Chapter 18


1. Trade Problems

2. Manufacturing versus Services

3. The Japanese Stock-market

4. The Bubble Economy

5. Bubble Finale

6. Living with the Bubble

With the 1980's Japan began to run into trade frictions. And the economy was clearly out of balance.

All this gave me quite a few more ideas about Japan's 'tribal' approach to problems - the preference for the emotional/practical rather than the logical/principled in particular.

Fortunately my connections with Nikkei allowed me to get some of these ideas into print in Nikkei’s various journals – Nikkei Weekly, Nikkei Business etc. (Sadly those connections were to be shattered some years later, when I really did need them, as I will relate later.)

But while some of us may have had some influence on trade question thinking, I doubt whether any of us could have made any dent in Japan's determination to rush into that speculative frenzy called the Bubble.

1. Trade Problems

Topic Number One in those innocent days was trade frictions, with the US especially.

By today's standards they were miniscule.

But at the time any hint of a continuous trade deficit was seen as proof of impending disaster for one side, and nefarious scheming by the other.

Nor should it have been hard to find the main culprit. At 360 to the dollar the yen had been grossly undervalued, and this was helping exports unduly (just as an undervalued yuan was later to help Chinese exports unduly).

So Japan's trade partners had a legitimate grievance. Tokyo's constant talk about the need to preserve the principles of free trade was meaningless, given that its own growth had been helped greatly by protectionist policies.

Besides, how can you possibly claim to adhere to free trade principles when the undervalued currency you cling to means a subsidy on all exports and a tariff on all imports?

That is about as protectionist as you can get.

And that was only part of the protectionist action. There was much more.

Prohibitive tariffs, arbitrarily determined quotas, non-tariff trade barriers, subsidies both open and disguised all combined to create the image of a ruthless Japan Inc. determined to try every protectionist trick possible in its eagerness to exclude foreign goods and dominate foreign markets.

(Among the critics at the time a favorite trade barrier story was the one that said European skis had to be kept out of Japan because Japanese snow was different from European snow.

(The one I liked was the ban on Guatemalan face-cleaning cloths (oshibori), claiming the thick edges around the rectangular mats were a danger to the eardrums of Japanese men in the habit of using the mats to clean their ears.

(Then, as now, Guatemala needed a textile industry much more than Japan did. )

Endaka (yen appreciation) problems

With the Nixon Shock of 1972, the yen rose to 240 to the US dollar. Japan fell into a coma of doubt and apprehension.

I think I managed to get it on the record then, both in Nikkei and the London Financial Times, that at 240 the yen was still heavily undervalued relative to Japan's export strength - that Japan would survive.

Years later in the wake of a few other shocks - the 1985 Plaza Accords especially - the yen was to appreciate to well under 100. Even so the economy managed to survive.

Japan just happened to be a very efficient producer of many manufactured goods. If it could not sell its manufactures at home it was bound to try to sell them abroad.

And even where initially it was not a very efficient, it realised how if it protected domestic producers from foreign competition long enough, eventually through domestic sales and cut-price exports they would gain the scale economies needed to be competitive.

At the time the foreign commentators liked to blame the trade surpluses on Japanese mercantilism. Or worse, on some kind of plot to destroy Western industry and dominate the world economy.

In fact they were simply the result of a very natural desire of the Japanese firms to survive. If firms could not do that through domestic sales, they would do it through foreign sales.

And the government was very happy to help them, thinking that boosting exports and restricting imports was needed for poor little resource-poor Japan to survive.

True, there are limits to the extent to which one nation can be allowed to poach and thrive on the markets of another nation.

But instead of complaining, those being poached upon should do more to protect their own industries and markets.

For years the US did nothing as key manufacturing industries - the US machine tools industry especially - fell before carefully planned export onslaughts by particular Japanese firms and industry groups.

Enormous time and effort was spent on trying to prove that Japanese competition was unfair, that it relied on predatory pricing to break into foreign markets.

Instead the US should have just slammed the door whenever it saw crucial industries under threat.

Market fundamentalists like to claim that if foreigners want to use predatory pricing to sell you their products cheaply you should just lie back and enjoy the bargains. Your citizens gain.

They fail to realize that if this threatens your own important industries, and if the loss of those industries weakens the industrial base or creates intractable unemployment, those citizens can end up with a very large net loss.

Exchange Rate Protection

Finally in the early eighties the US began to do what it should have done from the beginning - threaten to impose surcharges on imports from Japan to the extent the yen was undervalued against the dollar.

And once again, it was bitterly accused of protectionism by Tokyo.

Western free trader textbook economists chimed in, saying that import surcharges were the worst kind of protectionism.

Strange how not just the Japanese but even our Western textbook economists have seemed for so long not to want to realise the protectionist effects an undervalued currency.

They will fret over say a ten percent tariff protection for some product.

But they will happily accept a ten percent currency devaluation by trade competitor’s currency, even though the devaluation is equivalent to ten percent tariff protection for all of the competitor’s tradable domestic products, regardless of whether they deserve it or not, and a ten percent subsidy for all that competitor’s export products.

Textbook Versus Sensible Protectionism

How do our Western free traders get to think this way?

I suspect it is because currency movements seem to be the result of free market actions, which by definition are seen as good, while tariffs are seen as the result of political actions, which by definition are seen as bad.

This is textbook free market fundamentalism taken to its dogmatic extreme.

A political decision to protect a key industry with tariff can be crucial to the development of that industry. That was clearly the case with Japan’s car and computer industries.

Can anyone possibly argue that Japan and the rest of the world would have been better off without those industries?

Meanwhile devaluations as often as not have little to do with the free movement of currency markets. They too are often the result of political interventions. Or else of speculators and irrational market moods.

Handled properly, a tariff is no more than a tax on domestic consumers to promote an industry that in the long run should benefit those consumers.

Devaluations usually have much less justification, though for a backward nation an under-valued currency can be a useful way to protect the entire economy until that economy gets on its feet.

The bias against tariffs goes back to prewar years when they were used excessively for beggar-thy-neighbor purposes.

Warnings against tariff protectionism have been embedded in our economic textbooks ever since, together with elaborate and often mistaken diagrams * showing the theoretical benefits of unfettered free trade.

Devaluation protectionism is more of a postwar affair. The textbooks have yet to catch up with its implications.

Even today when the under-valuation of the Chinese yuan is doing great harm to the world economy some free market economists oppose pressure for revaluation.

Remarkable how outdated economic fashions, like outdated religions, manage to take control of peoples' thinking.

*for example, in the 1960’s textbooks I had to use most took no account of scale economies, either for particular industries or for economies overall. Many even assumed scale diseconomies – an assumption that for industries at least was already doubtful a century ago and to some extent for economies as well.

Trade Friction Policies

As the trade frictions reached a peak in the early eighties, I was invited to join a committee organised by the Finance Ministry to discuss the issue.

Trade problems did not belong to the ministry's turf, But it got round that problem by saying that its responsibility for collecting import duties allowed it to be involved.

Myself and the economist Hosomi Takashi suggested what to us seemed to be the obvious answer, namely that Japan should impose export taxes equal to the amount of the import surcharges that the US was threatening to impose.

