pjbooks Chapter 244 Blindfolded Ball
Chapter 244 Blindfolded Ball
(There will be an extra chapter tonight~)
Late April. Nagata Town.
The Secretary-General's Office, First Members' Residence.
In front of a large mahogany desk, a 29-inch Sony color television was playing on silent mode. The image on the screen was shaking violently; the House of Representatives chamber had completely degenerated into a chaotic brawl.
Young, up-and-coming lawmakers from the Osawa faction clashed violently with older, business-minded lawmakers who championed the interests of lower-level retailers in the central aisle. Torn agenda documents rained down like a blizzard, and the camera captured distorted faces and roughly torn silk ties.
The ashtray was piled high with messy cigar remnants.
Ichiro Osawa sat upright in the deep red leather boss's chair. His eyes were bloodshot, and his left hand gripped the red encrypted telephone receiver tightly.
On the other end of the phone, William, the economic minister at the U.S. Embassy in Japan, maintained the extremely smooth, polite, and somewhat nonchalant tone of a diplomat.
"Mr. Osawa, I'm very sorry."
"The Saionji family's overseas funds are currently under the compliance protection of a top market-making oligarch on Wall Street. In order to maintain the stability of the global financial settlement order, Washington has suspended the Securities and Exchange Commission's (SEC) investigation."
Osawa Ichiro's facial muscles twitched suddenly.
His breathing instantly became heavy, and several veins on his forehead bulged out abruptly.
"Minister William! This goes against our agreement!"
Daze suppressed the roar in his throat, his voice hoarse from extreme anger.
"I risked the entire Liberal Democratic Party splitting apart by having my members forcefully push for the repeal of the Large Retail Store Law onto the Diet floor! Now I've alienated both the old zaibatsu and the grassroots voter base!"
Daze swallowed hard.
"Now that Washington has stopped, I will indefinitely postpone the final review of the Large Stores Act and the Cross-Shareholding Amendment in Congress next week!"
A soft chuckle came from the other end of the receiver from William.
"Mr. Osawa. Your domestic financial backers have been wiped out in the bank loan withdrawals of the past few weeks. If you halt the progress of the bill now, you will be facing those enraged agents of the old zaibatsu alone."
William's tone turned cold, and the pressure he was exerting was undisguised.
"The United States will remain neutral on this. Of course, if you can ensure the bill passes smoothly next week, fully opening Japan's retail and financial markets to American capital, Washington will issue a public statement after the bill's enactment, fully supporting your reform faction. With the White House's political endorsement, your domestic political enemies will not dare to pursue any repercussions against you."
"This is the new deal we've offered. We wish your bill a successful passage."
A monotonous, unresponsive tone echoed in the receiver.
Ichiro Osawa held his hand up stiffly. His fingers trembled violently.
He slammed the receiver back onto its base.
"Bang!"
The telephone bounced violently on the table.
A bounced check.
What Washington offered was nothing more than a worthless check that could be voided at any time.
He now feels like a fool.
They sacrificed Japan's entire economic barrier and offended all the old zaibatsu and financiers in the country. Is this what they got in return?
Americans stepped through the market doors he had smashed open. Then, they turned around and, clutching the invisible and intangible bargaining chip of "political endorsement," tightened their grip on his throat again, launching a new round of extortion with no bottom line.
Ichiro Osawa stood up and walked to the French windows.
He looked out the window at the Tokyo buildings shrouded in rain, a chilling malice gleaming in his eyes.
"Washington politicians took the meat and left us with a pile of broken bones."
Osawa tapped his fingers on the edge of the windowsill.
Secretary Hirano, who had been standing in the corner, was now completely silent. Looking at Osawa's back, which seemed to want to devour him, his legs went slightly weak.
"Mr. Osawa..." Hirano's voice trembled, cold sweat dripping from his forehead and down his chin. "The stock market is falling every day, our financial backers are going bankrupt en masse, and now we're pushing through the repeal bill. The public outrage will burn our faction to ashes. Should we continue with the upcoming parliamentary deliberations?"
Ichiro Osawa turned around.
"The bill will still be passed. We shouldn't be the ones getting criticized."
Osawa strode back to his desk and shoved aside the deliberation schedule for the repeal of the "Large Store Law".
"We've already started the fire, but the person adding the last bit of firewood must be someone else."
