From prosperity to decline – what exactly did Japan go through?

In the 1980s and early 1990s, Japan, an economy that was once so popular, began to fall into the quagmire of a bubble economic crisis, struggling to extricate itself, and is still in a period of recovery.

At present, many Chinese, from economists to ordinary people, are talking about the appreciation of the renminbi, the sharp rise in housing prices, and the soaring stock market, all of which are similar to the appearance of Japan in the past. Some have raised well-intentioned concerns about whether China will repeat Japan's mistakes.

In any case, exploring Japan's "lost 10 years" from the 1980s to the early 1990s is of great implication for today's China.

To this end, this newspaper launched a special plan "Japan Bubble Economic Apocalypse", a special team of reporters to search ginza, once the world's largest real estate, interview homeless people on the streets of Tokyo, and trace fragments of the bubble era in the memories of those construction workers and bankrupts.

We visit former Japanese prime ministers, ministerial officials in charge of economic affairs, well-known scholars who participated in government decision-making and were active in The Japanese economy, heads of companies that went bankrupt during the bubble economic crisis, and so on.

The series will dissect how the Japanese economy was destroyed by the continuous expansion of the bubble, and objectively replicate various ideas about the bubble. And the end of all these efforts is that Japan's economic crisis has affected china's economy today

What is the significance of the reference? While promoting trade liberalization and capital globalization, how can China avoid the impact and harm of economic crisis?

Text/Photo This newspaper sent a special Tokyo reporter Qiu Min Zeng Xiangrong

At the end of October, late autumn in Tokyo was already a bit chilly. Walking the busy streets of Tokyo, any Japanese person can tell you a story of the bubble economy.

Young taxi drivers will say with emotion that if they catch up with the bubble economy, someone will come up with a lot of money and demand that they get from Tokyo to Nagoya (about 300 kilometers), and the annual income of taxi drivers in Tokyo can reach 10 million yen. But now it is less money and more cars, and the taxi business is not as good as before. The words are full of longing for the bubble era.

In the memories of old subway workers, the JR Central Line seemed to have become the hottest place for bankrupt suicides in the 1990s when the bubble burst, and as soon as the JR Central Line was reported to be out of service, someone must have committed suicide on the tracks. So you can see that Tokyo's subways are equipped with half-height screen doors, which were originally installed to prevent suicide.

Today's college graduates will tell you that in the 80s there was a saying called "cutting green wheat", that is, the company booked the student when he was about to graduate, and then sent him to Hawaii in the name of further education, for fear of being robbed by other companies. As soon as he entered the company, the boss took out 100,000 yen and said, "You don't have to go to work today, you take the money to Go to Ginza to buy clothes." "The city road used to be so prosperous.

The bubble that japan blew up in the late 1980s was the largest in human economic history to date. For the 15 years since the bubble burst, Japan has been paying off its debts: economic depression, political turmoil, and rising crime rates.

"In 1993, it took the Japanese 22 years to finally make the per capita GDP from the 18th place in the world to the first in the world; but now, after another 14 years, Japan's per capita GDP has returned from the first to the 18th." Mo Bangfu, a well-known economic commentator on TV Tokyo, told this reporter.

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It was a chaotic time. The streets of Japan are filled with popular readings such as "alchemy," and "financial skills" have become popular phrases, with more than half of Japanese holding stocks

Ginza, Tokyo, is one of the most prosperous commercial streets in the world. The pair of stone lions at the entrance of the Mitsukoshi Department Store coldly watched the ebb and flow of the economy.