That way Japan would not only show cooperative good will. It would also guarantee that the funds which would have been taken by the US in import surcharges would remain in Japan in the form of export taxes.

And to pacify the inevitable protests from less competitive Japanese exporters hit by export taxes, the funds raised should be pooled and used to help those marginal exporters survive and restructure.

Taken together it seemed a neat solution.

But in those days suggesting that Japan should tax exports was like suggesting a tax on motherhood. We ended up as a paragraph in the final report.

It was my first lesson in the inability of the Japanese to think strategically.

Years later when the Chinese ran into the same problem with the US, Beijing immediately promised export taxes.

In Japan, for someone to seem coldly and deliberately to have set out to devise policies which might cause economic harm to someone else is a serious sin.

Far better to do nothing. True, as a result of your inaction that someone else might end up suffering far more harm in the future.

But that is OK. That much greater harm did not seem to have been caused by you deliberately. Instead it was ‘shikata ga nai’ - something that could not be helped. Blame fate.

(An especially horrible example of this thinking came with the 1997 Kobe earthquake.

(Fires dotted the devastated areas and if there had been any wind that winter day the entire town would have been reduced to ashes.

(Since blocked roads meant fire engines could not get to many of the burning houses, the obvious answer should have been helicopters scooping up and dropping water from the ocean just a few hundred meters away.

(But that solution was vetoed, it seems. Why? Because large buckets of water dropped on a burning house could collapse timbers causing harm to people trapped underneath.

(So it was better to let them die a certain and horrible death from the flames rather than risk injury while being saved by water?

(Yes, it seems. The former was the result of unstoppable fate. The latter would have been the result of deliberate action by the authorities.

(Brilliant thinking.)

With the trade problem, the inaction was to lead to the yen appreciating to 80 to the dollar. Not just the marginal exporters were suffering but quite a few more deserving producers also.

But once again, shikata-ga-nai.

(The inaction during the late eighties as the dangerous bubble in asset prices got underway was very similar.

(That bubble could have been killed by an early increase in interest rates.

(But there would have been some collateral damage.

(Better to wait till things were completely out of hand and there was no choice but to move.

(This time the collateral damage was virtually to wreck the entire economy.

(All democracies suffer this consensus-imposed inaction problem. But Japan suffers much more than most.)

Local Production

The other remedy I thought Japan should have considered seriously at the time was the US demand that car makers produce in the US rather than export from Japan if they wanted to avoid import surcharges or quotas.

The car makers were up in arms. ‘Complete disregard of free trade principles' they intoned.

True, they were also terrified by the seeming difficulties of having to recruit and train US labor, little realizing that the problem with US labor had been bad US management – an area where my own work on foreign direct investment had shown how Japan already had an advantage, at least when dealing with Western labor in rural areas.

But eventually the Japanese car makers realized they had no choice.

Today their US factories are not only very successful (due mainly to that superior management) but they are close to becoming the mainstay of their global business.

Once again, we saw the inability of the Japanese to think strategically.

The very conservative Toyota was the worst. It was slow and reluctant to move into the US. It was also to be slow to move into China.

Today we have Chinese makers moving into the UK even before trade frictions get underway.

Production close to markets has many advantages. The Chinese seem to realize that point, even if the Japanese have been much more reluctant.

2. Manufacturing Sector Versus Service Sector

In writings and lectures I began to focus in on the efficiency gap between Japan's manufacturing industries and its service sector.

Not only did this distort the economy. It provided extra pressure to export, since the goods being manufactured in such volume at home were being weakly distributed at home.

In quite a few cases it was easier and cheaper to distribute and sell them to foreigners than it was to sell them to Japanese.

This efficiency gap was curious. At one stage I calculated that Japan could make cars at almost half the US cost. But the cost of distribution and sales in Japan was around four times more than in the US.

Already I could see some of 'cultural' factors involved.

For example in the case of cars much of the extra sales cost was due to a quaint reliance on
homon hanbai – having salespeople call personally and repeatedly on potential customers to persuade them to buy.

Anywhere else in the world the customers would be expected to visit the showroom, where, incidentally, they could make a better choice of which car to buy.

But in Japan's human relations-oriented society excessive services like
homon hanbai were seen as essential to make customers happy (some of the services included even having to repair customers' car punctures).

Besides, if that is what your competitors were doing you had to do the same.

Similarly with the banks.

When I was opening an office for The Australian in Tokyo I had a young salesman standing outside my door for an entire week waiting for me to appear so he could persuade me up to open an account with his bank (Fuji).

(The bank had prior advice from Sydney that I would be opening an office.)

Foolishly I assumed that I would get equally good service if I did open an account. Instead, I was treated to just the same slow, expensive and outdated practices as everyone else.

Customer relations is often touted as the key to business success.

But in Japan’s service sector, at least, it can lead to great waste and inefficiency.

The Competition Factor

Another reason for the productivity differences between the two sectors was competition differences.

In manufacturing, competition was hard to avoid. When the product is specific and concrete, even Japan's emotionally charged customers will tend to want to look at the quality and price before deciding to buy.

The manufacturer who ignored such things would not survive long, especially if he also had to rely on exports. Abroad, the hard-nosed, unemotional customers would look even more closely at quality and price.

In short, if efficiency as the only way for the ‘tribe' enterprise to survive, then efficiency it would have to be.

(This collectivist survival, or
ikinokori, factor is strong in the Japanese mentality. Individuals see identity in terms of the collective and if the collective ceases to exist, in effect the individual too ceases to exist.

(People tend to work very hard and productively in this situation.

(In the more individualistic society, if people felt their company was in trouble they would soon begin to look for other places of employment.

(In the late eighties, when it was already clear that Toyota was headed for Japan if not world domination I was able to sit in on a staff seminar.

(For over an hour we were told how the US car industry was about to stage a comeback and the Korean industry too was gearing up to become a serious competitor. Toyota would soon be in trouble.

(Every one would have to work that much harder, we were told repeatedly. The audience loved it, even though it is highly likely that everyone knew Toyota was in no trouble.

(Japanese in those days liked to jolted into action by the thought of some looming crisis. Books predicting every kind of crisis were, and remain, easy best-sellers.

(You motivate people through the heart, not the head. )

But in the service sector it was much easier to survive in other ways.

Markets were domestic and often fragmented. So competition was weaker. One could survive quite nicely by just doing what everyone else was doing, or by collusion with rivals.

Besides, comparing the price and quality of a service is not easy. Slick sales campaigns to deceive Japan's mood-sensitive consumers were, and remain, effective.

One reflection of his, often noted by Western advertising executives, is the way TV commercials concentrate almost entirely on mood creation with little mention of price.

Competitive – Brand X – ads are almost non-existent.

Another reflection is the never-ending ponzi and other fraudulent investment schemes, often run by charismatic figures able to lull Japan's many emotional investors into depositing their life earnings.

Phony religions also seem to proliferate and prosper on the same basis. (Here comparisons of price versus quality are, sadly but by definition, impossible.)

