The real reason for Japan's economic recession at the end of the last century Gan Xukang Now, there are many Chinese people think that the United States directed the "Plaza Hotel Agreement" is the main reason that led to Japan at the end of the last century into recession, and therefore the United States of America to put forward the "appreciation of the renminbi" demand extra vigilance, thinking that the United States will contain Japan's old tricks in China again, thus plotting to end China's economic growth in the golden age. The demand for "RMB appreciation" put forward by the United States is particularly vigilant, thinking that the United States will curb Japan's old tricks in China again, thus plotting to end the golden age of China's economic growth, so the domestic and even foreign calls for the government to say no to the United States of America's voice is very high. It should be said that its advice to maintain sufficient vigilance is desirable, but the Plaza Accord led to Japan's economic landslide on the grounds of refusal is extremely reluctant, because the Plaza Accord led to Japan's economic recession of the point of view itself is wrong, does not stand. The wrong understanding as a lesson to refer to will certainly jeopardize their own reform, therefore, in the present to clarify the real causes of the Japanese economic recession in the late last century has a special significance. Back then, the United States in order to get rid of their own economic crisis, pressure, strong demand for Japan and other countries to take the initiative to appreciate, under the pressure of the United States, Japan and other countries had to appreciate, the results of appreciation more than expected, in a short period of time so that Japan's exports were hit hard, and the economy fell into a depression. However, people should also note that, in February 1987, the "Louvre Agreement" has been corrected, the United States took the initiative to raise interest rates, while Japan and other countries to reduce interest rates, "Plaza Hotel Agreement" actually stopped the implementation. Therefore, the time of its real adverse effects is less than two years, so it is unfair to attribute to Japan the main cause of the bubble economy and the long-term recession caused by the bursting of the bubble; moreover, at that time, Japan was not the only one to implement the "Plaza Hotel Agreement", and there were also the countries in Western Europe, so why did these countries not have a large-scale recession? Why did these countries not experience a large-scale recession? If the yen ratio is too high, the inevitable performance of Japan's export contraction, in fact, Japan throughout the nineties have a lot of trade out of the super, visible, the yen ratio is too high doubtful; Japan's implementation of the floating exchange rate, the exchange rate is not static, if the local currency is too high, the government can also be through the covert intervention will be lowered, in the nineties, the yen rate fell several times, but can not save Japan's economy out of the water on the fire. This illustrates the limitations of the exchange rate itself in influencing the economy, and it is not the only factor that determines the ups and downs of a country's economy, let alone the determining factor. In fact, the main reason that the economy fell into a bubble in the mid-1980s and eventually triggered a decade-long recession was that, objectively, the external environment that generated Japan's rapid economic growth had changed and Japan failed to adapt to it in time; subjectively, Japan's own countermeasures made serious mistakes; and the shortcomings of the political, economic, financial and even educational systems made it unable to adapt to the requirements of the new era (the transformation of an industrial society into a knowledge-based society), which hindered Japan's ability to adapt to the new era (the transformation of an industrial society into a knowledge-based society). The change from an industrial society to a knowledge-based society hindered the further development of the Japanese economy. It should be said that the reason why Japan's economy was able to develop at a high speed in the post-war period was that, in addition to the subjective efforts made by the country itself, which emphasized on education and scientific research, the external environment undoubtedly provided better conditions for its economic take-off. The United States in order to contain the containment of socialism and the Japanese economy to provide strong support, including funds and technology and even the provision of consumer goods market, to provide military protection to save its military spending and dedicated to the economy; as a deep economic foundation of Japan is undoubtedly the first to fly up the country in Asia, the economy has the advantage of the first to take off, because at this time, the rest of Asia's industrial underdeveloped, rivalry Lack of competitors to become the Asian countries, including China, the main provider of industrial products; many countries in Asia, Africa and Latin America's independence makes the exploitation of resources into the