Read Naoki Hanzawa and rethink the mystery of Japan s lost thirty years ?

The road to hell is paved with good intentions

The mystery of the house-price-to-income ratio

Many people ignore a perplexing question when they use the long-term recession caused by the bursting of the housing bubble in Japan to illustrate the severity of China's real estate crisisJapan is at the peak of the property bubble, and the house-price-to-income ratio is only 20:1 in Naka-ku, Tokyo, and 10:1 in general areas, which is not high in the world's major cities, far lower than the current 25 30:1 in Shanghai and Beijing.

If the income of mainland cities is not high, then compared with Hong Kong, which also has a high income, it can remain in the range of 30 to 40:1 for a long time, as well as 25:1 in Seoul and 20:1 in Taipei.

Therefore, the bursting of Japan's bubble economy is not just as simple as housing prices being too high, but there are more complex reasons, which is what I felt when I recently reread "Naoki Hanzawa".

The Japanese drama "Hanzawa Naoki" has a lot of popularity in China, as the protagonist of a middle-level bank employee, the sentence "The credit of the subordinates is taken by the superiors as their own, but the fault of the boss is the responsibility of the subordinates" shouted out the hearts of many workers.

However, the TV series omits many descriptions of the social background after the bursting of the bubble economy in **, such as the rise and fall of the Nishi-Osaka Iron and Steel Company in the first "Shuraba", which just provides a good sample for answering the question above.

This article attempts to interpret the social background of this articleAnalysis of why Japan's bubble economy burst?And why has it experienced 30 years of stagnation?

The history of the ups and downs of a small and medium-sized Japanese company

First of all, a brief introduction to the plot of the first part of "Naoki Hanzawa":

Naoki Hanzawa, the head of the bank financing division, was ordered by the branch manager to issue a credit loan of 500 million yen to Nishi-Osaka Iron and Steel Company, but the company declared bankruptcy half a year later, and Hanzawa discovered the truth about the company's bankruptcy in the process of recovering the loan.

* The main story of "debt collection" takes place in 2004-2005, which is already the second lost decade in Japan, and the story of Nishi-Osaka Steel Company, which spans two full decades, is a typical microcosm of Japanese small and medium-sized enterprises.

The company was founded single-handedly by President Higashida in the early 80's during the boom of the Japanese economy, **DescriptionThere are many similar companies in the Osaka Steel Wholesale Zone.

Although the bubble economy burst in the early 90s, there will not be such a clear division in it, and at the beginning, the people felt the most was only **and the property market**, which has not yet affected enterprises and themselvesUntil 1995, most Japanese people were still immersed in the dream of being the best in the world, and until the 1998 Asian financial crisis, many Japanese people still felt that this was only a short-term economic downturn.

In the first "lost 10 years", the company's sales continued to grow due to its relationship with the president of a major customer, and the company was listed as a high-quality customer by the bank, although Shin-Nippon Special Steel, Nishi-Osaka Steel's largest customer, was also hit hard and the steel wholesale street in Nishi-ku, Osaka City.

Therefore, in 1999, just after the Asian financial crisis, Nishi-Osaka Iron & Steel responded to the strategy of "revitalizing the vitality of the Asian financial crisis in one fell swoop" of major customers, and began to expand production against the trend by financing the construction of a second plant from banks.

Unexpectedly, the former president of a major customer was replaced because of poor performance, and the plan to increase production was in vain.

This reflects the characteristics of entrepreneurs in the East Asian Confucian cultural circle, who always struggle to support themselves first when they encounter a crisis, and they fall down when they can't hold on. In particular, Japanese companies implement a lifelong employment system, and the responsibility for employees is similar to that of family members, in every story in "Naoki Hanzawa", entrepreneurs always consider the arrangement of employees first when facing bankruptcy, unlike European and American companies, which find that they will stop losses in time and go bankrupt immediately, die early and reincarnate early, and employees get severance pay as soon as possible, and find their next home as soon as possible.

Although this characteristic of Japanese companies has avoided the collapse crisis of the United States in 2008 and the violent social turmoil of Latin America, it is necessary to prolong the crisis and the company will inevitably die in the end.

In this way, in the second "lost decade", the crisis finally spread to Nishi-Osaka Steel, and it was almost impossible to find new customers, and the regular orders were gradually decreasing, and the company was dragged down by the heavy repayment burden and interest expenses, and the company's capital chain deteriorated.