He placed his hands on the table and stared at Hirano.
"The current cabinet was put in place by us. After supporting them for so long, it's time for them to serve as a shield."
"Hirano. Contact the Chief Cabinet Secretary. Next week's Diet vote requires the bill to be submitted under the banner of 'absolute Cabinet leadership in reform.' Send the message out and force the Prime Minister to personally deliver a presentation speech at the Diet."
Daze's eyes were extremely cold.
"They mobilized all the media resources within the faction to pin the blame entirely on the Prime Minister's weakness and incompetence for cooperating with the Americans to open up the market and condoning the Ministry of Finance's actions that led to the bankruptcy of small and medium-sized enterprises."
"Once the bill passes, we will follow public opinion and initiate a vote of no confidence in the cabinet."
Hirano pressed his hands tightly against the sides of his trouser legs and bent over deeply.
"Yes! I'll take care of it right away!"
……
Chiyoda Ward, Otemachi.
Fuji Bank Headquarters, Office of the Head of the Credit Department.
The pale sunlight filtered through the gaps in the blinds, casting dappled shadows on the carpet.
Managing Director Tanimoto sat upright in a large leather boss's chair, holding a list of default liquidations that had just been compiled by the risk control department.
Tokyo Optical & Precision, Kanto Special Chemicals, Keihin Real Estate.
These were once Fuji Bank's most valued clients, but in the past month, their financial chains have been completely broken due to the market crash (especially from January to March) and the cross-trading effect of the Mitsubishi Group's sale of overseas stocks. They are even unable to pay their bridge loan interest on time this month.
The credit section chief stood in front of his desk, sweating profusely.
He was holding a thick stack of documents, breathing rapidly.
"Executive Director, the optical factory's cash reserves have completely dried up. The Ministry of Justice is applying for the immediate seizure of their production lines and land."
"But with the market liquidity dried up, these assets are attracting no interest at auction. If we proceed with legal seizure procedures now and reassess them according to current market prices..."
The section chief glanced at Managing Director Tanimoto's gloomy face.
"Our books will soon show a single bad debt shortfall of 3 billion yen. But this is just the tip of the iceberg. If we include all related companies in the Kanto region affected by the market downturn and loan withdrawals, the total bad debt of the head office in the first quarter will exceed 250 billion yen, and may even approach the 500 billion yen mark!"
Managing Director Tanimoto removed his gold-rimmed glasses from his nose. He took out a handkerchief from his pocket and slowly wiped the lenses.
"April is almost over." Tanimoto's voice was calm, but suffocatingly so. "This level of deficit will not be allowed in the upcoming fiscal year 1989 annual financial statements."
He put his glasses back on, his gaze piercing the credit section chief like a knife.
"Once the hundreds of billions of yen in bad debts are made public, Fuji Bank's capital adequacy ratio will fall below the Bank for International Settlements' (BIS) 8% threshold next month. The Ministry of Finance's inspection bureau will immediately send people to investigate. Everyone here, including myself, will have to resign."
The credit section chief's legs trembled slightly.
"But Executive Director, the company has already substantially breached the contract, and the audit procedures..."
"Go and get two new credit approval forms."
Managing Director Tanimoto interrupted him sharply. He casually turned the list of defaulters and liquidated them face down on the table.
"The market fluctuations are merely a temporary technical adjustment. The underlying assets of these companies still possess value," Tanimoto said, leaning back in his chair.
"Use Fuji Bank's wealth management subsidiary to send people to remote towns in Chiba Prefecture. Quickly register a brand new real estate trading company."
Tanimoto extended his right index finger and tapped it heavily on the table.
"Then the head office approved a new loan of 3 billion yuan, which was directly transferred to this newly established shell company."
"Let this new company buy up all the dilapidated land and abandoned production lines of the optical factory at the valuation of last year's market peak."
The credit officer's mind went blank for a moment. His eyes widened, and his lips trembled slightly.
"Executive Director, this...this is an unauthorized transfer from the Tobashi enclave account..."
"Shut up!"
Managing Director Tanimoto sat up abruptly, placing his hands on the edge of his desk and fixing his gaze on the section chief's face.
"The optical factory used the money from the land sale to pay off the old debts of the head office. The head office not only recovered all the principal and interest, but also added a high-quality loan of 3 billion to the new company."
