Cover image for Saving the sun : a Wall Street gamble to rescue Japan from its trillion-dollar meltdown
Saving the sun : a Wall Street gamble to rescue Japan from its trillion-dollar meltdown
Tett, Gillian.
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Publication Information:
New York : HarperBusiness, [2003]

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xxv, 337 pages : illustrations ; 24 cm
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HC462.95 .T48 2003 Adult Non-Fiction Central Closed Stacks

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For more than a decade, Japan's dismal economy -- which has bounced from deflationary collapse to fitful recovery and back to collapse -- has been the biggest obstacle to economic growth. Why has the world's second largest economy been unable to save itself? Why has a country, whose financial might in the 1980s was the most feared force on the globe, become the sick man of the world economy? Why has the industrial transformation once called the Japanese Miracle frozen into the Japanese malaise?

Saving the Sun answers these questions by telling the story of Long Term Credit Bank, one of the nation's most respected financial institutions, and its attempts to transform itself into a Western-style bank. Through the stories of three extraordinary men, former Financial Times Tokyo bureau chief Gillian Tett brings to life the bank's long struggle to regain its financial health. In the process, she shines a light into the secretive world of Japanese banking where business is done in sex bars and gangsters lurk behind the scenes. And, in a fast-paced narrative, Tett chronicles the internal conflicts between reform-minded and tradition-bound factions within the bank, as well as the powerful and protective Japanese bureaucracy.

Filled with dramatic scenes involving some of the most important figures and institutions in international finance -- -Paul Volcker, Lawrence Summers, John Reed, Goldman Sachs, UBS, and CSFB -- Saving the Sun charts the growing confusion between a government eager to revive the economy but unwilling to accept the necessary compromises and the Western bankers (profiled here for the first time) who too openly scorned Japanese capitalism and its paramount interest in social harmony over pure profit.

What emerges is the first viable explanation of what caused Japan to stumble from such economic heights -- readers will finally understand what has hobbled that country. But what also emerges is the realization that a profound rift still exists between Japan and the rest of the world. Though Long Term Credit Bank's transformation into Shinsei bank has been a rousing success in financial terms, the Japanese press, government, and people have all but turned against the idea of American-style capitalism. Indeed, instead of reforming Japan, the banking crisis may have convinced ordinary Japanese, more than ever before, that they must go it alone.

Author Notes

Gillian Tett has a PhD in social anthropology from Cambridge University. She became a Journalist with a strong interest in finance. She served as the Financial Times newspaper's deputy head of the Lex column (an agenda-setting column on business and financial topics), Tokyo bureau chief, economic correspondent, and foreign correspondent. In 2003, she published a book on Japan's banking crisis, Saving the Sun: How Wall Street Mavericks Shook Up Japan's Financial World and Made Billions. In 2004 she began building a group at the Financial Times to cover capital markets anticipating the need to watch an industry that was growing quickly. By 2007, one year before everyone else, she began issuing warnings of a looming financial crisis. In honor of her work she was given 3 awards: the Journalist of the Year at the British Press Awards, British Business Journalist of the Year and the Wincott Prize. She speaks regularly at conferences around the world on finance and global markets. She is the author of Fool's Gold: The Inside Story of JP Morgan and How Wall Street Greed Corrupted It's Bold Dream and Created a Financial Catastrophe. It is the tale of how a team of Wall Street bankers led by JP Morgan created the world of "Shadow Banking" and then lost control of their creation.

Reviews 3

Booklist Review

In the 1980s,apan's heady financial growth spurt had everyone wondering whether they were going to take over the world, economically speaking. That period created one of the world's largest stock and real estate bubbles ever, and the subsequent fallout has created enormous levels of bad debt that have threatened time and again to collapse their banking system. Rather than giving another overview ofapan's 13-year economic downturn, this book focuses on the history of one specific bank, the Long Term Credit Bank, which typifies the problem. This character-driven story shows how the protectionism and chronic denial of wrongdoing that stem fromapan's cultural avoidance of public shame have allowed nearly $1 trillion in bad debts to fester for all this time. Tett follows LTCB through its collapse in 1998, when an American company stepped in and tried to introduce Wall Street-style management technique, which did not go over well. This focus on one particular bank gives a microcosmic view ofapan's business ethic and a not particularly positive view of their future. --David Siegfried Copyright 2003 Booklist

