Dogs and Demons   ::   Керр Алекс

Embarrassed by the TSE's poor showing, MOF relaxed some ofthe restrictions and lowered costs in 1995, but this failed to stem the withdrawals. Starting in 1994, the listing department began sending delegations to Asian capitals beating the drum, and after almost two years of soliciting, it managed to persuade Malaysia's YTL Corporation to debut on the TSE's foreign section, which it did with great fanfare in February 1996. YTL's offering raised $44 million (versus the $700 million raised by Korean Mobile Telecom and more than $1 billion raised by Telkom Indonesia in New York around the same time). A year later, only one more Asian firm joined the Tokyo exchange, and in 1999 none did.

Once known as the «land of technology,» Japan is now out of touch with the times. While Merrill Lynch and Goldman Sachs were developing elaborate computer algorithms to predict the future of the market, brokers at Nomura were still using abacuses, on which they knew how to do only one operation: add. That is why Madame Nui's toad held such sway over the Industrial Bank of Japan. The toad's utterances were as good a predictor as any of which direction the market would go.

The lesson of the Bubble is not that Japan should be castigated for departing from Western norms. Credit ordering, Japanese style, was a huge success, and it has helped other Asian nations to expand their industrial bases with great speed. To some degree, the Japanese system is still providing benefits to the nation, just as America's «deficit without tears» aids its economy. Both these systems, however, stretch underlying laws of money and have the potential to become dangerous when carried to extremes. For the United States, the danger of surplus dollars abroad is a real one, but the threat is not total: market forces do rule large segments of the U.S. economy, thus lending stability to the structure. In Japan, on the other hand, inflated assets, «virtual yen,» and imaginary balance sheets rule all, making the structure much more fragile. The issue is one of balance. As in the case of the construction industry, Japan's financial world carried things to extremes, pushing credit ordering beyond reasonable limits. In the process, the Ministry of Finance, Nomura, bank executives, and pension-fund managers lost all idea of what a healthy financial position really consists.

Indeed, in following Madame Nui's toad, the IBJ deserves credit, for in the never-never land of late-twentieth-century Japanese finance, toad magic and spells from ancient China were the best available predictors of the market. The toad told Madame Nui sometimes to buy and sometimes to sell, and as a result she lost only $2.