climax of the supply of sufficient to make Japan and other countries to take the lead into the developed camp to get cheap resources, through the price of finished products and raw materials between the scissors difference, Japan gained profiteering; U.S. -Soviet hegemony has plunged many regions into turmoil, and Japan's relative stability of the political situation The US-Soviet rivalry caused many regions to be in turmoil, while Japan's political situation was relatively stable. But as time pushed into the 1980s, Japan's economic prosperity to a dizzying height, its external environment is also quietly changing. Bipolar pattern makes the United States and the Soviet Union into a long-term struggle for hegemony in the Soviet Union dragged shaky, but at the same time the United States itself is also wounded, the relative strength is not as good as before, with Gorbachev's ascension to power, towards the détente of the footsteps, the threat to the United States is also greatly reduced, and under the protection of the United States of America, Japan is rocketing, in the petrochemicals and chemicals, electronics, automobiles, iron and steel, heavy industry, such as synthetic materials, and other industries to get Great development, imposing, a serious threat to the United States own economy, the decline in the competitiveness of the U.S. economy makes Japan's trade with the United States for a long time in a huge amount out of the super, so Japan has become the most realistic threat to the United States, the U.S. and Japan's economic friction and therefore frequent, curbing the expansion of Japan's economy in the U.S. calls for a high degree of, so that the U.S. government not only to press for the yen's appreciation, forcing the Japanese to open up the market, but also to take measures to limit Japan's exports to the U.S. to restrict the transfer of high technology to Japan. Restrictions on U.S. high-tech transfers to Japan. The European **** body suffering from the trade deficit also took the same position. The U.S. and Europe shifted from intentional support to containment, undoubtedly stopping the pace of Japan's high growth without any constraints significant reasons. Taiwan and South Korea and other close neighbors in the 1960s and 1970s, the gradual rise of the economy, Taiwan electronics and chemical industry, South Korea's heavy shipbuilding automobile and other catching up with Japan's unique scenario is no longer the case, the results of the competition mercilessly reduces the market share of Japanese companies, compression of the product's profits. Japan's high economic growth has also made Japan's labor and land prices skyrocketed, in order to improve competitiveness, many of Japan's traditional industries have moved out to Southeast Asia, mainland China and other places to enter the capital globalization of the results of Japan's local industries into the hollowing out of the natural lack of economic growth, while overseas assets are unprecedented growth, according to incomplete statistics, in 95 years, Japan's overseas assets increased to one trillion U.S. dollars, and last year, exceeded three trillion U.S. dollars. billion U.S. dollars, in terms of Japan's domestic, the average growth rate of 1%, equal to the recession for nearly twelve years, but if you consider the growth of overseas assets, the Japanese economy almost doubled during this period, such a large scale of the economy in such a short period of time can also be doubled, and so on, and so created a stealth Japan, is indeed a remarkable achievement, but the local economy with the capital outflow into the However, the local economy fell into a recession as capital shifted out of the country, which was inevitable. Into the nineties, with the collapse of the Soviet bloc, the end of the Cold War unloaded the long-term financial burden on the United States, so that the United States can put their energy into supporting economic development, after Clinton came to power, the United States military spending was greatly compressed, the fiscal deficit was reduced to 98 years there was also a huge surplus in the U.S. government's support for a number of high-tech breakthroughs in the field, regained the commanding heights of economic restructuring Effective, the unemployment rate and inflation rate fell to a minimum, the economy grew strongly for a long time to set a new post-war record. The strong growth of the U.S. economy is undoubtedly a major reason why Japan, which suffered from recession after the bursting of the bubble economy, has been hit again. Relative to the appreciation of the dollar assets, in high-tech competition in the Japanese yen system of asset depreciation is the trend. And in the context of the appreciation of the dollar assets, the implementation of the linked exchange rate of Southeast Asian countries suffered a heavy blow, the outbreak of the financial crisis in Southeast Asia in 1997 so that a large number of investments in these countries in Japan naturally have to follow the loss of Japan, Japan's exports to its also be affected. The reason why Japan can not catch up with the United States in high-tech, in addition to the internal