Anti- Service Sector Bias

Another problem was the poor reputation of service sector employment.

It was traditionally seen as having to rely on
kyaku-hiki - customer touting; something seen as on a level not very much above that of Japan's many mizu shobai (literally, water trade) bars, salons and eateries in the downtown areas.

In manufacturing, however, and as in feudal days, you survived only by the quality of the goods you made - a much nobler activity.

Indeed, the feudal
shi-no-ko-sho (samurai, farmer, craftsman, trader) ranking borrowed from Confucian China still seemed to apply, with the trader (the service sector person) well behind the craftsman (the manufacturer) in prestige.

Manufacturing had yet to acquire the drab, dirty-hand stigma it was clearly suffering from in the West.

I had already begun to notice how my best Sophia students happily went to work for Toyota, Nissan or Nippon Steel. Only the semi-dropouts wanted to work in the service sector.

I could compare this with my Oxford cohort back in the fifties. For them, even then, jobs in manufacturing firms were virtually out of consideration. Most wanted to be bankers, scholars, teachers or bureaucrats, or office managers rather than factory managers.

At the time the Japanese, flushed with their trade and economic success, were to dub this the 'British disease.' In fact, and as argued earlier, it was the Chinese or Indian disease.

Already I was beginning to sense the ease and accuracy with which many of Japan's economic peculiarities could be explained by my ‘curve of progress' concept. (
See chapter 15)

How to Walk on Two Legs

The manufacturing-service sector dichotomy was important in another context.

Japan was still in its high growth phase at the time. Many wanted to know how long the high growth could continue.

My pulpit theme was that if Japan using only one leg - manufacturing - could do as well as it was doing, how much better could it do if it got the other leg - the service sector - into action.

(I was yet to know how determinedly the Japanese would set out later to wreck their economy with bad economic policies.)

Improved sales and distribution would ease trade problems. Improved services would also provide more and better balanced growth.

Reduction in excessive service costs – something very easy to achieve in Japan - would also be a major damper on inflation.

As well, and to the extent the service sector share in total GDP was much greater than that of the manufacturing sector, a five percent improvement in service industry productivity would not only be easier to attain; it would also provide much more GDP growth than a five percent improvement in manufacturing productivity.

Yet Japan seemed to be devoting most of its energy and hopes on improvements in manufacturing productivity - improvements which for the most part would simply add to trade frictions and ultimately harmful yen appreciation.

(True, in those days Japan was still caught up in the mantra that said it was a small island nation devoid of resources. Manufactures provided the exports needed to buy imports.

(Yes, was my response. But did it need to buy trade frictions also? And was it so short of resources? It had the two of the world’s most un-importable resources – water and skilled labor.

(All the rest it could access, probably more easily and cheaply than most because of most of its heavy industries were close to large-scale harbors.)

But in those days the concept of abstract, intangible services being just as important as, or even more important than, concrete manufactures was hard for most to grasp.

Most seemed to regard services as some kind of free good, in the production of which efficiency was not important.

It was reminiscent of the thinking in the West before the development of economics as a science (though it did have a Japanese rationale: excessive use of manpower in the service industries kept unemployment at bay).

I would often fall back on my father's path-breaking writings of the 1940's. His name was well known in Japan; almost all school textbooks in postwar years used to mention how he had developed the concept of an economy divided into three sectors - primary, secondary and tertiary.

But he had also pointed out how not only were services (the tertiary sector) just as relevant to an economy as manufactures (the secondary sector).

Also that in an advanced economy the share of the service sector output in total GDP would increase while the manufacturing sector share would inevitably decrease with rising incomes.

Even if only for that reason, services were more important than the manufacturing that so many Japanese saw as crucial for Japan's future.

These points had some effect on the audiences. My father had a lot more prestige in Japan than I had.

(Ironically, and as mentioned earlier, in the 1940's my father's works had been welcomed by Japan's progressives since they pointed out how at the intermediate economic growth stage the share of manufacturing in GDP would increase at the expense of agriculture.

(In those days, Japan's conservatives had seen agriculture as the source of all wealth, rather like the conservative French economic school in the 18th century. Manufacturing was a less important activity.

(In Japan, it took until well into the 20th century for the importance of manufacturing to be realised.

(Only since the eighties has the role of services in an economy finally begun to be realised, and then reluctantly.)

3. The Japanese Stock-market

As we moved into the eighties the economy continued to prosper, despite the shock of the Plaza Accords.

The heavy spending on improved transport sparked by Tanaka Kakuei's ambitious plans to 'improve the archipelago' had done much to help expand domestic demand.

Domestic demand was also boosted by the continuing rise in asset prices.

But asset price rises in turn helped spawn rampant speculation, often gangster related. The Japanese stock market was a particularly bad example, as I was to discover through some hectic experiences.

If I elaborate a bit more than I should I hope the reader will bear with me. The details say much about some irrationally emotional and tribal factors underlying the Japanese personality.

They are also crucial to a later development – the growth and collapse of the Bubble economy

Herd Instincts

Like many others in those days, I used to dabble in the stockmarket.

My first discovery was something called the

means lantern, and it was used to describe the collective urge blindly to follow a 'lantern' holder - someone investing heavily in some stock on the basis of some speculative gossip, usually put out by himself and other stock-market manipulators.

On this basis the values of shares could be ramped up at will no matter how fragile the gossip might be. The mere fact that things were moving was seen as a fine reason to follow the 'lantern.'

(This follow-the-leader complex exists in all societies. But Japan seems to provide some very bad examples.

(To cope with it, the courts will now actually rule it to be a crime to set out deliberately to inflate buying orders in order to generate buying by others.

(In effect, the psychological weaknesses of Japanese share buyers are now formally recognized as existing and as needing the protection of the law.

(Elsewhere we would say that if individuals are stupid enough to be deluded by such psychological gimmicks that is their own and not the court’s responsibility.

Dream Instincts

Another way to move markets was to create a
yume, or dream.

Even the serious market reports would admit that investors were searching for 'dreams' as incentives to invest. Mere facts and figures, like PERs and profit statements, were too cold and impersonal.

Fantasy was preferred.

For a long time rumors of alleged AIDS cures were a favorite 'yume.' Everything from chocolate firms to construction companies were alleged not only to be researching cures but were close to breakthroughs – this at a time when even the top pharmaceutical companies in the US were still far from any breakthrough.

All this would be seriously reported in the financial press, as if it was just possible there were grains of truth.

At one stage I counted the shares of 30-40 companies bobbing up and down as the manipulators threw out yet another tidbit of phony AIDS information.

The speculative flames would be stoked even further.

That the sane and otherwise intelligent inhabitants of the Japanese islands could believe this nonsense and act on it was to be my first but certainly not my last introduction to the strange state of the Japanese stock-market denizen.

An example I remember well was the fertiliser stock scam of the mid-seventies, with prices ramped up in advance of a planned UN population conference.

What does a UN population talkfest have to do with fertiliser?

A lot, naturally.

You see, it was very likely that the Latin American nations at the conference would oppose any endorsement of birth control. This in turn would create the prospect of a global population explosion, which in turn would see urgent calls for the world to grow more food, which in turn would increase demand for fertiliser.