In 1989, the peak of the bubble economy, the target price of Ginza Shiding in front of the Stone Lion was 120 million yen per yeong (3.3 square meters). Another landmark in Tokyo, Tokyo's Imperial Plaza, the price of a square mile of land under the square is actually higher than the value of land in California as a whole, and the price of land in one Tokyo is equivalent to the price of land in the United States. Japan is immersed in a myth that "land prices do not fall". "By selling all the land in Tokyo, you can buy the United States, and then rent out the American land to the Americans." Mo Bangfu said, "Such remarks were often seen in Japanese newspapers at that time, and were accepted and proud of by most Japanese people. ”

According to survey statistics released by the Japanese Land Agency, in the mid-1980s, with a large amount of money pouring into the real estate industry, Japanese land prices began to soar wildly. Since 1985, land prices in the six major cities of Tokyo, Osaka, Nagoya, Kyoto, Yokohama and Kobe have risen in double digits every year, with residential land prices rising by 30.7% and commercial land jumping by 46.8% in 1987. In 1990, the land price index in the six major urban centres rose by about 90 per cent compared to 1985. In the Tokyo metropolitan area, there has been an almost vertical increase in land prices since 1986, with land prices at their peak in 1990 being about 2.5 times that of 1983.

As land prices skyrocketed, urban residential prices began to rise. Generally speaking, the price limit for a worker to buy a dwelling on wage income alone should be about 5 times his annual income. In 1990, the ratio of housing prices to annual income in the Tokyo metropolitan area had exceeded 10 times, and in the core areas, it had reached a level of nearly 20 times. Even in the Osaka metropolitan area, this ratio is more than 7 times.

In addition to land prices, the stock market is creating another myth of "undefeated". The owner of a Japanese securities company appeared on the cover of Time magazine in the United States on a rocket. At the end of 1989, the average Nikkei share price was 38,915.87 yen, equivalent to 3.68 times that of 1984. The last day at the end of 1989 was a record high of nearly 40,000 yen. At that time, the Price-to-Earnings ratio of the Japanese stock market was as high as 80 times (at that time, the Price-to-Earnings ratio of the United States, the United Kingdom, and Hong Kong was 25 to 30 times). But people didn't anticipate the crisis, "At that time, there were 40 economists in Japan who predicted the outlook, and none of them thought there would be an economic crisis, and they were optimistic about the future. Beichuan, former vice president of Shanyi Securities, recalled to reporters the market at that time. The Ministry of Finance, which oversees Japan's economy, also announced that the average share price will soon rise to 60,000 to 80,000 yen. The whole country of Japan rejoiced. It was a chaotic time. The streets of Japan are filled with popular books like "alchemy," "financial skills" have become a popular phrase, more than half of the Japanese hold stocks, and Japanese, known for their high savings rates and frugality, line up in Ginza to buy LV bags. This phenomenon is unprecedented in Japan, because since the era of the Meiji Restoration, There has always been a basic tendency in Japan: to attach importance to industry and despise virtual industry. The so-called "virtual industry" mainly refers to speculation, especially speculation in the stock market. The Japanese call stock speculators "Zhuya", that is, "speculators", and have never had a good impression. Ordinary people's money is mainly stored in banks, insurance companies and post offices. In the bubble economy period of "undefeated stock market" and "land price does not fall", ordinary people have taken the money stored in the bank to the stock market, "You don't buy stocks, you are stupid, and the annual return on investment is 100%." Mo Bangfu said. Banks take a lot of money to persuade you to buy land, land prices are rising, and interest is close to zero. If you borrow money from the bank to buy land, you will definitely make a lot of money due to the appreciation of the land. When the land is bought, the bank will use the land as collateral to buy other land, and so on. Qiu Yonghan told reporters that Qiu Yonghan is known in Japan as the "god of making money" and is an investor who has experienced Japan's economic storm for decades.

The Japanese capitalists attacked on all sides. In 1989, in Hawaii, only one of the valleys where golf courses could be built was still in the hands of the Americans, and the rest were bought by the Japanese. Most notably Tokyo billionaire Hideki Yokoi, who bought Tam Park outside London, Jupiter Hill in the south of England, and Scotland's prestigious landmarks, Glennep Castle, and Filgra Palace on the outskirts of Barcelona, Spain. In 1991, the Empire State Building, which is considered the heart and soul of New York, was acquired for $40 million.