system, the United States as the hegemony and get the hegemony of the interests of the United States to make it live in some of Japan can not be compared to the advantages is also a major factor, for example, through the play of the hegemony of the privilege of the United States and many countries in the plundering of the important resources and thus get through the normal way to get the wealth can not be obtained through the issuance of the United States dollar to get a huge amount of royalties, the establishment of a large number of military industry during the Cold War can develop civilian products, while the arms industry can develop civilian products. The military industries established during the Cold War allowed the development of civilian products, and the export of arms allowed the U.S. to make huge profits, etc., all of which were difficult for Japan to achieve. The manufacturing technology of Japan's military industry is actually world-class in many aspects, but because the hat of the defeated country is still not removed, it is still subject to constraints, and it cannot earn excessive profits through the sale of large quantities of arms as in the case of Europe, the United States, and Russia. The rise of the Chinese economy in the nineties was also in part responsible for Japan's slide into recession. China and Japan in the nineties before almost completely complementary relationship, the development of China's economy so that Japan has been a great benefit, but with the restructuring of China's economy, and the expansion of foreign investment in China, China has also begun to export a large number of cheap light industrial products, China's low-cost commodities flooded into Japan to make Japan's long-term depressed prices, low and medium-grade industries were further hit, and had to step up the relocation to the other countries. Unable to break through the United States in the high-tech industry, and the traditional industries by Taiwan, South Korea, China and other strong impact, is undoubtedly Japan's economy in the nineties, into the predicament of the external factors. As a matter of fact, the end of the Cold War and the deepening of globalization have led to low growth not only in Japan but also in other economically developed countries. In order to cope with the crisis, Europe and the United States developed countries have adopted the strategy of economic integration, so that their economic room for maneuver can be enlarged, such as the emergence of the European **** body, the North American Free Trade Area and so on can be said to be a response to the specific form, in this regard, the Japanese people should be able to see the microcosmic, in line with the changes in the current situation, to make their own preparations, and the most important thing that should undoubtedly be done is to adjust the foreign policy strategy in a timely manner, to get out of the Cold War mode, to achieve rapprochement with the Asian Neighboring countries to achieve reconciliation and relations with all parties to the depth of the promotion, so that their technical advantages relative to their financial advantages to give full play to the full, on the basis of obtaining the full benefits, and then fight with Europe and the United States, it can be imagined that the situation is much better, but, unfortunately, the Japanese people's thinking is still trapped in the old Cold War consciousness can not be extricated, is not adapted to the requirements of the times, to take the road of economic integration, to get rid of the limitations of the island economy, but the realization of the political power as a diplomatic power. Instead of adapting to the requirements of the times and taking the road of economic integration to get rid of the limitations of the island economy, the Japanese have made the realization of a political power as the center of gravity of their foreign strategic objectives, nationalism has risen, the power of denying the history of aggression has become stronger and stronger, and the foreigners have expressed their desire to say "no" to the world in a loud voice, which has deteriorated the relationship with the neighboring countries and has made the Japanese economy lose the room of manoeuvre after encountering the crisis. II Serious mistakes in policy 1 In order to overcome the economic depression brought about by the appreciation of the yen as a result of the Plaza Hotel Agreement, Japan had lowered the interest rate several times, and after the Louvre Agreement was signed in February 87, it began to implement the ultra-low interest rate of 2.5%, which was undoubtedly beneficial to stimulate economic development, and the economic growth in that year amounted to 4.3%, and exceeded 6% after entering into 88, and in terms of the macro-economic situation at that time, the interest rate should be adjusted upward appropriately and in time. From the perspective of the macroeconomic situation at that time, the interest rate should have been adjusted upward appropriately in a timely manner, but the Japanese government was satisfied with the high growth rate, and continued to implement the ultra-low interest rate, and raised the