Such failures are always repeated in different times and in different countriesWith past experience, entrepreneurs have expanded against the trend in the downward cycle of the industry, and have succeeded several times, becoming path dependent, and once they encounter a real long-term economic recession, they will eventually fall short and go bankrupt.

We always think that Japanese companies are too financially conservative in terms of not going through the pain of others and not persuading others to be kind, but this is also a kind of survivor effectOnly companies with conservative genes can survive.

On the one hand, he made false accounts by inflating sales and greatly adjusting personnel expenditures to stabilize or even arbitrage bank loans, and on the other hand, he transferred funds overseas through the accounts of multiple relatives, and finally completely got rid of debts through bankruptcy.

The bankruptcy of every company like Nishi-Osaka Iron and Steel will lead to the collapse of a number of upstream companies that have been struggling to support, and also make the bank have an extra bad debt, which is the reason why Japan's economic recession has lasted for decades.

The book also tells the story of Awaji Steel, a small and medium-sized company with annual sales of one billion yen and debts of more than 2 billion yuan, which has been in deficit since a few years ago, and has been struggling to support itself with about 1.2 billion yen in financing from four banks.

Therefore, in the eyes of entrepreneurs such as Dongtian who maliciously evade debts, they are not wrongThe bank is the culprit of this crisis, and all he does is "present the revenge drama of Dongtian".

The book also focuses on the key role of banks in the formation and bursting of the bubble economy.

The bursting of the housing bubble

There is a plot in the book, Hanzawa went to track down Dongtian's private residence, and when he arrived at the apartment building, the first thing he did was to see the "cornerstone" of the building, and when he saw that it was built in the fourth year of Heisei (1992), he immediately felt half cold

Even after the collapse of the bubble economy, apartments were still sold for much higher prices than they are today, and this building is what it was built at that time. At that time, it was about 70 or 80 million yen, but now it is worth up to half the price. No, if it is built in such a ghost place, if it is auctioned, it may be enough to choke on 30 million. As a result, the mortgage loan at the time of the apartment may already be under-collateralized.

* In this houseAlthough they are already under-collateralized, they are still paying off their debts, which is a portrayal of most Japanese people who bought houses in the years before and after the peak of the housing bubble. According to a 2018 report, more than 10% of households over the age of 65 in Japan are still paying off their mortgages during the bubble economy.

Mortgages in the United States are generally "non-recourse", and after the house is repossessed by the bank, even if the collateral is not enough to repay the loan, the bank cannot seek recourse from the lender, even if it is paid off. But under Japanese law, if you lose your property, you have to pay your debts – and the same is true in China.

Therefore, even if the house price falls by half, the residential loan is the best asset of the bank, and the mortgage is always the first to be taken over when the bank goes bankrupt or merges.

What really dragged down the banks was the land mortgage loans of enterprises, the book records what happened at that time:

Due to the skyrocketing land prices, many companies have become wealthy, so they use land as security to intervene in various and beyond the scope of their business. It's just that the investment in equipment is good, and there are many people who invest simply for the sake of investment, and in order to join the frenzy of pursuing ** and investment trust assets that have nothing to do with the bank, they have borrowed money for reinvestment with land as collateral.

However, then the stock price started to **, and people who lost a lot of money on their investments ended up with only a lot of debt. Not only that, but to add insult to injury, the value of the land has also been greatly reduced, and finally it has fallen into the dilemma of having no effective collateral when you really want to borrow working capital.

The recession that followed the bursting of the bubble economy hit the wholesale steel street in Nishi-ku, Osaka City. The steel industry has been particularly affected by the economic downturn, and in the more than ten years since the bubble burst, many companies developed from retail stores have been eliminated round by round as if they had been combed and tooth grate.

Therefore, even if the property market bubble bursts in China, it is only residential, and it will hardly cause a sharp rise in the debt ratio of enterprises, and this is to learn the lesson of the bursting of the bubble in the Japanese property market, in advance of the bank strict constraints, the focus is on commercial buildings, early introduction of a large number of loan mortgage restrictions, the proportion of loans for the purchase of office buildings by enterprises can only be up to 50%, the term is up to 10 years, the result of the crackdown on speculation is that commercial buildings have not risen for many years, losing speculative value.