Publisher's Weekly Review

Financial journalist Tett asks why the economic engine that achieved phenomenal growth for Japan between 1953 and 1970 has been stalled since 1990, with 2003 marking the fifth consecutive year of deflation. Puzzled by the persistent stagnation and dissatisfied with prevailing macroeconomic explanations, Tett has taken an intriguing alternate route to investigate what has gone wrong: she focuses on the history of the Long Term Credit Bank (LTCB) as it evolved from financing industrial customers during the boom years to expanding its portfolio with real estate loans in the 1980s and recent attempts to reinvent itself as Shinsei Bank after being purchased by a U.S. consortium in 2000. The twists and turns of the fascinating LTCB saga are cultural and political eye-openers, but Tett also thinks that the problems she found in the bank are symptomatic of Japan's economy as a whole. She argues that one consequence of Japan's reliance on old ways of doing business was the proliferation of nonperforming loans, burdening the banking system to the tune of more than a trillion dollars in the 1990s; she sees the meltdown of the LTCB and the need to put it up for sale as an inevitable result of failure to get tough with rafts of deadbeat borrowers. When the determinedly entrepreneurial U.S. consortium took over the LTCB with a vision of transforming it into a viable commercial bank, it soon discovered a vast number of hidden bad loans along with unexpected resistance to the consortium's new business strategies. Her candid assessment in this lively volume is certain to stir debate since she points an accusatory finger at what she characterizes as paralyzing traditions of consensus thinking, harmony, hierarchy, insularity and resistance to change, especially if the proposed changes originate with non-Japanese. Illus. not seen by PW. Agent, Amanda Urban. (Sept.) Forecast: A national broadcast and print media campaign that includes first serial rights to the Financial Times should attract the attention of business readers, especially those disposed to see the LTCB/Shinsei story as emblematic of challenges Japan's economy faces today. Tett's sense that hallowed Japanese institutions and traditions are to blame for the country's lackluster economic performance should heat up the discussion as well. (c) Copyright PWxyz, LLC. All rights reserved

Library Journal Review

Tett, former Tokyo bureau chief of the Financial Times, has written a forward-looking book about the Japanese banking system-and the prognosis is not good. According to the author, without serious structural reforms, Japanese banks will implode, triggering catastrophic economic events worldwide. Sadly, the Japanese have been aware of the problem for years but have largely ignored it. Although covering something of this magnitude could be difficult, the author wisely focuses on the Long Term Credit Bank (LTCB), one of the more egregious examples, to tell her story. LTCB, which came perilously close to defaulting in 1999, was nationalized by the Japanese government and sold to a Wall Street investment group. Painful staff reductions, budget cutbacks, and major loan reductions combined to produce a new entity called the Shinsei Bank that has been largely profitable. How did financial disaster come to the LTCB? Nonperforming loans were the main culprit, stemming from excessive real estate lending with little or no credit analysis oversight and compounded by an opaque regulatory system, a problem confronted by countless other Japanese banks. This exemplary chronicle is recommended for larger public libraries and all international business collections.-Richard Drezen, Washington Post/New York City Bureau (c) Copyright 2010. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.