official interest rate to 3.25% in May of the following year, which was still an ultra-low level. Ultra-low interest rates caused excessive credit expansion, and asset prices such as land, real estate, and stocks skyrocketed, triggering a wave of speculation and economic overheating. Due to the appreciation of the yen, the Japanese have a large amount of surplus funds, some people riding on the Japanese wildly copying the real estate boom will also look to the United States, in the United States at a high price of a large number of real estate, entertainment companies, etc., at that time, the momentum of the great imitation of the fee is to try to buy the whole of the United States, but then the price crash made them lose a lot. The price of land and other soaring rounds made the flow of social capital has also changed, for financial speculation funds instead of more than the funds used in the manufacturing industry. In order to deal with the bubble caused by economic overheating, the Japanese government resolutely decided to implement the economic "hard landing", monetary politics from expansion to austerity, in order to raise interest rates sharply to control bank lending, from 89 to August 90, a short period of time, five times to 6%, interest rates rose sharply leading to a decline in stock prices, in order to curb the rise in land prices, and at the same time take measures to curb the rise in land prices, and at the same time take measures to curb the rise in land prices. In order to curb the rise in land prices, and at the same time take strict control of financial institutions on real estate loans, "total restrictions" policy, also makes the speculative funds used to copy the real estate land greatly reduced, the result is that real estate and land prices plummeted, the investor lost a huge amount of money, it is estimated that by 92 years, at least 300 trillion yen in stock assets of 100 trillion yen in land assets evaporated. Trillion yen land assets evaporated, a large number of enterprises went bankrupt and closed down, huge bank loans into bad debts and dead debts, many famous big banks themselves were forced to the dead corner, the collapse of the bubble economy made Japan's economy fall into recession from high growth, and its situation was similar to the emergency brake of the economy of our country in 89 years. In order to avoid recession and the transitional implementation of ultra-low interest rates is the cause of economic overheating, and to manage the economic overheating to take the emergency brake is the bubble burst, so that the Japanese economy into a weak reason. It can be seen that improper grasp of the macro is the main reason why Japan fell into an economic crisis at the end of the last century, how can the Chinese people put the main responsibility for the recession in Japan on the Americans? Think about it, if the Japanese at that time if like Germany timely adjustment of interest rates, the economy is not likely to show the overheating of the state, and for the management of economic overheating, if like us in China in the mid-1990s to take a soft landing approach, then to the economy caused by the killing force is not as big as the emergency brakes. 2 Economists believe that economic development will lead to industrial isomorphism and thus over-investment, which is one of the major causes of economic crisis. In the history of capitalism, several outbreaks of economic crisis, the reason is this, with the end of the post-war golden growth season, the major industrialized countries, except Japan are entering a period of difficulty, the reason why Japan was able to survive, in addition to its in the oil crisis vigorously develop and promote the application of energy-saving technology successfully out of the saving economy, and the rise of China in the 1980s and Southeast Asian countries, thereby expanding demand for its products, and no such thing. Demand for its products, and no geographical advantage in this regard, Europe and the United States are in a long time in trouble. The way out of the economic crisis lies in the restructuring of the economy and the development of new industries. In the capitalist world, whoever is the first to make technological breakthroughs will be able to take the lead in highlighting the predicament. The United States is determined to develop high and new technologies such as information technology in order to break through the siege of Japan and other countries, and as a result, the United States has taken the lead in ending the difficult situation and laying a solid foundation for the rapid development in the 1990s; whereas Japan is still enamored of its own success and has no doubt about the technologies that have contributed to its own success, ignoring the fact that the others are trying hard to learn from themselves and try to copy themselves due to the envy of their own success, and that the Japanese are proud of their success rather than feeling the danger. Pride rather than feel the danger, when Japan will concentrate on land, real estate and stocks and other speculation to achieve short-term benefits and ignore the re-innovation so as to adjust the economic structure to maintain the gap between themselves and emerging countries, so that they are still in a comparative advantage of the time, with the imitators step by step towards success, step by step close to Japan, Japan's doom began to come. Since the 1990s, it is not difficult to understand that the surplus of equipment and the resulting surplus of investment, personnel, and capital have become the problems that plagued the Japanese economy. 