Japan, After The Bubble
December 29, Tokyo, Japan
In the autumn of 1989, Jin Matsushita was making more money than he ever dreamed he would; more money, indeed, than he thought he'd ever need. After joining Yamaichi Securities straight out of high school, Matsushita had worked his way up from lowly office boy scribbling stock prices on a chalkboard to fully fledged stockbroker in Yamaichi's nationwide army of salesmen — and what a golden time it was to be trading stocks for one of Japan's largest securities firms. Japanese companies like Toyota and Sony were becoming globally dominant, while the country's businessmen, flush with cash, fanned out across the world, snatching up iconic properties like New York City's Rockefeller Center, the fabled Pebble Beach golf course and Hollywood's Columbia Pictures. Matsushita himself was earning an annual salary of $150,000 plus a bonus that often exceeded his base pay. Everyone was getting rich. The Nikkei 225 stock index soared to an all-time high of 38,916 on Dec. 29, 1989. "It was a kind of miracle, I suppose," says Matsushita.
It was the kind of miracle that doesn't last: an economic bubble that soon burst. What followed was collapse and years of torpor that came to be known as Japan's "lost decade." Neither Tokyo property prices nor Japanese stocks — nor the Japanese people, for that matter — have ever fully recovered. The Nikkei index on June 15 closed at 10,040, an astonishing 75% below its 1989 peak. And Matsushita, now 73, is working the night shift at a convenience store just to make ends meet.
Looking back, it's odd that so few people saw the bust coming. I certainly didn't. In 1989, I was Tokyo bureau chief for Newsweek, and I lived through the bubble years acutely aware of what strange days they were, yet without quite realizing those days were numbered. It should have been obvious that such excess was unsustainable. At one point, the combined value of Tokyo real estate was said to eclipse that of the entire U.S. In Japan you could easily spend more than $1,000 on a round of golf or on an evening in a hostess bar in Ginza. All this reinforced the notion that Japan was an industrial giant that seemed able to outcompete even the mighty U.S. George H.W. Bush, then U.S. President, came to Japan with trade at the top of his agenda, only to famously throw up on Kiichi Miyazawa, Japan's Prime Minister, during a state dinner. Miyazawa gently cradled Bush's head as the stricken President slumped in his chair, an image that we journalists couldn't resist using as a metaphor. The country that had been vanquished militarily now seemed poised to conquer the world economically. The Atlantic Monthly captured the angst this caused in a two-part series entitled "Containing Japan."
Why did serious publications think Japan needed to be contained? Because at the time, it seemed as if its politicians, policymakers and business leaders had patented a superior brand of capitalism. In less than two generations, the country had climbed out of the wreckage of war to become the world's second largest economy. Books like Japan as Number One detailed how different its economic system was from that of the laissez-faire U.S. — the government directed capital into key industries and allowed powerful business groups, called keiretsu, to exclude competitors from domestic markets, while Japanese companies made relentless inroads into Western markets. Americans who once scared themselves silly watching news footage of phalanxes of Soviet troops parading through Red Square instead made themselves queasy by watching phalanxes of Toyota workers performing calisthenics before hitting the factory floor.
Technology and money and power were flowing across the Pacific to Japan, and salarymen — guys like Jin Matsushita — were among the lucky beneficiaries. Tokyo in those days was a gilded city, where restaurants sold sushi sprinkled with gold flakes. Other foreign correspondents would cover wars and risk getting shot. In Tokyo, as the dollar sank in value against the yen, the greatest risk I faced was having a heart attack when the bill for dinner arrived.
Japan was exotic, and it could also be insular and xenophobic. When foreigners stayed out past midnight, after the subways in Tokyo closed, they risked being unable to get a cab home. I was once out carousing into the morning hours with a couple of friends from Japan's Ministry of Finance — the élite among Japan's powerful bureaucrats — when we tried to flag a taxi. I told my friends no driver would stop unless I hid in the shadow of a nearby building. "No, that's not true," one of them protested. I hid, and within seconds a cab pulled up for my Japanese companions. I jumped into the backseat, much to the dismay of the cabbie. My buddy expressed shock. "What a racist country we are," he muttered. I laughed. This wasn't racism, it was capitalism. Cab drivers assumed a foreigner wasn't going very far, whereas the average salaryman lived some distance from the center of town, guaranteeing a big fare. Like everything during the bubble, it was all about the money.