And on this basis fertiliser socks did indeed rise, for around 20 percent, for a while.

And as ever, the manipulators got out at the top. The chochin brigade were left holding the baby.

‘It is Crazy Therefore we Like it' Instincts

Even more irrational were the so-called
'shite kabu' (speculative shares, with shite pronounced rather like shitty, which was quite an accurate description as it turned out).

These were usually valueless shares with no redeeming feature whatsoever - not even 'dreams' or 'lanterns'.

But manipulators would begin quietly to move in and start buying. As the price began to rise for no seemingly logical reason, they would buy more.

Market denizens would begin to take note. They would be intrigued by the fact that no one was offering any reason whatsoever for the price rise.

Many were shares in companies close to bankruptcy. Or else in companies with absolutely no growth prospects whatsoever.

But none of that seemed to matter. On the contrary, the worse the company the better it was for the speculators.

Somehow simply the sight of a worthless share slowly but remorselessly moving up in price would inflame buying instincts.

Price increases of several hundreds of percent were common.

But inevitably and eventually the price would have to collapse and there would have to be losers.

The organisers would walk away with yet another bundle of cash, some of which would be used a year or two later to ramp up the price of the same or some other worthless share, secure in the knowledge that speculators would follow suit.

Short Selling Criminality

Assisting all this was an easily manipulated short selling system.

As the prices of the
shite kabu moved up to quite absurd levels, short sellers would move in.

Short selling in any market is risky since if short sellers exceed long buyers the former can be penalised in various ways.

But in Japan in those champagne days long buyers almost always exceeded short sellers by a very large margin.

Short selling shares was seen almost as the equivalent of short selling Japan. It was unpatriotic.

Even so, the sight of a company close to bankruptcy having its shares being traded at PER values of well over one or even two hundred was bound to encourage some kind of short selling.

And at first that would seem to be a very safe thing to do. The volume of long buys would already have been greatly inflated by the manipulators-gangsters buying the
shite share on credit to boost its price.

But then just at the moment when the short sells began to increase significantly, the manipulators would somehow be able easily to get funds from banks or securities companies to turn their long buys into ordinary buys.

The sudden decrease in long buys and the possibility of a short seller squeeze would further inflame speculator nostrils. The price would move even further into the stratosphere

Eventually the short sells would indeed exceed the long buys and the squeeze would get under way, with daily 'fines' imposed on the short sellers in the form of fees to 'borrow' shares to cover the gap.

The gangster-manipulators could begin to unload at handsome profits.

Helping them was a system that said that all long buy or short sell trades had to be liquidated within six months.

The short sellers were caught. If they did not buy back quickly, they would be hit with the mounting 'fines.' If they did buy back, their massive losses would be a direct gain for the manipulators who would be able gradually to dispose of the shares they had been buying earlier to force prices up.

By any standard this was a total abuse of stock-market ethics. The stock-market authorities could easily have moved to change the six month buyback rule.

Even extending the six months would have made a difference. The gangster-manipulators would be caught, having to hold on to enormous volumes of shares with expensive borrowed money.

But the authorities did nothing. The squeeze was allowed to intensify, to the direct benefit of the gangster-manipulators. Clearly those alleged defenders of share market order and probity were in bed with the gangsters.

The Honshu Paper Scandal

One of the worst examples came in the late eighties.

The shares of Honshu Paper were being ramped, with Nomura Securities, the proud, dominating and all-powerful industry leader, in close collaboration with a large gangster grouping.

Eventually the scandal and the gangster connections became too large for the media to ignore.

But at precisely the moment when the media were finally moving to condemn the Honshu Paper scam another manipulated short-selling squeeze was under way, this time with the shares of a pathetic textile company, Fukusuke.

Once again, widows and orphans were among the victims. Some wrote to me in their distress, and I wrote about it in Nikkei Business.

I did not get even a reaction, let alone action.

The Fukusuke operation was allowed to go through to its wretched six month deadline conclusion. The gangsters went off with their winnings. The widows and orphans presumably went to the wall.

All this in front of the very eyes of the media and authorities who were belatedly criticizing the Honshu operation.

A Nation of Cowards?

Incidentally, when a brave English market specialist had a book published in England exposing Nomura for its gangster connections and manipulations, he was promptly sued by Nomura for large amounts in a British court.

No one in Japan, not even Nikkei, had the courage to lend even lip service support for his efforts to expose the corruption lying at the very heart of Japan's financial markets.

He was saved by the eruption of the Honshu Paper scandal. Only then did Nomura feel shamed enough to withdraw its suit. But the Englishman received no thanks from Japan for his solitary efforts to help clean up Japan's share-market stables.

This cowardly aversion to helping conscience-driven people fighting or writing for justice is a very unattractive aspect of Japanese society.

The cowardice in the face of Japan’s blatant, up-front gangsters is disgusting.

(A rather similar situation was to emerge years later with a very brave lady journalist, Ogawa Shoko, who had tried to expose the late nineties Aum Shinrikyo religious fanatics who were already in the business of assassinating opponents.

(For her pains she was hit by the full weight of Aum legalistic revenge, and was left to fight a lonely battle in the courts until the sarin gas of 1997 attacks finally awakened Japan to Aum evil. )

(Even then, few in Japan seemed to want to thank her for her vigilance, or show sympathy for her legal battles.

(The person of conscience can easily be seen as somehow having disturbed the slumbering peace and tranquility of the society - a very considerable sin.

(Whistle-blowers suffer an even worse fate.

(It is a very strange way to run a society, even if it does have its muted parallels in other societies.)

Beyond Reason (Rikkutsu)

A strange by-product of this market frenzy was the seemingly quite normal use, even in responsible media, of the term
‘rikuttsu-nuki’ - devoid of rikuttsu, or reason - to explain the movements of manipulated shares.

Anywhere else in the world a term like this would be seen as a clear negative. Consciously to act contrary to reason is to deny one's identity as a reasoning human being.

But in Japan it seemed to represent the supremacy of warm illogical emotion over logical, cold reasoning.

In other words, Japan did not need reasons (rikkutsu) as a basis on which to operate its markets. It could create its own rules and procedures.

(Indeed, to describe someone as ‘rikkutsu-poi’
– i.e. a person who tries to rely on reasoned arguments to make his points – is a negative in Japan.

(True, in the West to some extent – in the Anglosaxon West especially – we do have the concept of disliking people who are overly argumentative.

(But even our nit-pickers do not suffer quite the same dislike as
rikutsu-poi people in Japan.)

Political Shares

One of the more curious of the stock-market irrationalities were the so-called political stocks.

Prior to an election it was taken for granted that the prices of certain shares would rise, as part of a deliberate ramping operation designed to give such-and-such a politician the funds he needed for his election campaign.

Most stock-market addicts seemed to know about this; it would be common gossip in the financial media.

Even so, many would rush in to buy the designated share in advance of the election, only to be left high and dry as the price inevitably collapsed soon after the election.

It reminded me of those Snoopy cartoon personalities - smart Lucy and dumb Linus - with Linus always having the football snatched away at the last moment by Lucy as he responded to her call for him to kick it.