3 In order to save the economy, the Japanese government followed the example of Roosevelt in the 1930s by expanding the fiscal deficit and investing heavily in public utilities in an attempt to stimulate economic development. But the ineffectiveness of the Keynesian approach for developing countries made this move failed to pull the Japanese economy out of the fire. On the contrary, the Japanese people have been burdened with a heavy financial burden. 91 years to formulate the "long-term plan for public **** business" is expected to invest 630 trillion yen, due to the recession makes the tax revenues decreased year by year, the Japanese government to raise funds on the road of issuing bonds, the result of making the central government and the local government of the balance of long-term debt at the beginning of the new century exceeded 600 trillion yen. At the beginning of the new century, it exceeded 600 trillion yen, and the fiscal crisis deepened greatly. The reason why the investment of trillions of dollars and can not achieve the desired results but to deepen the economic crisis, lies in the construction of public **** cause itself can not promote economic restructuring, prompting the development and growth of new industries, and, as mentioned earlier, the key to solving the problem lies in the success of structural adjustment, lies in the formation of a new climate of the industry, if not in this regard, the efforts of the public utilities on the investment of even more is a waste of money; like Japan such as the Developed countries, infrastructure is relatively perfect, high utilization rate in the city investment transformation, because the facilities have to meet the demand, so the transformation again can only make the project contractors benefit, and the project itself can not get with the scale of investment corresponding to the benefits, such as a road can continue to use the road destroyed and rebuilt once again, the new road and the old road to play the difference in benefits, can not achieve the qualitative improvement of the results are the same as to say that the If the investment is not effective, it is actually a waste of money; and if we invest in villages or mountainous areas that are underutilized, we cannot change the situation of underutilization after investing large sums of money, and we cannot achieve the economic and social benefits corresponding to the investment, and the result is also a waste of money. The consequences of throwing several hundred trillion yen into the sea were serious, and the Japanese government became the worst financial country in the developed world, and the balance of long-term debt did not exceed the GDP in the 1990s, casting a heavy shadow over Japan's economic development. 4 The financial liberalization promoted in the late 80's, the interest rate of commercial large deposits increased, higher than the interest rate of corporate issuance of cp, so that the non-financial enterprises speculate on financial assets became possible, enterprises can profit as long as they deposit the money raised in the bank, as a result, it triggered a lot of enterprises to engage in financial speculation, the funds for financial speculation is much higher than the investment in kind, is one of the main reasons for the financial asset bubble. 5 The delay in the handling of non-performing claims made some financial institutions unable to overcome the crisis by themselves, which resulted in the bankruptcy of some large financial institutions and exacerbated the economic recession; in the late 1990s, the legacy of the bubble economy was underestimated, and the resilience of Japan's economy was overestimated, and erroneous macroeconomic policies were adopted, so that the boom which had not been easy to emerge was aborted again. The disadvantages of the system The occurrence of the bubble economy, the economy into recession after the delay can not be recovered, the government's policy many mistakes also shows that the post-war formation of the political and economic education and other aspects of the system can not adapt to the requirements of the new era, which, some experts have made an in-depth analysis. The main shortcomings of the political system: a party in power for a long time caused serious political corruption, collusion between business and the government, the latter to the former bribe, the former in the policy, the allocation of funds for the latter to provide services, which greatly affects the fair competition, so that the optimal distribution of financial resources can not be achieved, can not get the maximum benefit; pursue money politics, there is no money without money to enter the political door, the result is that many parliamentarians