The Toll of a Long Slumber
Bubbles are fun, but when Japan's imploded, it sucked the life out of an entire country, stripped it of ambition and of the sense of rapid progress that had come to define its postwar history. Yoichi Funabashi, now the editor of the Asahi Shimbun, one of Japan's most influential daily newspapers, told me: "An entire generation has been born and grown up, and known nothing but slow economic growth and limited opportunity. Compare them to their father's generation, the generation that turned so many Japanese companies into household names all over the world. I don't think young people today have any idea what they are going to do, or what even they are supposed to be doing."
On a visit to Tokyo today, it's easy to miss this toll that the country's long slumber has taken. The city has always been orderly and efficient, and parts of it now seem even more prosperous than they did in 1989. The once drab business district around Tokyo Station near the Imperial Palace is now full of high-end retail shops and pleasant pedestrian malls. Japan in some ways managed to spread the economic pain over 20 years, so that it is more like an endless dull ache than an open wound.
For many Japanese, though, the pain is not merely abstract and psychological. Consider Matsushita. Nine years after the Nikkei peaked, Yamaichi Securities — the company where Matsushita, in true Japanese fashion, spent his entire career — went under. It had finally succumbed to the moribund stock market, as well as a scandal in which company officials got caught hiding trading losses. Matsushita had 90% of his life savings tied up in Yamaichi stock when it imploded. Although he was a financial adviser and ought to have understood the risk, this is not so surprising. Ask an American what he does for a living, and he'll usually describe his profession: I'm a banker, an engineer, an auto worker. Ask a Japanese, and he'll name his employer — I work for Toyota, I work for Sony — because he fiercely identifies with that organization. When I gently suggest to Matsushita that perhaps it was unwise for him to have put all his savings in one basket, he gets a bit defensive. "My wife and I had furious squabbles over this after Yamaichi went down," he says quietly. "She asked how I could do this. But I worked for Yamaichi Securities,'' he explains. "It never occurred to me, never, that one day our company would not exist." And then, to reinforce his point, he says to his American visitor: "One year ago, did you think it was possible for General Motors to go bankrupt?"
I don't have the heart to tell him yes. Americans today are learning only too well that industrial icons can fail when a bubble bursts. The crash of the debt-fueled U.S. real estate market and the subsequent financial crisis have plunged the country into the worst recession in decades. Although the U.S. is starting to show signs of stability, Japan's postbubble malaise demonstrates how long it can take for a damaged financial system to heal.
Twenty years on, Matsushita is still counting the costs of Japan's years of excess. Sitting in the community room of a residential complex east of Tokyo, where he now lives, he explains how he bought his apartment in 1996, the year he retired from Yamaichi. He paid 76 million yen (about $775,000 at current exchange rates) for the place, borrowing 59 million yen of the total to finance it. That debt is the bane of Matsushita's existence. When Yamaichi failed in 1998, wiping out most of his savings, he had no way to pay off the note with just his meager income from social security. The price of his apartment collapsed soon after he had bought it, so he can't sell. And unlike in the U.S., where owners can take their lumps and walk away from mortgages without the debt following them, Matsushita's is a "recourse" loan — common in Japan — which means that harsh penalties await those who fail to keep making payments for any reason.
So eight years ago, Matsushita took a job at a local 24-hour convenience store to make enough money to live and pay off his mortgage. The septuagenarian works the graveyard shift — 9:45 p.m. to 7:15 a.m. — for $81 a day. "I usually do get to work overtime hours and make a bit more money," he says, "because the high school and college kids [who relieve him in the morning] aren't very responsible. They are always coming up with excuses as to why they can't make it in until 10 a.m. or so.'' And just before heading off for another night shift, he adds: "That never happened when I was young." But when Matsushita was young, Japan had its best days ahead of it.