Like Lucy, no doubt the politicians and gangster-speculators would walk away laughing each time they managed to deceive the chochin brigade, yet again.

And the favored politician would be under yet another obligation to be nice to the securities companies and gangsters who got the ball rolling for him.

It was illogical Japan at its worst.

4. The Bubble Economy

Nor was it just the stock-market that had gone wild.

Land booms were another constant.

Japan seemed unable to generate for itself the healthy domestic demand crucial to any advanced economy.

It had tried to rely heavily on exports (foreign demand), which ultimately was self-defeating via the over-valued yen.

Now increasingly it was beginning to rely on unhealthy inflations of stock-market and land prices.

Eventually the latter were to create an economic monster – the Bubble – that would harm the economy for more than a decade and discredit the nation for much longer.

The Tanaka Kakuei Boom

My first exposure to a land boom had been the Tanaka Kakuei
'rettokaizo' (archipelago rebuilding) boom of the early 1970's.

The Tanaka plan made sense. It envisaged a network of high-speed highways and train-lines across the nation.

If it had not gone ahead, Japan today would be a much sadder and weaker nation (though this did not discourage the anti-Tanaka people. He was blamed for the serious inflation, mainly oil-shock caused, which hit the nation a year later.)

For Japan’s hungry speculators also it was to be a blessing.

The transport developments which Tanaka had promised would require large amounts of land, they argued. So all land prices were bound to rise, indefinitely, even if the land had nothing to do with the new transport links.

That boom suffered a mini-collapse in the mid-seventies, partly as a result of Tanaka's downfall. But land prices soon resumed their upward course.

Japan was still fixated on the belief that despite occasional ups and downs, land prices in the long term would inevitably keep on rising.

'Japan is a small island with limited land space' and 'We can make other things but we cannot make land' were the underlying slogans.

I was to be a partial victim - having to buy into relatively high priced Tokyo land during yet another period of land price inflation, this time in the early 1980's, simply to get the living space needed for myself and a family.

But I would have suffered a lot more if I had waited a few more years.

Asset Price Insanity

Sometime in the late eighties, we were being forced to realise that something even stranger than before was happening with asset prices.

Not only were they being forced to quite absurd levels by Western standards. Even by Tanaka and subsequent land boom standards they were unrealistic.

Eventually we were looking at land prices that said the total value of land in Japan was equal to four times the total value of all land and resources of the USA.

Tokyo was worth more than all of California.

The land underneath the Imperial Place was worth more than all of Canada. And so on.

The stock-market index was to rise to almost 40,000 (to put that figure in perspective, it was later to fall to around 7,000).

Several factors seemed involved.

One was the over-confidence born from seeming US impotence before Japan's export onslaught.

It was reinforced by a 'Japan As Number One' mentality - the title of a book by Harvard academic, Ezra Vogel.

Indeed, one of the stock-market's many jumps in that period was attributed specifically to that book's publication.

If Japan was Number One, then that had to be even more reason for ignoring Western logic in the pricing of assets.

Details like PERs, dividend returns and sensible asset profitability formulas became irrelevant.

At some stage an enterprising journalist (I think he was with Nikkei) began to use the word Bubble to describe what was happening. It stuck, and rightly.

In the West bubbles might eventually collapse. But Japan's Bubble would last forever was the thinking.

Japan was different.

Bubble Beginnings

Ironically it was the West, largely in the form of the US, that helped create the Bubble.

To correct the trade imbalances, Washington in the late eighties had decided to tell Japan how to run its economy.

And to be fair, the US reasoning about the main cause of the trade imbalance was not entirely off the mark - the weakness of domestic demand.

The prescribed remedy? Japan should keep interest rates low and increase money supply. That would expand domestic demand, which in turn would help reduce the pressure to export and increase pressure to import.

Japan's progressive and intelligent finance minister (Miyazawa Kiichi) went along with the US advice even though he feared an inflationary result. As one of the postwar progressives influenced by Keynesian views, Miyazawa was very conscious of demand problems.

But his aim was not just to appease the angry Americans by expanding demand.

Any reduction in export surpluses would also help reduce the relentless rise in the value of the yen which in turn was doing grave damage to marginal exporters.

Endaka fukyo
- recession due to the expensive yen - was the buzz word in those days.

By accepting the US advice Miyazawa would hope to kill two birds with one stone - endaka fukyo and the trade balance problem.

It was far from being the mistaken policy it was to be depicted as in Bubble postmortems.

(Miyazawa's Keynesianism, i.e. his emphasis on demand as a key economic variable, was influenced by my father's views.

(Graduates like himself entering the Finance Ministry in the immediate postwar years were required to spend two years on an economic research project.

(It was a good idea, worthy of revival, incidentally, since then, as now, most entrants were from the Tokyo University law department, with little or no background in either business or economics - a major reason why today's bureaucrats still manage to mishandle the economy.

(Miyazawa's study project was the writings of my father.

(Years later I was to be given a copy of his research report by the Tokyo Stock Exchange head, Taniuchi, a close friend of Miyazawa.

(In my occasional meetings with Miyazawa over the years he would mention my father warmly.

Normally some easing of monetary policy would be harmless enough. It would indeed help expand the domestic demand needed to reduce trade surpluses.

But the easing coincided with the fervor still being whipped up by those land and stock-market speculators - the latter especially.

Miyazawa, like the rest of us, must also have known about their existence.

But I doubt if any of us realised that a relaxation in monetary policy would see them go insane – that they would trigger a speculative Bubble of such dimensions and irrationality.

Bank Foolishness

It began with the banks.

Flush with money, and with government policy now calling for them to expand lending quickly, they were only too happy to oblige.

But with
endaka fukyo fears still hanging over the economy, the people who most wanted to borrow were not the people keen to make the goods and services needed to stimulate the economy.

It was Japan’s parasitical land and share speculators (and the resort developers, of which more later).

Soon a classic vicious circle got underway.

The more the banks loaned, the more asset prices rose. The more asset prices rose, the more Japan's bankers wanted to lend.

You judge the degree of risk by watching what everyone else is doing. If everyone is doing it then it cannot be risky. You go with the crowd.

As the Japanese put it, even with a red signal it is OK to cross the road if everyone else is doing it.

(‘Momentum market' theorists would have a field day in Japan.)

The result is that whether in Japan or abroad Japanese buyers are usually in there with everyone else buying all the way to the top of a boom, and refusing to buy at the bottom.

They find it hard to operate counter-cyclically.

This was also true for many years in Australia’s wool markets, where the Japanese were major buyers. Market fluctuations were much larger than normal supply and demand would predicate.

In Australia at the time the exaggerated activities Japanese land-buyers were also seen as a major problem for the economy, in both the upward and downwards directions.

It was also noted how market fluctuations were fortunately eased by Overseas Chinese speculators buying in when the Japanese were selling.

The Overseas Chinese are better able to think counter-cyclically perhaps.

The EIE Scandal

One of the key Japanese speculators was an outfit called EIE.