Saving the Sun A Wall Street Gamble to Rescue Japan from Its Trillion-Dollar Meltdown Chapter One Samurai Bankers After the war we had a system that was really a type of socialism under the disguise of capitalism. The bureaucrats directed everything, in a wise way, and we all accepted that and worked together very hard. The system worked well for a few decades. -- Yoshiyuki Fujisawa, former chairman of IBJ In the evening of June 8, 1999, the Tokyo police telephoned Katsunobu Onogi at his house. "Tomorrow we are going to arrest you," the caller said politely, "please take care to be ready!" Staging the arrest so everything could be done in the proper fashion, the police asked Onogi to suggest a convenient location. Japan is clearly not a country that leaves room for surprises. Nor was Onogi surprised. As he put down the telephone, part of him felt relieved. He was grateful that the police did not plan to drag him away in a disorderly fashion. At the age of sixty-three, Onogi had spent his entire life behaving with dignity and he had absolutely no intention of going to prison without being properly attired in the suit and tie that was the badge of a Japanese "salaryman." The possibility of such shame appalled him. At the same time, Onogi was terrified, too. Even with the correct clothes -- and with all the perfect etiquette -- prison was a frightening place. Onogi had always been an intellectual and methodical man. He wore large, bookish glasses and an impassive expression on his square face, broken only by a tense half smile that turned down at the corners of his mouth. Whenever he faced a problem, he liked to scour history books for answers and in the weeks leading up to his arrest, Onogi had furtively peeked into bookstores to see if there was any guide to what a middle-aged man should do in prison. Alas, there was no way to bone up on the ordeal ahead. Nor had Onogi's professional career given him any idea of what to expect in jail. Onogi could scarcely have imagined that he would share the fate of a common criminal. He had spent his whole life believing that he was a member of the elite , a respectable man who did things right, according to Japanese ideas of duty. He had slaved for forty years of his life in Long Term Credit Bank, one of Japan's most prestigious banks, where he had risen to become president. Normally, such service would have guaranteed Onogi a comfortable retirement. Holidays in Hawaii; rounds of golf; group trips with former colleagues to Japan's hot springs; the satisfaction of knowing that he had served his country well. That was how most sixty-three-year-old Japanese bankers lived. But somehow it had gone horribly wrong for Onogi. LTCB had collapsed with almost $50 billion of bad loans, engulfing Onogi and his employees all in a shame that was too much for some of the most senior LTCB bankers to bear. A few weeks earlier, fifty-nine-year-old Takashi Uehara -- the man who was expected to succeed Onogi as LTCB president -- also received a telephone call from the police warning that his arrest was imminent: Uehara and the other LTCB managers were accused of hiding the bank's bad loans. Uehara decided to commit suicide. Once the Japanese believed that the correct way to kill oneself was to slash the stomach open with four precise strokes of a sword, letting the guts spill out, a method known as seppuku . Nowadays, that was deemed "selfish," since it created a bloody mess that needed to be cleaned up. Consequently, when executives committed suicide in the 1990s, they usually hung themselves in an anonymous hotel -- to spare their family "shock." Uehara had always been a stickler for etiquette: He checked himself into a little suburban hotel and hanged himself, leaving a note on the table for Onogi and the other LTCB bankers. It said: "I am so sorry." Onogi, however, did not want to kill himself. He considered it his duty to suffer his shame alive -- to "endure the unendurable," as the Japanese emperor had described the American conquest after World War II. So, he fixed his mind on cheerful things. He reflected on an Italian film he had just seen on television about a concentration camp in World War II, called Life Is Beautiful . Onogi liked the title. "Life is beautiful!" he told himself. "Life is beautiful." He also resorted to his favorite mental survival trick: He imagined that he was looking down at himself from far outside his own body, as if he were an academic writing one of the sweeping pieces of history that he loved to read. Onogi had always found that trick comforting. It seemed to put life into perspective; to give a broader dimension to his own, little fate; to give a meaning to the terrible events that had engulfed LTCB. It was, he sometimes admitted with a dry chuckle, a very strange tale -- not just for him, but for Japan. And it seemed to be getting stranger, with every year that passed. For Onogi, the LTCB story had started almost exactly four decades earlier, on April 1, 1959, a time when the pink cherry blossoms were blooming in Tokyo. On that day he turned up at the bank, as a fresh young graduate for his first day at work. "Onogi Katsunobu here!" he declared to an official, with a bow, using his surname first in the Japanese manner. He was wearing a suit and tie back then as well. But it was an ill-fitting, cheap, dark blue outfit, identical to the suits that all the other new graduate trainees wore. Fourteen years earlier Japan's economy had been smashed to pieces in World War II. So the bank had assumed that the new trainees would be too poor to afford to buy their own suits, since these cost Y30,000 ($84) each, or three months' average wages, so they doled out matching outfits to the graduates for free ... Saving the Sun A Wall Street Gamble to Rescue Japan from Its Trillion-Dollar Meltdown . Copyright © by Gillian Tett. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold. Excerpted from Saving the Sun: A Wall Street Gamble to Rescue Japan from Its Trillion-Dollar Meltdown by Gillian Tett All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

Table of Contents

Forewordp. ix
Prologuep. xv
Chronologyp. xxi
Part I

p. 1

1. Samurai Bankersp. 3
2. Blocked Reformp. 18
3. Money Madnessp. 29
4. The Trillion-Yen Manp. 44
5. The Bubble Burstsp. 54
6. Takahashi's Revengep. 70
7. Onogi's Choicep. 81
8. The Swiss Gamblep. 97
9. Scapegoats and Seedsp. 113
Part II

p. 127

10. An American Dreamp. 129
11. "Cowboy"p. 146
12. Negotiationsp. 166
Part III

p. 183

13. Yashiro's Dreamp. 185
14. Culture Clashp. 196
15. The Sogo Shockp. 208
16. Homma's Deathp. 221
17. The Fight with the FSAp. 227
18. Stalematep. 238
19. Success?p. 250
20. The Bad Loan Surprisep. 260
21. Saving the Sun?p. 274
Epiloguep. 281
Notesp. 291
Notes on Bad Loansp. 313
Sources and Bibliographyp. 317
Acknowledgmentsp. 321
Indexp. 327