Informality and Monetary Policy in Japan: The Political Economy of Bank Performance; Amakudari: The Hidden Fabric of Japan’s Economy; Saving the Sun: A Wall Street Gamble to Rescue Japan From Its Trillion-Dollar Meltdown
Informality and Monetary Policy in Japan: The Political Economy of Bank Performance
These three books take quite different approaches to one of Asia's biggest mysteries: Japan's economic collapse. Van Rixtel, a senior economist at the European Central Bank, casts his analysis in the context of broad political economy theories, with special attention to monetary practices. He starts with a thoughtful and systematic review of the scholarly literature on what is distinctive about Japan's political economy and in the process summarizes the positions of most leading thinkers on the subject. On the critical issue of the late 1990s banking crisis, Van Rixtel singles out policy mistakes according to standard economic theory, which were then compounded by questionable Japanese practices, such as the lack of transparency and weak regulatory discipline. These he associates with the Japanese practice of amakudari, literally, "descent from heaven": bureaucrats leaving government to take up positions in the private-sector industries they once regulated.
Colignon and Usui also examine the practices of amakudari and all of its complex ramifications. They have collected a large database that records patterns of movement from specific ministries to different sectors of the private economy. They document the networks and informal relationships that make Japanese capitalism less than a pure market-driven system. Above all, they show that there is no clear line between acceptable corporatism and corruption.
Tett attempts to explain the problems of the Japanese economy through a case study of a single Japanese bank, the Long Term Credit Bank (LTCB). By focusing on specific individuals, his story of LTCB's crisis of nonperforming loans reads like a suspense novel. In the mid-1980s, bank officials felt compelled to yield to the excitement of real estate speculators. When the "bubble" burst, LTCB was nationalized, and the government sought out new investors. The story livens up with the arrival of a group of U.S. venture capitalists and bankers, including Paul Volker, Vernon Jordan, John Reed, Goldman Sachs, and a collection of investors called the Ripplewood group. They changed the bank's name to Shinsei to give it a Japanese public face but sought to make it operate more like a U.S. bank. This turned out to be far from easy, and when Tett's story ends in the summer of 2002, the future of the bank remains uncertain (although the American investors seem likely to do well individually). Since then, Shinsei has become profitable, and Ripplewood has gone on to buy up numerous other Japanese assets. The moral of the story is that American business practices, when guided by American theories of what once made Japanese practices seem so impressive, may indeed work in contemporary Japan.