An obscure Osaka-based company, it suddenly came out of nowhere to begin spending hundreds of millions on Australian hotels, resorts, golf courses – anything it could get its hands on.

And not just in Australia. It was also scouring the south and central Pacific for purchases.

No one seemed to know the source of its funds. And because of its inflationary impact, Canberra wanted to investigate.

My former newspaper, The Australian, became involved. I was asked to help.

Our general assumption was that the funds had to be black Korean political money channeled out of Korea through Osaka Koreans, or else Osaka gangster money (Tokyo gangsters were already fairly committed).

None of us imagined that it was being loaned by the seemingly responsible, government-funded Long Term Credit Bank of Japan, simply as a result of the EIE owner having a friendship with the corrupt LDP politician (and later prime minister), Takeshita Noboru.

EIE's collapse led to LTCB's collapse, with something like five trillion yen in bad debts – one of the larger of the many post-Bubble financial scandals to hit Japan.

Bloated Collateral Values

True, not all speculators operated on the grand scale of EIE.

Many were small-time, semi-gangster outfits, amply assisted by Japan's primitive and corrupt banking system.

For example, A-san would want to borrow say 80 to buy land already over-priced at 100 million yen. Banks were only too happy to oblige, assuming prices would go even higher.

And sure enough, within a year or so that land would be even more over-priced, at say 200 million.

Excited by his instant paper profits, A-san would then want to use that land as collateral to borrow more money to buy more land.

Anywhere else in the civilized world, bankers would smell risk and cut collateral values relative to market prices.

For example, that block of land now badly over-priced at 200 would be given a collateral value of much less than 200 - say 150.

But not in Japan.

Impressed by the price jump from 100 to 200, and convinced land prices would indeed rise forever, bankers would offer A-san not just 200 but also a further 20 percent on top, to 240.

In other words, it was assumed that when A-san came to sell the land it would indeed be worth 240, or more.

Armed with his 240 million yen A-san would soon be out looking for more land to buy and use as collateral for more loans to buy even more grossly over-priced land.

(Some argue that the US sub-prime mortgage loan scandal was not much better. But here at least the loans were for income-producing properties. In Japan the loans were mostly for non-income producing property.)

As prices moved into the stratosphere, the tribal/collectivist commentators would then chime in saying that the continued rise in prices proved it was quite reasonable and rational for prices to be so high, and for banks to lend so foolishly.

After all Japan was a small could make cars but you could not make prices were bound to rise forever….

One of those commentators was the well-known, Nikkei-connected and usually very considered, Kozai Yutaka. He said that even if prices seemed inflated, those prices had to be correct.

They were the result of free market movements, and markets could not be wrong.

When I saw that even an economist of his conservatism had bought the market fundamentalism coming out of the US I realized the Bubble was going to be around for some time.

True, some disagreed. The tochi shinwa - the myth ( shinwa) that land prices would rise forever - was how they labeled it.

But even they drew back from open criticisms of what was happening around them.

Those willing to come out in public and sound a warning of future disaster could be counted on the fingers of one hand, my hand - Noguchi, Kobayashi, Miyao.....

We would meet occasionally, and shake our heads in disbelief about what was going on around us.

But they got no further than I did in trying to warn the public.

In Japan you do not try to contest too loudly something imprinted with the stamp of conventional wisdom.

Japan –Surplus Land?

Whenever I had a pulpit, I did what I could to fight the conventional wisdom. I would try to shock audiences by arguing that Japan was awash with surplus land.

The proof? Just take a short walk in Tokyo's Kanda district, a few blocks from the CBD banks and newspaper offices that were telling us that Japan had no surplus land and that the land boom would last forever.

Almost the entire area was an ocean of cheap, one or two-storey, immediate postwar, jerry-built stores and shops with no redeeming virtue whatsoever, and crying out for high-rise redevelopment.

That redevelopment alone would be enough to put a cap on Tokyo's rising CBD land prices.

The same was true for many other areas in central Tokyo like Kanda. The Ichigaya area where I was living, for example.

But Japan had little interest in that kind of wisdom in those ebullient days. It had convinced itself there was no more land left for productive redevelopment.

If and when a developer did manage to harangue the elderly proprietors of one of those decrepit Kanda buildings to move out and provide room for redevelopment, he would be denounced by the media as a cold-hearted semi-gangster (jiageya) unfeeling for the plight of these poor people seeking only to maintain their traditional slum-like lifestyle.

The fact that those 'poor people' (who would receive fortunes if they sold their land) were in effect blocking the development needed to provide accommodation for other Japanese was ignored.

But much was being made of the plight of young Japanese unable to find accommodation.

If ever I needed a proof of Japanese emotional illogicality it was this.

Surplus Country Land

Nor did I have to look around central Tokyo to find surplus land.

A drive to my Boso property took me through miles of untouched forest or hill land just beyond the outer Chiba suburbs and only an hour by car or train from central Tokyo.

I would tell my lecture circuit audiences that Japan's land surplus was a major reason I had come from allegedly land-rich Australia to allegedly land-poor Japan, and wanted to stay.

In Australia it would have been impossible for me to have anything like my two acre Boso farm only an hour or so from the CBD. Hobby farms, even two-three hours from Sydney, were hard to find, and very expensive to buy.

But few wanted to believe me. The tochi shinwa was too deeply embedded.

To create more land for Little Japan expensive plans to fill in much of Tokyo Bay were being pushed. Some even proposed floating pontoons off the coastline as possible sites for factories etc.

The height of this absurdity was a MITI boondoggle to start building three storey residential edifices UNDERGROUND. It was only abandoned when the prototype began to leak badly.


The Shiodome fiasco shook me badly.

Here were 31 hectares of abandoned railway yards less than one kilometer from the crowded Tokyo central district, with good ocean views and transport links, ideal for high-rise development.

Put up for the sale in any normal society it would have killed Tokyo CBD land speculation fever in its tracks.

But the government refused to sell the land.

It said that by putting the land up for sale it would further inflame speculative fever. Prices would rise even higher.

So there we had it - a brilliant new Japanese contribution to economic theory.

In the West you might hope to lower prices by increasing supply.

But in Japan prices increased when you increased supply.

Japanese style economics?

Yet given the irrational herd behavior of Japanese speculators there could even have been some logic in the thinking.

In the same way, the opening of the large Ark Hills redevelopment in downtown Tokyo five years earlier sparked a flurry of CBD land speculation and price rises, even though the opening of Ark Hills meant an large increase rather than decrease in supply of office space.

(Yet another Japanese contribution to economic theory is the one in 2007 that said taxi fares should rise, partly because of fuel price increases, but mainly because post-Bubble demand for taxi rides remained low and liberalization meant taxis were in over-supply.

(All this had cut income of taxi drivers by some 20 percent. A price increase was needed to make up for their loss of income, we were told.

(On this basis starting fares were increased from the already very high 660 yen to 710 yen in 2007.

(Western logic would say that if you suffer over-supply and a lack of demand, price increases risked worsening the situation.

(You should cut fares, not raise them. And some even noted this in Japan.

(No, they were told. Japanese customers would sympathise with the plight of the drivers and continue to use taxis as much as before, even if only to help the drivers.