"Make the books balance for me. No matter what means you use, the upcoming annual financial report must not show the Ministry of Finance or the outside world a single yen of bad debt!"
"Otherwise, we'll both have to go to the rooftop, do you understand?"
The credit section chief, holding the documents with trepidation, bowed deeply.
"Yes... I'll take care of it right away."
The section chief backed away from the office, the heavy wooden door closing behind him.
Managing Director Tanimoto slumped back in his leather chair. He reached out and irritably tugged at his hair.
I turned my head and looked out the window at the endless rain.
He knew very well that this was just a temporary measure.
Using fictitious new loans to cover up real losses, the entire Marunouchi banking system was playing this game of musical chairs, a kind of bookkeeping magic trick.
Everyone is closing their eyes, desperately trying to cover up the impending financial nuclear bomb with a paper-thin prosperity.
……
Marunouchi, Tokyo.
The core strategic room on the fourth basement floor of the Saionji Industrial Headquarters.
A huge LCD screen occupied an entire wall. Instead of displaying the alarming stock market index, the screen scrolled through the "1989 Fiscal Year Financial Statements (Preliminary Profit Reports)" that major city banks had just released to the public.
The air was filled with the aroma of Darjeeling tea and muscat grapes.
Executive Director Endo stood in front of the control panel. He held several printed financial summaries in his hand and adjusted his gold-rimmed glasses.
"Young Miss, the reports from the major banks have been released."
Endo gave a short laugh, his tone laced with undisguised mockery. He placed the documents he was holding flat on the rosewood table.
"Fuji, Sumitomo, and Sanwa, these city banks with the largest exposure to the real estate sector, experienced a three-month-long plunge in the first quarter. However, the non-performing loan data they disclosed were unusually low."
Endo pointed to the impressive profit forecast data of Fuji Bank on the screen.
"Their books even showed a batch of inexplicably new high-quality loans. The Ministry of Finance's audit bureau just let it pass."
Saionji Satsuki sat upright in a large leather swivel chair.
Today she wore a pure black velvet dress, with a greyish-white cashmere shawl casually draped over her shoulders. Her long, black hair was simply tied back with a dark velvet ribbon. Her hands were clasped together on her knees, her posture extremely relaxed.
"Acknowledging the true extent of bad debts means that the Ministry of Finance's inspection bureau will immediately send people to investigate. The bank president and managing director will have to resign immediately and may even face charges of breach of trust."
"But as long as they use 'enclave accounts' and shell companies to balance the books, this bomb won't explode during their term. Using a false prosperity is enough to maintain their current dignity and capital adequacy ratio, and that's enough."
"After all, no one wants to be the sinner who cuts the fuse before disaster actually strikes."
Endo turned around, faced Satsuki, and bowed slightly.
"So, Miss, shall we proceed with the CTRPS acquisition model as planned? The M&A team is ready and can be deployed at any time."
She picked up the bone china teacup on the table and took a sip of black tea.
"No rush."
"Go talk to these blind gamblers about acquiring physical assets now. They will not hesitate to extort cash from us at valuations at the peak of the bubble."
"Then we'd be the ones getting ripped off, just paying the highest price to fill the bank's hole."
Executive Director Endo nodded slightly and gathered the financial summary on the table.
"Understood. The M&A team will remain silent."
Satsuki turned her head and looked at Saionji Masato, who was sitting in the shadows on the other side of the control panel.
The person in charge of the Saionji Intelligence System (SIS) was wearing a well-tailored dark black suit and a dark tie that was tied meticulously.
"Uncle Masato. Have the results of the Sumitomo Bank fund flow monitoring come out yet?" Satsuki cut straight to the point.
Zhengren bowed slightly and opened the black leather notebook beside him.
"As per your request, we have indeed discovered several anomalies, Miss."
"According to the intercepted transaction records from the lower levels, Sumitomo's real estate financing in the Kansai region has recently seen extremely frequent fund swaps. Large amounts of funds are flowing intensively to shell companies that have just been registered in remote prefectures and cities. They are deliberately circumventing the regular audit route of the Ministry of Finance."
Satsuki interlaced her fingers and gently rested her elbows on the armrests of the leather seat.
"They've accumulated the deepest mess, so their attempts to cover it up are naturally the most drastic. We'll continue to maintain the highest level of surveillance over Sumitomo."