Harvard Professor Vogel exclaims "JAPAN IS NO.1", and the Japanese chant "Japan can say no", a tiny island nation where 100 million people are immersed in one of the biggest bubbles in the global economy to date.

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The famous economist Hayashi once recalled that his cousin in Tokyo bought a house for 500 million yen on the eve of the bubble economy, and by the middle of 1990, it was worth only 100 million yen

Greenspan said: "People can't tell if it's a bubble until it bursts." ”

The first day of market trading in 1990 was a turning point, and the Nikkei stock price fell into hell. Since then, the Japanese stock market has been mired in a bear market that has lasted for more than a decade. To this day, the Nikkei is still oscillating at the level of 17,000 yen.

This is followed by real estate. Many Japanese people still clearly remember that in September 1990, Japan's state-run radio and television station NHK broadcast a special program on land issues in prime time for five consecutive nights, pointing out that land prices can fall, proposing that land prices in Japan should be cut by half, and advocating reform of the land tax system to restrict real estate financing. The show was like a bombshell, and its huge public opinion impact opened the prelude to the bursting of Japan's bubble economy. With the show's broadcast as a turning point, land prices in Japan began to plummet for the first time since the end of World War II.

In 1991, the huge real estate bubble began to burst from Tokyo and quickly spread throughout Japan. Land and houses cannot be sold at all, the buildings that have been completed one after another have no occupants, and empty houses are everywhere. Real estate prices plummeted, and real estate prices in six major cities fell by 15% to 20% that year. According to land price statistics published by the Japanese Ministry of Land, Infrastructure, Transport and Tourism in 2005, the average land price in Japan has shown a downward trend for 14 consecutive years. Compared with 1991, residential land prices have fallen by 46%, basically returning to the level of 1985 before the housing bubble; commercial land has fallen by about 70%, the lowest point since 1974. The famous economist Hayashi once recalled that his cousin in Tokyo bought a house for 500 million yen on the eve of the bubble economy, and by the middle of 1990, it was worth only 100 million yen.

When the Japanese government realized the severity of the bubble, they took a tough approach to squeezing the bubble. First of all, raise bank interest rates and carry out macroeconomic regulation and control. Since May 1989, the Bank of Japan has raised its discount rate three times. In August 1990, in order to prevent the impact of the gulf war on oil prices, the Bank of Japan raised the discount rate from 4.25% to 6.0% at once. The 3.5 percentage point hike in just one year and three months shows how strong it is.

The second is to start with fiscal policy. In March 1990, the Ministry of Finance set up a sub-committee on the land tax system in the government tax system investigation meeting to discuss the strengthening of the land tax system. In October, the reform direction of the land tax system based on the establishment of the land value tax was determined, and the Land Basic Law was enacted, and the land value tax was collected in April of the following year. In December 1990, the Land Policy Council decided to lower land prices and officially began squeezing the bubble.

Statistics later showed that Japan's stock market and real estate plunged and caused losses of $6 trillion. Bankruptcies began to emerge in large numbers. The economic depression spread directly into the political and social spheres and reached the roots of national culture. Japanese TELEVISION programs used to be popular in the game of sorting the prime ministers of the 90s, and after more than a decade of political turmoil and cabinet changes, even the Japanese could not tell how many prime ministers there were in Japan in the 90s. Japan did not have such a chaotic political situation even in the extremely difficult times after World War II.

In the view of Takeshi Noda, a member of the Japanese Diet and former head of the Economic Planning Agency in Kiichi Miyazawa's cabinet, it is not an exaggeration to describe the impact of the bubble economy on Japanese society by describing the impact of the bursting of the bubble economy on Japanese society. In this regard, the writer Hayao Miyazaki's vision is undoubtedly more acute. In Miyazaki's Spirited Away, the protagonist is Chihiro, the only daughter born in 1990. From the perspective of children, Miyazaki tells the story of Japanese society: the long slump after the bankruptcy of the bubble economy, the difficulty of reforming the old social system, and the strong distrust of the government cabinet by the people, which are all troubles for adults; and in the world of children, school morals are corrupt, school violence is continuous, and juvenile delinquency is the common darkness. How to find a key to open the door of light, in the story of Hayao Miyazaki, Chihiro finally unleashes the full potential of her body and successfully completes her adventure. But Takeshi Noda believes that "Japanese society can never return to the kind of mind that was once full of rivers and rivers, and interests dominate everything." ”