(More Japanese-style economics?

(Once again the human factor was seen as stronger than what most of us would see as purely economic forces.

(But this time the logic was especially weak.)

Mythical Assets

Bolstering the Bubble even further was the concept of
fukumi shisan (contained or hidden assets).

It said that if the land owned by a company for its activities was originally worth 100, its value today and therefore its share price should jump to a level many times more since the Bubble-inflated value of that land was now worth many times more.

The fact that the value of a company’s land would only be relevant if it was having to sell the land - something that would only happen if Japan's economy was in slump and the inflated land values therefore no longer existed - was never allowed to sully the minds of the speculators.

Fukumi shisan
was a favorite excuse for ramping the share prices of very conservative steel and shipbuilding companies requiring large areas of land for their operations.

PERs of over 100 were common, with dividend yields often a mere 0.1 percent when interest rates were around six-seven percent.

This disconnect between returns and interest rates covered the full range of property investments, and not just the share market.

To the Western mind, if land developed to the best of its potential could only offer a return of around two percent relative to bubble land prices, and interest rates remained high, then eventually something would have to crack.

And provided the bubble continued, that something would not be interest rates. It would have to be the sound of property developers going bankrupt.

That logic was never allowed to intrude into the minds of Japan’s mad speculators.

Resort Boom

Yet another Bubble factor was the resort development boom

It happened like this.

As Japan cast around for ways to expand domestic demand, some of us with media access began to point out the weakness of Japan's leisure industry, resort development especially.

(This problem of weak demand continues to dog the Japanese economy.)

My Boso experience had me wondering why others were not interested in using Japan's empty hill areas for resort development.

One result was the resort development law of 1987 under which the government provided incentives for the regions to set aside land and funds for new resorts.

That in turn was to encourage even more land speculation, not to mention the building of expensive resorts – hot spring hotels, golf courses, theme parks, play parks – destined to go bankrupt as soon as the Bubble collapsed.

Some of the waste was inevitable. Planning was bad (organising large resort developments is not a Japanese skill, it seems). Corrupt gangsters, politicians and bankers were involved.

But some problems were less predictable. Even worthwhile projects were to fail.

Both the investors and the commentators (including myself) failed to realize just how weak was the demand in Japan for Western-style leisure.

Just two hours from Tokyo was the Kujukuri beach area – a vast stretch of broad, southward facing clean sand (kujukuri means 99 li with each li close to a kilometer).

Anywhere else in the Western world it would have seen Gold Coast-style development equal to that near my home town of Brisbane.

Or more. Brisbane only had a population of around one million. Tokyo and its surrounds had a population close to 30 million.

Yet apart from a few high-rise resort condos - relics of the Tanaka land boom - Kujukuri was virtually deserted.

Meanwhile Brisbane’s Gold Coast was lined with dozens of high-rise condos enjoying good all year round occupancy.

Roads to the coast from Brisbane were already clogged by mid-Friday afternoon.

Yet even today, almost two decades later, and with road improvements making it only one hour from central Tokyo, Kujukuri is still fairly bereft of leisure facilities.

On a Friday evening the roads leaving Tokyo for Kujukuri are largely empty. The few resort condos have only one or two windows lighted.

I for one did not realise just how strongly Japanese values worked against the kind of leisure spending we take for granted in the West.

Quite apart from the leisure effect, few seemed even to want to have a status-symbol mountain villa or beachfront pad to entertain friends and impress people

(This lack of status/ leisure spending is very relevant to the chronically weak state of the Japanese economy even today, as I will discuss later.)

to the rescue?

Together with the resort law came a curious campaign calling for so-called
‘yutori seikatsu,’ or a more relaxed lifestyle.

The government had decided that one of the reasons for trade frictions and anti-Japanese feeling generally was that the people were working too hard.

The early seventies had seen a major fuss over former Pakistan prime minister, Bhutto, describing the Japanese as ‘economic animals.'

Few wanted to realise the background, namely that Bhutto was simply implying that the Japanese with their greater interest in economic recovery rather than global politics were not interested in attending the very political non-aligned nations' conference he was organizing.

In short, they were economic animals, not political animals.

(Anyone who had read Plato would realize that ‘animal' in this context had no more bestial connotation than the claim that ‘man is a social animal.’)

But Japan was determined to believe that the world regarded it as less than human because of its obsession with economic progress.

A return to more spiritual and human values was urged.

A similar fuss was to be caused by an EC report describing the Japanese as work-alcoholics living in rabbit hutches.

Part of the
yutori seikatsu campaign (the government even used to run ads urging the change in lifestyle) was the legitimization of the two-day weekend.

This, I told myself, would see the beginning of a real resort boom.

yutori was slow to arrive. And when it did arrive, it did little to increase leisure-seeking of the kind we know in the West..

(I was once pulled into an NHK roundtable to discuss the need for more

(I was happy to agree, but noted how simply preparing for the program had required an army of NHK staff and a mountain of documentation, most of which was unused.

(Not much
yutori there, I said before the cameras.

(For once I managed to get a laugh out of that usually staid organization.)

Gangsters, Again

The resort law may have left most Japanese unexcited. But it did do much to encourage Japan's hyena-gangsters.

They soon realised the chance to get money for nothing.

All they had to do was float some scheme for golf course, hot spring or hotel development and insist it was consistent with Tokyo’s call for more resort development .

With minimum or zero collateral they could easily persuade the more corrupt or stupid of Japan's bankers to lend the money for their development.

After all, were they not all cooperating with the national goal of expanding resorts?

If and when things went wrong they could simply renege on the debt.

Enough banks had seen their loan staff suffer various forms of death when they tried to foreclose on gangster debt to realise that it was best not to bother.

Eventually the government under its loan loss insurance schemes would have to pick up the tab for their bad loans anyway.

The Japanese banking system had become a conveyor belt pushing funds the large funds accumulated by Japan's savers into the hands of Japan large gangster community.

The bankers who loaned the money would get brownie points for meeting lending quotas, allowing them to retire with large bonuses eventually.

The politicians would reinforce their ties with the gangsters by acting as intermediaries with the bankers.

Everyone was happy.

And this was the nation someone once called Japan As Number One.

5. Bubble Finale

Eventually the party had to end. By the early nineties even the speculators were beginning to realize they had gone overboard.

If Japan had had any sense the party could have ended a lot earlier. All it needed was for the Bank of Japan to jack up its rates.

But the increase in rates kept on being delayed, partly for fear of what would happen, and when it came it happened.

On a cold afternoon in February 1990 the stock-market made its first major collapse. I remember it well. I was listening constantly to the radio stock-market report while driving long-distance that day.

Share after share was down, at first ten percent, then an hour later by twenty, then thirty, but still no buyers.

The day before everyone was buying happily. Today no one had any interest in buying.

Few moments of truth could have been as spectacular.

All along Japan must realized it was playing with fire, and that something needed to be done before it was too late.

But as we see so often in Japan (the latest is the failure at first to realize and then do something about the catastrophic consequences of population decline) action is constantly delayed, until it is too late.