WhileThe actions of Japanese companies at that time were related to the indulgence and encouragement of the banks, the book says:

In most cases, it is the banks that persuade these people to buy investment products. "The quota indicators for loans for the purchase of investment products and loans for working capital are different. There are many bank employees who market their products irresponsibly, and when they later refuse to take out a loan due to insufficient guarantees, of course, some customers will say, "This is not the same as the original statement", and similar disputes have continued one after another, which has gradually become one of the reasons for the damage to the bank's reputation.

Of course, in our view, companies have the autonomy to choose their loans, and we can't blame banks for all of this, but the problem is that Japanese companies and banks do not have a simple business relationship.

The road to hell

Banks are the backbone of Japan's economic miracle, the main driver of the formation of the bubble economy, and the key factor in the failure to revive the bubble for decades after its burst.

Japan before the bubble economy was similar to China today, and companies relied on indirect credit financingBanks dominate the entire economy, and Japan is even more unique in terms of the "anchor bank" system.

The main bank refers to the bank that provides the most financial support for an enterpriseIn addition to normal business relationships, banks also have comprehensive, long-term, and fixed relationships with corporate shareholdings and personnel dispatch. Before the bank staff is reused, they can be sent to the following enterprises for a period of time, similar to our "grassroots training", after gross negligence, they will also be assigned to the related enterprises as finance, although the personnel is still in the bank, but the person can never return to the bank.

These regimes are shown to precede the bubble economyJapan's major banks are more like "de facto controlling shareholders" of companies.

Japan's main banking system is due to the wartime economic system before the war, in order to control the production of wartime materials required by enterprisesIt excludes the shareholders' dominance over the enterprise, restricts the proportion of dividends, does not allow the enterprise to raise funds through the capital market, and can only obtain funds through banks, thus establishing "bank-centrism".It is a national mobilization system that supports the war with the strength of the whole country.

After the war, in order to completely dismantle Japan's militarism, the United States cut off the direct connection with large enterprises, and dismantled several major chaebols that were considered to be wars. But the cunning Japanese bureaucracy took advantage of the fact that the Americans knew nothing about the Japanese system, and retained this complex banking system, which seemed to be private but was actually completely controlled by the **, bypassing the eyes of the AmericansGuiding funds to be continuously injected into the key industries of the first direction, so that in a very short period of time, the Japanese heavy industry system can be rebuilt from the ruins.

Japanese companies were characterized by their long lifespans, and after the war, a large number of cottage businesses were converted into small businesses, and at this time, Japan's large companies had been revived, and Japan was finally formedA bank-enterprise relationship system in which "banks and large enterprises hold shares in each other, and banks have a certain degree of control over small enterprises".

Therefore, before the bubble economy, it was difficult for small and medium-sized enterprises to change their main banks, and the main banks also needed to help small and medium-sized enterprises tide over the difficulties when they were in difficulty - this is the sense of mission of the employees of Hanzawa Naoki Bank - even if the company has gone bankrupt.

In order to ensure that banks have this ability, there is a financial regulatory system called "escort fleet":

The post-war Japanese financial system is like a fleet, and the administrative guidance and various financial regulatory measures are aimed at protecting every member of this fleet from being left behind and smoothly reaching the "other side of victory".

In the past, banks that were protected by the "convoy escort" approach also received help from others in times of difficulty. Because of the priority of justice and human feelings, banks provide financing to small and medium-sized enterprises, even if bad debts pile up, banks are still calm.

During the bubble economy, most people who wanted to enter the bank applied for the job on the grounds that they were engaged in project finance. At that time, financing was very expensive, and even looking for investment projects in order to raise money, and it was the dream of many bankers to be able to participate in large-scale projects with huge financing in order to put the cart before the horse.

Japan's special banking system is not only absent from Europe and the United States, but also from China, which has a more similar financial systemAlthough China's banking industry is not independent, the goal of "risk control" has always been higher than "supporting the development of the real economy".The influence on companies is not at all as high as that of the Bank of Japan.

In fact, this is also a lesson from Japan's failure, that banks should not be higher than enterprisesIf too much social responsibility is given, it will make it irresponsible for the quality of its own assets.

What is thought-provoking is that in "Naoki Hanzawa", except for the first story, it is all the routine of "the company is in a desperate situation, and the bank staff is trying to help", which recalls the honeymoon relationship between banks and enterprises before the bubble economy, which is also the reason for its popularity.

It can only be said thatIt's a good wish, it's an idealistic feeling, but as Hayek said, "the road to hell is paved with good intentions."