No one can deny the similarity of The appearance of China's current economy to that of Japan: the appreciation of the renminbi, the rise in the stock market and the soaring property prices

After a fifteen-year depression, beginning in 2005, the Japanese economy finally entered a "recovery of the economy." Some Japanese economists who have emerged from the pain of the bubble believe that China is the next bubble on the world economic map. The appreciation of the renminbi, the rise in the stock market and the explosion of property prices, a series of familiar phenomena, have made economists more eager to analyze today's Chinese economy with the Japanese economy of that year.

"China has clearly entered the bubble economy, and there is nothing wrong with it." The British capital of Yukihara, who is known as Japan's Greenspan, stressed it three times in a row to this reporter.

No one can deny the similarity between the appearance of China's current economy and that of Japan. First, the Plaza Accord, which led to the yen's appreciation, is seen as the starting point of Japan's bubble economy. In September 1985, the Ministry of Finance of five developed countries, including the United States, Japan, the Federal Republic of Germany, France and the United Kingdom, was established

The Governor and the Governor of the Central Bank met at the Plaza Hotel in New York and decided that the five governments would jointly intervene in the foreign exchange market and cause the dollar to fall in an orderly manner against major currencies in order to increase the export competitiveness of U.S. products and solve the huge trade deficit of the United States.

At the Tokyo currency market the day before the Plaza Accord, $1 = 242 yen, and by the end of 1985, the dollar had fallen below the 200 yen mark. By the beginning of 1988, the dollar had even fallen to the level of $1 = 128 yen, nearly doubling in less than two and a half years. The expected appreciation of the yen has greatly stimulated the large-scale inflow of foreign funds, driving house prices

and the stock market continued to rise sharply. Today, the renminbi is gradually appreciating, and Qiu Yonghan believes that the goal of the final appreciation of the renminbi will be "1:5".

Second, there is excess liquidity, and this professional vocabulary of economics has become a familiar word for the Chinese people this year. In order to prevent the economic depression caused by the appreciation of the yen, Japan has adopted an accommodative monetary policy and fiscal policy. Fearing that the appreciation of the yen would raise the cost and price of Japanese products, resulting in a decline in competitiveness in overseas markets, the Japanese government proposed a policy of domestic demand-led economic growth and began to loosen domestic financial regulations. The Bank of Japan cut interest rates five times in a row, from 5% in 1985 to 2.5% after March 1987, the lowest in Japanese history at the time. Relevant data show that between 1987 and 1990, the average annual growth rate of Japan's money supply exceeded 10%, far exceeding the growth rate of its nominal GDP.

Third, behind the appreciation of the local currency, China and Japan are facing the same pressure, that is, trade frictions with the United States, with a large international trade surplus. China's Ministry of Commerce's latest projections show that China's trade surplus will reach $250 billion in 2007, a figure that follows the Chinese government's efforts to reduce export tax rebates and vigorously suppress exports.

Fourth, in the case of excess liquidity, China also experienced a sharp rise in land prices and stock markets like Japan in that year, and promoted each other. During the bubble economy when land myths prevailed, Japanese investors set their sights on corporate-owned land assets, that is to say, on the implicit interests of corporate assets, and on the prevalence of land price increases when evaluating stock prices. Under the influence of this atmosphere, enterprises that owned more real estate in the past, even if their bank's income is now zero, will increase the earnings per share due to the rise in land prices, and their stock prices will rise as a result. Steel and heavy chemical companies, which experienced two oil crises, were already seen as sunset industries in the early 1980s, but at this time they became fragrant because of the real estate they owned, and their stock prices rose sharply. This small detail of stock market investment seems to find a large number of cases in today's Chinese stock market.