"Yes."
The gentleman nodded in agreement.
Satsuki looked at the scrolling bank codes on the screen and continued.
"Furthermore, regarding the underlying assets that Executive Director Endo just mentioned: the specialty materials suppliers surrounding Shin-Etsu Chemical, the instrument manufacturers of Tokyo Optical, and those semiconductor equipment manufacturers—add all of these to SIS's key list and keep a close eye on their funding schemes."
Masato held the pen and quickly made notes on the paper.
"Understood. However, Miss, there may be physical obstacles to the execution of this plan."
Masato closed his notebook, looked up, and stared directly at Satsuki.
"If senior bank executives are using shell companies to balance the books, the truly fatal evidence of violations—such as original handwritten signatures approving 'enclave accounts' or recordings of core meetings—would never remain in ordinary electronic ledgers. Electronic infiltration has its limits; to obtain physical evidence, human intervention is required."
"Miss, SIS's regular intelligence network alone is not enough. I need to request interdepartmental coordination and call upon personnel from the Security Department to assist."
Satsuki nodded slightly.
"Can."
"I'll inform Dojima. Have him cooperate with your operation." She looked at Masato, her pace slowing slightly. "As for when we need to send someone to rummage through the executives' trash cans, or to plant listening devices in the bank managers' offices... Uncle Masato, you don't need to ask me about these things in the future."
"Once you know where the intelligence cards are, just order them to refill them. You have full authority over the deployment."
Masato closed the black leather notebook beside him.
He rose from the shadows of the control panel and bowed deeply to Satsuki.
"Thank you for your trust, Miss."
He straightened up, his voice as steady and crisp as ever.
"I will keep things in check."
Satsuki nodded gently. She turned her head, her gaze returning to the huge LCD screen in front of her.
The edges of the screen displayed the fund monitoring nodes of various banks.
"After obtaining the original documents, they were immediately sent to the highest-level underground vault for safekeeping."
"No unnecessary intervention should be made before their funding chain completely breaks down and they are begging for someone to take over."
"Let these big bank presidents sleep a little longer in their falsified ledgers."
……
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[Author's Note: A Brief Historical Introduction to the "Blindfolded Ball"] (Does not count towards the main text)
Many readers may wonder: why did those shrewd Japanese bankers collectively "turn a blind eye" to the massive bad debts of hundreds of billions of yen when the market had already collapsed and the underlying real economy was in shock?
The answer is simple: to protect one's official position and the dignity of capital.
Under the international financial rules at the time, active international banks were required to maintain their capital adequacy ratios above the "8 percent red line" set by the Bank for International Settlements (BIS). If a bank were to expose the false prosperity, acknowledge defaults by underlying businesses, and revalue collateral (dilapidated land) at plummeted market prices, a massive deficit would instantly be revealed on its balance sheet. This would not only immediately breach the 8 percent red line, leading to a complete takeover by the Ministry of Finance, but the bank's president and managing directors would also face immediate resignation and even criminal charges of breach of trust.
In order to prevent the bomb from detonating during their term of office, the Japanese banking industry collectively and tacitly embarked on a self-deceptive financial magic trick—in Japanese, this is called "Tobashi" (飞ばし).
Their operation is essentially an absurd game of transferring funds between two hands: When a reputable company becomes unable to repay its loans due to a market crash, the bank will never seize its assets. Instead, bank executives will immediately instruct their subordinates to quickly register an untraceable shell company in a remote area. Then, the head office will approve a new, massive loan to this shell company. The shell company, with this new money, will then buy up all the defaulting company's worthless assets at the "original price at the peak of the bubble." Once the defaulting company receives the money, it immediately "settles" its old debts to the head office.
Through this self-deceptive operation, the bank will not only have no bad debts in its upcoming annual financial report, but will even have an additional "high-quality new loan" issued to the new company.
In this frenzied "blindfolded ball," everyone danced blindfolded, using new debt to cover up old debt, and using fictitious new loans to cover up the impending financial nuclear bomb. This absurd bookkeeping game dragged on until the mid-to-late 1990s, until the game of musical chairs could no longer borrow new money, the fig leaf was completely torn off, and the real bad debts of tens of trillions of yen were finally revealed, directly dragging the whole of Japan into a long and desperate "lost decade."