Dogs and Demons_ Tales From the Dark Side of Japan - Kerr [120]
While the public pays for its debt with usurious interest rates, industry has access to free money. Stocks and bonds pay negligible returns, and banks would never foreclose on businesses in their keiretsu grouping. In a world where banks hand out money for free, it would be easy to predict that companies might begin to pile up debt. That they did. Today (and for most of the postwar era), corporate debt in Japan has exceeded equity by an average of 4 to 1 (compared with 1.5 times to 1 in the United States). Allowing companies to leverage themselves far beyond what was considered safe in the West was one of Japan's most successful stratagems. It worked well in the high-growth era, but when exports reached a plateau and growth slowed in the 1990s, these companies found themselves saddled with huge surplus capacity. Suddenly they began to feel the heavy weight of debt on their shoulders.
Judging by history, one could even argue that the Japanese show a cultural bent toward wild, heedless borrowing. Perhaps it was a result of the traditional intense love of the moment. It is remarkable how many Kabuki and puppet-theater plays revolve around debt, or around the misuse of money entrusted to the hero or heroine. (In contrast, Chinese theater is obsessed with injustice and law courts – the misuse of power rather than the misuse of money.) One of the most famous moments in Japanese puppet theater is the scene known as Fuingiri, "Breaking Open the Seal," in the play Meido no Hikyaku. An Osaka shop clerk, Chubei, driven by his love for the courtesan Umekawa, breaks open the seal on a packet of gold coins consigned to him by his master. He knows the punishment will be death, but he can't stop himself. Debt owed by daimyo lords to moneylenders in Osaka brought down the Tokugawa Shogunate in 1868. Debt was the very key to Japan's pre-Bubble financial system, with its cycle of assets-debt-assets. And spiraling debt and misuse of funds intended for other purposes is the hallmark of the bureaucrats who run agencies such as the tokushu hojin. In the corporate sector, a giant millstone of debt hangs around the neck of Japanese industry. In short, the Japanese are anything but natural savers. On the other hand, who is? It is human nature to borrow-and here is where the bureaucrats guiding Japan's financial system made a mistake that has had serious consequences for society. They punished noncorporate borrowers with usurious interest rates.
In Japan, lenders can legally charge interest of 40 percent, the sort of rate for which Dante confined usurers to the third ring of the Seventh Circle of Hell. While corporations enjoy access to capital at near-zero interest rates, private individuals have no alternative but to turn to sarakin, «consumer loan companies,» a nice name for loan sharks, who lend at official rates ranging from 30 to 40 percent, with actual rates sometimes reaching 100 percent. Failure to repay earns a visit from a crew of gangsters. The Ministry of Finance smiles on this system, because it believes such high rates dampen consumer borrowing. But despite MOF's best intentions, nothing will stop needy people from borrowing money. What consigning the consumer-loan business to gangsters did achieve was to drown millions of people in usurious debt. Saikaku remarks, «Of all the frightening things you can imagine, surely there is nothing as horrifying as having one's fortune ruined and being hounded by creditors. Nothing else even comes close.»
Sarakin are the hopeless debtor's last resort, yet it is estimated that in the late 1990s borrowers from loan sharks amounted to 12 million people (one in eight adults). In fact, the only part of the Japanese banking system to grow appreciably