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By Root 1185 0

infusing daily life with a grace and a calm that are rare in the fractious West. The problem arises when tatemae goes beyond its natural limits. As we saw earlier, when Japan began to modernize after 1868, the rallying cry was Wakon Yosai (Japanese spirit, Western technology). Tatemae, the idea that an unruffled surface takes precedence over stating the facts, is an old bit of Wakon, of Japanese spirit, and, like the Wakon of «total control,» it runs into trouble when it does not adapt to modern systems. Tatemae is a charming attitude when it means that everyone should look the other way at a guest's faux pas in the tearoom; it has dangerous and unpredictable results when applied to corporate balance sheets, drug testing, and nuclear-power safety reports.

As we saw earlier, Japanese finance companies lend money to bankrupt borrowers or subsidiaries so that they can continue to pay interest and make bad loans fly off the books. This is to-bashi, «flying» – one popular technique for which is to have a bank sell a troubled property to a subsidiary, to which it then loans the money to pay for the property: real-estate problem solved! The docile Japanese press meekly reports tobashi transactions as if they were real ones; one must learn this in order to understand how to read a Japanese newspaper. A headline announces «Nippon Trust sells choice Kyoto site» or «Hokkaido Bank sells assets to write off loans,» and one might imagine that the banks were disposing of assets. However, in both cases the banks were selling to their own subsidiaries in tobashi transactions. The headlines should have read «Nippon Trust fails to sell choice Kyoto site» and «Hokkaido Bank finds no bona fide buyer to help it write off loans.»

The National Land Agency accepts tobashi sales as real ones, which further distorts land-value statistics. Hence while the agency estimates that land prices have dropped in half from their peak, the results at actual auctions show that the fall is more than 80 percent. This is a classic example of an official statistic based on skewed data, but, unfortunately, we have even less to go by in estimating the true situation in most cases.

Tobashi is only one of several techniques of funshoku kessan, «cosmetic accounting.» Another technique is, as we have seen, «book accounting,» whereby banks value their holdings at purchase value, although they may be worth much less today than what was paid for them. Or unsightly liabilities are simply brushed away, such as pension-fund deficits, which Japanese companies have not had to report, even though they face huge exposure to their underfunded pensions. When all else fails, outright falsification comes into play – with encouragement from the ministries of Finance and of International Trade and Industry. In the Jusen scandal of 1996, when Japan's seven housing-loan corporations (known as Jusen) went bankrupt, leaving bad debts of ¥8 trillion, former MOF men (amakudari, or «descended from heaven,» because after retirement they descend to the management of companies under MOF's control) ran six of the seven Jusen, which together had extended loans of which an astonishing 90 to 98.5 percent were nonperforming. In the years before the final collapse and exposure, the amakudari executives guided the Jusen banks in a game of elaborate trickery. At Juso, for example, the bank showed investigators and lenders three different sets of figures for the total of bad loans: ¥1,254 billion, ¥1,004 billion, or ¥649 billion. MOF was aware of the scale of the Jusen disaster as early as 1992, but it must have chosen to work only with the С List, because a report at that time concluded that the Jusen were «not approaching a state of danger.» This decision to put off the reckoning led to the public's having to pay hundreds of billions of yen more in 1996 to clean up the mess.

Tobashi and «cosmetic accounting» are endemic; one could say they are defining features of Japanese industry. As embarrassing as revelations of serious abuses are when they come, MOF cannot do without either, because Japanese