• Tokyo


the Feb. 20 article “BOJ will buy ¥1 trillion in corporate bonds; rate stands“: It’s a shame that the action taken by the Bank of Japan with such good intentions will in the long run lead only to more economic pain. This is not just a Japanese mistake; America’s stimulus package and Troubled Assets Relief Program are making the same mistakes and sowing the seeds for a larger economic crisis in the future.

In Japan, the BOJ’s aggressive action of buying corporate debt implies that a serious financial problem exists in Japan as a legacy of past Japanese economic policies. It means that the bad corporate debts of Japanese banks were never fixed but merely dressed up in another form, that the “solid corporate balance sheets” were a myth. Why?

The answer lies in Japanese governmental restructuring and past stimulus packages. They were and will be just life-support systems for inefficient companies, industries and banks. This is evident in the lack of demand for their risky securities. These firms and banks should have been allowed to exit the economic stage in the last recession and subsequent “restructuring,” but the interest rate subsidies and exchange-rate depreciations gifted by abnormally low Japanese rates have allowed these economic zombies to live off the efficient in Japanese society.

They used cheap financial capital to over-invest in labor-saving production. This over-investment not only reduced the return on capital in Japan but also created an oversupply that puts downward pressure on prices and wages, yielding the anemic gross domestic product. This also perpetuates industries that are losing out to cheaper Asian competitors.

The solution was, and is, to let these firms merge, be bought out or go bankrupt. Japan needs a new Meiji revolution in which the death grip of these corporate zombies is removed from Japan’s economic throat. The Japanese don’t want to see Japan join the Soviet Union on the dung heap of economic history.

william schrade

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.