、、Do you have to save the bank?

There is a plot in the new fifth part of "Naoki Hanzawa": some long-term customers of the Osaka branch paid off their loans early because they were neglected by President Asano, and asked to change the main bank, and after listening to the report, President Asano thought that it was just a corporate complaint, this bank bureaucrat who had never done actual business at all, and his thinking was still stuck in the era of corporate dependence on banks before the bubble economy, and he didn't know that the credibility of the Bank of Japan had plummeted at this time. The reason for this is, first of all, that banks have waived their obligation to seek recourse for corporate bankruptcy

, the book says:

In order not to be eliminated from the market, the most important thing for banks now is not to protect counterparties, but to protect the banks themselves. Banks are no longer special institutions, they are just ordinary enterprises that will go bankrupt if they are not well managed. The reliability of banks precedes the bubble economy. If banks can't lend a helping hand when the company is in trouble, its social status will naturally decline, and it will be just an ordinary member of the many companies that the company will be.

In fact, people have gradually realized that if a large bank goes bankrupt, it cannot be said that it will have no impact on people's lives in the slightest, but it will not change anything in the end, so people have gradually become indifferent to this matter.

Hokkaido is an example of this. When Takushoku Bank, one of the pillars of the metropolis bank, collapsed, everyone said that the local economy would stagnateIn fact, the local economy has stagnated, but this has nothing to do with bank failures and more to do with the overall economic downturn in Japan. So the logic that public money must be used to protect banks simply doesn't work, and it's no wonder everyone is questioning the move.

This is completely different from the attitude of the United States** to the large-scale bailout of the financial system during the 2008 financial crisis, because the problems encountered by the financial systems of the two countries are different.

The reason for the collapse of the Bank of Japan was the large-scale non-performing assets that were formed during the bubble economy era and were systematically covered upThese banks have long been effectively bankrupt, and if they are given bottomless help, they will only allow the crisis to drag on and sink deeper.

And in the financial crisis of 2008,U.S. financial institutions are suffering mainly from liquidity risks and credit crisesExcept for a few subprime loans, the underlying funds are not non-performing assets, and as long as they inject liquidity on a large scale and directly ease the enterprises, they can solve the problem. On the contrary, if the rescue is not timely and the intensity is insufficient, the private consumption power will decline, and the normal enterprises may really be dragged down.

Saving banks is also the principle of "saving the emergency but not the poor".For those in a liquidity crisis, they can be saved, and for those who are insolvent, they can only break their wrists to prevent infection to other institutions that are still healthy.

Where the dream begins

First of all, let's summarize the three reasons related to banks in the process of the formation and bursting of Japan's bubble economy

1. The abnormal relationship between banks and enterprises formed after the war in Japan helped Japan rebuild its industry and rise rapidly, forming a Japanese economic miracle, but in the 80s, when the economic sector became increasingly complex, it also led to the accumulation of a large number of non-performing assets in banks

2. The performance management model of banks has led to employees taking advantage of their dominant position to encourage enterprises to use land as collateral and arbitrage funds for large-scale investment, which has directly pushed up the property market bubble. After the bubble burst, huge debts dragged down a large number of normally operating businesses and affected many more through the debt chain;

3. Large-scale corporate bankruptcies, coupled with the shift of manufacturing to low-cost countries, detonated banks' non-performing debts, triggered a wave of bank bankruptcies, and further spread the crisis to all small and medium-sized enterprises.

*At the end of the first part, in Dongtian's plan, the destination of the transfer of funds is a place that we are very familiar with - Shenzhen, China.

This can be said to be a dream of Higashida. China continues to set off a construction boom, and every time he goes to China, he always sees roads under construction and high-rise buildings rising from the ground. **To the unlimited potential of the Chinese market, Higashida wanted to open a company in China and strive to make it a reality. For the arrival of this day, Dongtian spent several years saving a sum of money in a planned manner.

In this way, Dongtian, who saw through the various drawbacks such as the blockage and unreasonableness of the domestic market, made a bold decision to enter the Chinese market.

"In Shenzhen, where 20,000 yen a month is enough to maintain a minimum standard of living, and workers' wages are only one-sixteenth of those in Japan, there are still a large number of people from all walks of life looking for work. The competition for building materials is extremely fierce, the market is almost white-hot, and the momentum of this construction boom will not decline in the short term. This is an unprecedented business opportunity!”