and officials or their children, generations of prominent high-ranking government officials, the generation of prominent high-ranking officials, some experts in-depth analysis of this. The result is that many legislators and officials are either the sons of their fathers, who have been in high official positions for many generations, or are backed by tycoons and wealthy businessmen, and the elites who are truly capable of doing something have been turned away, which is undoubtedly not conducive to the realization of the government's optimal political efficiency, and frequent decision-making blunders are unavoidable; prolonged rule has made some of the bureaucrats, but they are in control of the real power, and the political officials responsible to the people have become the ornaments and puppets. The result of bureaucratic control of officials is that officials responsible to the people and "trusted" by the people are unable to fulfill their real power to do what the people need to do, while bureaucrats who are not responsible to the people but control the power are blocking reforms to safeguard their own interests while engaging in private money and power deals to provide unlawful interests for unlawful elements; the dominance of a single political party and the lack of opposition parties have made the political system uncompetitive, with legislators fighting and bickering, and executives of the executive branch not being competitive enough. While the parliamentarians argue and quarrel, the officials who implement the reforms are not highly motivated and are not energetic enough; the centralization of power makes the local power too small and the motivation cannot be fully exerted, and so on. The main drawbacks of the financial system: the same as China's current state-owned banks, the implementation of administrative management (Tibet Province, the financial sector to implement the integration of financial frigate fleet management), regardless of the state-run private, good or bad business are subject to its protection, as a result, the market mechanism can not be brought into play, the lack of due competition between banks, some banks non-performing loan programs serious, dead loans and huge accounts; strict administrative management leads to collusion between business and the government, some of the private financial institutions to bribe managers, and some of them are not competitive enough. private financial institutions to bribe the management, to get through the joints, to avoid financial inspection, to obtain special interests; to hinder the internationalization of the financial market, as a result of which the gap between Japan's financial industry and that of Europe and the United States has widened; the bank's participation in the enterprise, with a large number of shares of the enterprise, as a result of which it had to expand its loans in accordance with the enterprise's requirements, and in the event of the enterprise's failure, the losses were huge; and so on and so forth. The main shortcomings of the enterprise management system: post-war Japan implemented the strategy of expanding exports externally and protecting the market internally, which made Japan enjoy a huge foreign trade surplus for a long time and contributed to the rapid development of Japan's economy; however, the result of the protection internally inevitably led to the weakening of many enterprises in the country and a serious lack of competitiveness; the enterprises engaged in the internal iron rice bowls and chairs, and practiced lifelong employment, so that the enterprises could not According to the actual situation to determine the number of workers and professional structure, assessment and incentive mechanism is the annual merit sequence system, seriously hampering the competition between individual workers, affecting the growth of outstanding talent, the lack of enterprise due to the vitality and vitality; in the Japanese government's full support, the enterprise prevails in the large and comprehensive, small enterprises also want to rely on the banner of the large enterprises, the result is a loss of autonomy, the large enterprises hit the rocks, small factories also follow the capsize; with the current shareholding enterprises in China, the lack of the same. China's current shareholding enterprises, the lack of effective supervision mechanism, the bottom of the enterprise transparency, decision-making efficiency is low, often occurring large shareholders fraud small shareholders, corporate credit in a series of scandals after the exposure of a greatly reduced, funding has become difficult; enterprises hold each other's shares, to engage in interlinked transactions, which reduces the cost of the transaction, but also weakened the competitive mechanism of the market is not conducive to the optimization of the allocation of resources, and is not conducive to stimulate the spirit of innovation in the enterprise. Innovation. Insufficient innovation makes Japan's slow structural adjustment, in the high-tech competition is greatly behind Europe and the United States, in some aspects even worse than South Korea, Taiwan, so Japan's traditional