In a Toyo Keizai magazine article I had used the analogy of the person paralyzed by fear when facing a cobra. Now the cobra had struck.

Back-to-front Land Taxes

I had long seen the land tax question as crucial, both as an answer to the Bubble and to the problem of local government finances.

Taxes on land holding (a key source of local government finance) were low.

They were very low if the land was left undeveloped (a further disincentive to the development needed to kill the Bubble).

An acre of undeveloped hill land might incur an annual tax of only a few hundred yen.

But central government taxes on profits from land sales profits were very high – more than half in many cases.

Needless to say, this meant there was every incentive to hold on to land, especially if it was undeveloped, and very little incentive to sell, which in turn meant it was almost impossible to put a brake on rising prices.

But Japanese ‘logic’ said the high land sales profit taxes were needed as a punishment for speculators cashing in on their ungodly Bubble gains.

It would also discourage them from buying more land (which they did anyway because they had ways to avoid profit taxes).

My argument was the system should be put into reverse, even though higher land holding taxes were not to my advantage at the time.

Higher land holding taxes were also needed to finance services from local authorities. (Japan’s land taxes were far below the levels that most Western nations saw as normal – less than one percent of market values as opposed to 4-5 percent in many other countries.)

Some years later land holding taxes were finally lifted, and considerably. But by this time the Bubble was over, and land prices were collapsing.

As a result the taxes did much to discourage the post-Bubble recovery in land prices that Japan needed badly.

Especially damaging was a punitive tax imposed on holdings above three acres (3,000 tsubo). This was supposed to discourage large speculative land purchases, at precisely the moment when Japan needed to encourage large land purchases, speculative or otherwise.

Around this time I was told by a top Home Affairs (Somusho) official that they had noted my calls for higher land holding taxes and had finally acted on it.

But that did little to make me happy either. The amount extra I had to pay in taxes for my Boso land had become a heavy burden.

He agreed that the punitive tax on large land purchases was a negative. But by this time the authorities could only look at its value as a new source of income.

Conclusion: Other nations have had and continue to have their asset price bubbles.

But for Bubble-style irrationality we need to go back to the tulip bubble and the South Seas Islands bubbles of the 18 and 19th centuries.

Japan's ability to create its own Bubble, and then the seeming inability to realize what was needed to stop it, told me much about the Japanese mentality.

6. Living with the Bubble

Meanwhile I had to make my own living, separate from the speculative fever that surrounded me daily.

True, I was happy to enjoy some of its side-effects.

Banks, firms and other organisations flush with cash seemed even more desperate than before to organize lecture and other fiestas.

Almost every day saw me heading off to yet another venue.

But less consoling was the constant tension in the air. Everyone seemed to know something unusual and unnatural was going on.

Many felt uneasy, but helpless to do anything about it. So learn to live with it seemed to be the general conclusion.

I learned another new word -
jabu jabu.

It was the onomatopoeic rendition of water overflowing in a bucket. It described well the sound of billions of yen bubbling around the economy looking for outlets.

(Japanese has dozens of these repetitive terms -
dara dara meaning slow and lazy, pica pica meaning spic and span etc. They hint at a strong Polynesian-Malay influence at some stage of the language's evolution.)

(The contrast with the clipped, unexpressive Chinese-origin words in Japanese is striking.)

Trying to Get Serious

Often I felt I should try to cut back on the lectures and concentrate more on more serious things, like trying to finish the English language version of my original Tribe book.

I also wanted to take time out master the more educated Japanese I should have been using in my lectures (I was still making do with the language I picked up from conversation and TV broadcasts.)

But the lure of the lecture circuit and other Bubble euphoria was too strong. It allowed me to join everyone else in the
jabu jabu bonanza.

Besides, I was beginning to realize that my tribe theory was still rather undeveloped. Not only did it not explain much about Japan – something that was to take me another ten or more years to get on top of (results in earlier chapters) .

It was also requiring me to explain a lot about the rest of the world – something about which I was and remain less than expert.

This in turn gave me the excuse further to postpone writing the English-language version of my original book.

Japanese Book Writing

I should have used the same excuse to avoid writing books for a Japanese audience.

Kodansha, a leading publisher, had come to me begging me to do a book for them.

In 1978 they had organised for me the slim paperback
taidan (dialogue) book – Unique Japanese - which had sold 170,000 copies.

They wanted a follow-up.

I tried to refuse; apart from anything else I had no particular book-length theme to write about. But they persisted and I assumed they would look after me again as before, regardless of what I produced.

I was wrong. This time there was no tape recorder in a luxury hotel room.

I had to write everything myself.

It tried to pull together many of the topics I was using on the lecture circuit – Japanese society, the Bubble, foreign policy etc – into a consistent book theme.

Then I had to supervise the Japanese translation, since many of the concepts and arguments were new to the person helping me.

The final book took well over six months to produce.

But Kodansha treated it as a semi-vanity press affair and did little promotion.

The title was meaningless –
Gokai sareru Nihonjin (The Misunderstood Japanese). They left it mainly to me to push sales at lecture halls – a trick they often used with other lecture circuit speakers I discovered.

All they needed was around 10,000 in sales – enough for them to break even with a small profit.

The return to me for all the time and effort was minimal.

I should have known; I had had a similar experience a few years earlier, this time with a taidan book for a little-known publisher.

I had gone along with them since they had lined up a well-known commentator, Hasegawa Keitaro, as my opposite number.

We were to talk about anything we liked, for a book that was to be entitled Japan Seen from Inside and Outside.

As with the earlier Kodansha taidan book I assumed that we would just talk into a microphone for a day or so, and they would handle everything from there.

But they simply ran out the proofs as we had spoken them. It took me months to clean up the mess, and this time too the publisher’s sales effort had been perfunctory.

I think they thought that just having some more names on their book-list would look good.

Campus Life

Meanwhile I was still having to hold down what in theory was a fulltime university job.

Fortunately my teaching load remained light. I was able to concentrate it into one or two days a week, leaving me time for outside lectures.

I also needed time for handling the articles and interviews I was constantly being asked to contribute to various publications.

A sabbatical year helped.

Even so I was struggling to keep up with demands, especially since weekends, and sometimes more, were having to be spent on my rather foolish attempt to develop the Boso countryside single-handed.

Fortunately I had kept clear of the various faculty faction fights. But I had let myself get involved in a plan for a faculty shakeup.

I felt it should be divided into two sections - one that retained the existing bias of teaching everything Western-style and in English, and the other to concentrate on Japanese studies with a requirement to learn Japanese properly and use Japanese textbooks.

After all, many of our mainly foreign students had come to Japan to learn Japanese and about things Japanese.

The two-section breakup remains, but the attempt to encourage more emphasis on using Japanese soon fell apart.

I would have been happy to supervise the Japanese studies sub-section, but someone else was put in charge.

I decided to concentrate more on my own affairs, based in the well-located office I was renting close to the university campus - an office I needed anyway if I was to have a secretary to handle my various commitments.

(University offices were barely big enough for a single individual.)

Increasingly I was being drawn to the idea of trying to get re-involved with Australia, even if only for a year or so.