizo Takenaka, is attempting to conduct a large-scale experiment with the Japanese economic system and the banking sector that forms a critical part of the system. But since it could possibly throw the lives of many into devastation, such an experiment without sufficient prior calculations and considerations must never be conducted. With Mr. Takenaka's plan, the banks now have little choice but to rapidly slash their assets to prepare for the worst possible scenario.

Recently, at a board meeting of a large corporation, the CEO and the directors were discussing a new business plan. Someone asked, "How about the plan's financing?" "No bank is prepared to lend money," was the answer. This was not a joke, but a true story. U.S. Federal Reserve Chairman Alan Greenspan has for years called for the cleanup of bad loans and a recovery of Japanese banks' role as financial intermediaries. But Mr. Takenaka's experiment has already caused a nosedive in stock prices, intimidated the banks, and stalled economic activity in general. The economy continues to deteriorate and, at the end of the day, the amount of nonperforming bank loans will actually expand.

The foreign media and economists outside Japan may be interested intellectually in Takenaka's experiment, so they support it. They will not suffer the pain it could bring. But the Japanese people can never allow our national economy to be subject to one economist's dangerous untested experiment.

--from a November 29, 2002, article by former Japanese Ministry of Finance Vice Minister Makoto Otsumi in the Daily Yomiuri