industries produce a serious surplus of products, while the United States of America's high-tech industry is a red-hot in 99 years rose to become the first major industry, become the pillar of the national economy. Comparing the two, it is not difficult to find that Japan's traditional economic system of Japan's economic development of the serious constraints, Japan's economy to make a breakthrough, it must be Sin heart and soul of the major reforms. In addition to the same as China, the same as the standardized talent manufacturing full of irrigation and short of cultivating innovative talents of the education system, rigid health care system, unfair not reflecting the more work more pay tax system, the lack of effective supervision, the use of ineffective financial investment and financing system, and even the judicial system, population policy and so on a number of aspects are considered to have serious shortcomings, in addition to protection of the transition to the extent that the degree of internationalization is insufficient, foreign In addition, the lack of internationalization due to the transition to protection, and the difficulty of access to foreign talents and capital were also considered to be factors that were not conducive to Japan's economic development. All these were included in the scope of reform. As can be seen from the above, the reason why Japan experienced a serious economic recession at the end of the last century lies in the objective changes in the environment, but also in the failure to adapt to the traditional system, and more importantly, in the subjective mistakes of the Japanese themselves, if the responsibility is to be held accountable, of course, the main responsibility lies in their own, and can not be blamed on others, so that we, the Chinese people in the future, should not be on behalf of the Japanese people will be the blame for all the faults to the old U.S. "Plaza Hotel Agreement" on head to the old U.S. to pour dirty water on the body. Therefore, we Chinese should not blame the Plaza Hotel Agreement on behalf of the Japanese for all the faults of the United States and pour dirty water on them. Otherwise, take it as a warning to take it as a reference for the opposite of the actual action, then the result is likely to China's monetary reform misguided into another wrong road, and this is undoubtedly a tragedy that should not have happened.
Reference:
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You have to write the reason why this is more difficult, so I found a better material for you hope to help you put!
Causes: Investors in and out of Japan (including Japanese banks and various hedge funds) utilized foreign exchange arbitrage trading in Southeast Asian countries to make large inward and outward moves, which became an important trigger leading to the outbreak of the financial crisis.
The essence of the yen carry trade is: to borrow yen at a very low interest rate, invested in the dollar or Thai baht, in order to obtain a higher interest rate than the yen. If the yen depreciates against the U.S. dollar, then there is a double gain: a carry gain and an exchange gain.
To prevent deflation, the Bank of Japan pursued a low interest rate policy in the mid-1990s. This is for those who want to participate in foreign exchange arbitrage trading is a godsend. 1995 to 1998, the U.S. Federal Funds rate and the Bank of Japan target interest rate spread between about 5%, while the flow of the yen to Southeast Asia at the time of overseas loans roughly estimated at 260 billion U.S. dollars. This means that the yen foreign exchange arbitrage transactions of the average carry gains of about 13 billion U.S. dollars a year, three years is 39 billion U.S. dollars. And over the same period, the yen depreciated by nearly half relative to the dollar, so that the average exchange gain on $260 billion in overseas loans was $130 billion. Conservative estimates, three years of yen carry trade investors received 169 billion U.S. dollars of "pie in the sky".
These huge figures tell us that short-term arbitrage investors are able to pull capital out of Japan and invest it in emerging markets, and ultimately reap huge profits. It can be argued that the flow of capital from Japan to its Southeast Asian neighbors, as well as the attractiveness of these emerging markets themselves, **** with the creation of the economic bubble in Southeast Asia before 1997.
Because of the yen capital flows into Southeast Asian countries, emerging markets, there is a "double mismatch" (double mismatch) of the fatal pitfalls. One is the Southeast Asian market "short-term borrowing, long-term investment" mismatch, and the second is "loan foreign exchange (dollar or yen), investment in the national currency" mismatch. That is to say, there is a bad lender, there is also a bad borrower, bilateral are at fault. The inherent cause of the Asian financial crisis is that the Southeast Asian countries do not have good national risk management, while Japan's banks based on their own reasons, the withdrawal of loans from the region, resulting in most of the capital outflow from Southeast Asia, but the Asian financial crisis is the trigger.
