Japan across the decades

Eighteen months after our 1969 launch, our first cover story on Asia is a survey of Japan. Our opening question to the finance ministry asks why economic growth should be slowed from 13% per year to a mere 10%. That feels a very long time ago now: in 2018, GDP growth was 1.1%, and that was a good year.

“It’s probably the most influential private bank in the world.” Our two-month investigation into Bank of Tokyo includes an interview with Yusuke Kashiwagi, “the supreme competitor”. A few months later, we do the same to the ministry of finance.

As early as 1980, we were writing about Japanese bank mergers that had yet to bed down. “Dai-Ichi Kangyo Bank is still under stress from a remarkable merger nine years ago.” And stop us if this sounds familiar, from June 1980: “Nomura’s international struggle.”

Euromoney correctly calls the coming collapse in Japanese markets. “The received wisdom is that Tokyo is abrim with confidence. But the real story may be in the less visible – but rather more significant – Tokyo real estate market.” The following year this proves to be true, leading to a lost decade in Japan, which you might argue has never really ended.

Euromoney predicts a new reality in which the IMF moves to Tokyo as Japan becomes the world’s largest bilateral aid donor. It doesn’t happen, but more than 30 years later Japan does still lead the Asian Development Bank.

Our investigation uncovered a remarkable turn of events. “The collapse of the Japanese equity market in 1990 was orchestrated by the country’s Ministry of Finance and the Bank of Japan. The world’s two most powerful financial regulatory bodies acted in concert to fabricate a story that they’d fallen out with each other. They figured the Japanese markets would implode if deprived of their unquestioning belief in the coherence of Japanese monetary policy. They figured correctly.”

“Japan is at a crossroads,” we wrote. “If it can bring about a radical overhaul of its economy – by thorough deregulation it can again become the world’s most successful economy. If it just muddles through its present difficulties, it faces a future of economic growth lower than in the US and Europe.” It’s pretty clear which path was taken. Our journalists spoke to 260 senior Japanese executives to draw our conclusions.

The CEOs of all three of Japan’s megabanks were interviewed in this study of the role they could play in a world where European and US banks were in sometimes terminal decline. “Japan’s megabanks find themselves in the glow of unaccustomed financial health,” we wrote. “But how do they put their new-found advantage to best use? And can they ignore the demons that caused such huge mistakes in the past?”

Nomura’s takeover of the European and Asian arms of Lehman Brothers made it the world’s largest independent investment bank. There was – rightly, as it turned out – doubt about whether Nomura could overcome the cultural clashes involved and become a true global heavyweight in investment banking. The deal was on the cover again, by now under considerable scrutiny, in October 2009.

Nobuyuki Hirano is the world’s most recognized and respected Japanese banker and an articulate voice on the demographic challenges facing Japanese banking and society. He wants MUFG to be the world’s most trusted financial institution. It is helped by its stake in Morgan Stanley; saving that bank during the global financial crisis turned out to have a wide range of pay-offs that nobody expected. “Everyone is aware we face an unprecedented challenge.”