Japan's banking sector ran into big trouble due to huge domestic non-performing loans. The problems began to show in March 1995 when two credit unions in Tokyo were exposed. At that time, two credit unions in Tokyo exposed more than $1 billion in bad loans, mostly to real estate companies. These very weak regional banks and credit unions were linked to the big "master banks" through the "master bank system". When the small banks failed, the big banks also started to suffer. The decline of the Japanese economy and the yen exchange rate from 1996 to 1997 had a huge negative impact on the entire banking system.
Since 50 percent of the Japanese banking industry's capital is Tier 2 capital, which consists mainly of the unrealized value of equity portfolios, they were subject to two opposing pressures. On the one hand, stock prices fell between 1996 and 1997 as the economy slowed and foreign investors pulled back due to the weak yen; on the other hand, the weak yen raised the yen value of dollar-denominated loans. Both factors have weakened the ability of Japan's banks to meet the 8 percent capital adequacy ratio.
The only way to meet the capital adequacy requirement at the time was to reduce overseas lending. Nomura Research Institute estimates that if the yen stays at 140 to the dollar and the stock market stays at 15,000, Japanese banks will need to reduce lending by 5.6 trillion yen. This is equivalent to 11% of Japan's GDP. If domestic lending is not cut, the only way is to cut back heavily on lending abroad.
In November 1997, the Hokkaido Takushoshu Bank collapsed. This was the first serious bank failure in Japan. The bank's failure did not stem from loans to Southeast Asia, but since then the Japanese banking industry has accelerated its recovery from Southeast Asia. It is no coincidence that Japanese banks went bankrupt at about the same time as Thai banks.
International Monetary Fund and Bank for International Settlements data show that between 1996 and 1999, Japanese banks in the five countries in crisis, a reduction of 47.4 billion U.S. dollars in loans, and between 1995 and 1999 in Southeast Asia, a total of *** reduction of 192.5 billion U.S. dollars in loans (most of them in Singapore and Hong Kong). It was the withdrawal of lending by the Bank of Japan that created the sharp credit crunch in Southeast Asia and became one of the major triggers of the Southeast Asian financial crisis.
The lessons of the Asian financial crisis are extremely profound. Japan encouraged capital outflows to prevent further domestic deflation and an overvaluation of the yen. And hedge funds and other short-term arbitrage investors are happy to use the yen for foreign exchange arbitrage transactions. The most important thing is that the countries in crisis were happy to receive capital inflows from foreign direct investment, portfolio investment, government loans before, and did not even realize the huge risks that lurked there.
Even the International Monetary Fund, which analyzes Southeast Asia by country, did not see the inherent economic relationship between Southeast Asian countries and Japan. Emerging markets have borne the cost of a crisis before they began to understand the importance of national risk management - to look at risk from the height of the entire country, rather than just analyzing it at the level of one sector or industry.
In fact, Washington's view at the time was that the crisis should be blamed on the failures of the countries in crisis themselves, not on regional banks withdrawing loans. This view fails to see the essence of the problem, and the medicine is bound to be ineffective.
To this point in the article, Japan is one of the sources of the 1997 Asian financial crisis has been very clear: as Asia's largest economy, Japan's attempts to get rid of deflation led to the emergence of the East Asian economic bubble, the withdrawal of its overseas bank loans to the Asian economy into a serious recession.
Japan's own economic woes, the 1985 "Plaza Accord" forced the yen appreciation has been planted. Japan's own economic imbalances, not yet ready to appreciate the time, hasty appreciation of the yen, resulting in the following 15 years of economic recession. Japan's efficient trade sector (manufacturing) can still maintain a current account surplus after the appreciation of the yen, but by the government to protect and inefficient non-trade sector (financial, service, real estate sector) can not cope with the economic bubble brought about by excess liquidity.