"There are two questions, the extent to which the renminbi should appreciate; how to control the current stage of entering the bubble economy." These two problems, if solved well, can smoothly pass through the difficult era of bubbles. Yukihara Ying capital thinks.

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At the forefront of financial research, Japan's bubble economy is interpreted as a "currency war." China is setting out to avoid the risk of asset bubbles

Although the Japanese economic community's assertion that "China has entered a bubble economy" is not shared by most Chinese economists, the consensus among economists is that the lessons of Japan's bubble economy deserve China's vigilance and that China should avoid following in Japan's footsteps.

Ba Shusong, deputy director of the Institute of Finance of the Development Research Center of the State Council, wrote a book review for "Saving Japan - The Banking Crisis and Wall Street Action after the Bubble Collapse", and for the book written by Gillian Tate, a reporter of the Financial Times in Tokyo, he said with emotion: For Chinese readers, reading this book is not a leisure activity that can be easily obtained. What makes us unable to relax is the theme of the book, the restructuring of banks, so that readers familiar with the Chinese banking community can not help but feel the pain of the skin, many paragraphs, if the protagonist of the article is replaced by the name of a Chinese banker, the original narrative of the Japanese banking community can be basically applied to China without being used as a major adjustment.

A reflection on Japan's financial system and banking mechanisms, the biggest soil for the bubble economy, is perhaps the most valuable lesson for China.

"China has realized the causes of the Japanese financial crisis and has begun to work to avoid the risks that an asset bubble could accumulate. Without making the mistakes of The Japanese era, China could create the latest model for dealing with the recent economic crisis characterized by asset bubbles. Zuo Xiaolei, chief economist of Galaxy Securities, said.

At the forefront of financial research, Japan's bubble economy is interpreted as a "currency war."

"Suppose I am an American consortium, I also clearly expect the yen to appreciate, suppose I in 1983, with $10 billion in exchange for 2400 billion yen, enter the Japanese market, buy Japanese stocks and real estate, the Boom in the Japanese economy led to the stock market and real estate going crazy like a rise, in 1985 the yen began to appreciate, by the beginning of 1988, the stock market and real estate assumption that I had doubled (doubling in 5 years is the lowest assumption), that is 4800 billion yen. At this time, the yen appreciated to 1:120. I sold off Japanese real estate and stocks in a year and then exchanged them back for dollars, which is $40 billion. In 5 years, I made a net $30 billion. This is the simplest "currency war form" that netizens assume.

Are we facing a "currency war" today?

What is a bubble economy

A bubble economy is an economic phenomenon in which the market price of an asset or series of assets is much higher than its actual value after undergoing a continuous process of price increases.

In the process of the formation of the bubble economy, the initial price increase will make people expect to increase the price, so it attracts new buyers, who generally just want to make profits through future price increases, and do not care about the condition and profitability of these assets themselves. When this behavior becomes a universal social phenomenon, the book value of social assets is much higher than their actual value, and a so-called "bubble economy" is formed.

The "bubble economy" is generally reflected intuitively through the stock market and the real estate market. Prices always have to return to value, and the bubble economy will always burst one day.

A well-known bubble in financial history

In the history of finance, the most noteworthy story of the bubble economy should be said to be the tulip bubble economic event that arose in the Netherlands in the 1630s. In the Netherlands at the time, the price bubble of tulips was constantly soaring, and the price of a pot of rare tulips was worth a house sold on the side of the best canal in Amsterdam. A large number of tulip traders crowded into taverns to buy and sell their tulip futures at high prices.

In February 1637, the price of tulips stopped rising. Because investors in the tulip futures market have gradually come to understand that investing in this product is driven by a stupid investment theory (that is, they have spent such a high price on this flower, on the basis of the virtual economy, they hope that there will be more stupid people to buy the flowers in their hands at a higher price).

The Great World Crisis of 1929

The United States in the 1920s was known as the "Magical America." Beginning in 1920, U.S. manufacturing boomed for 10 years. At the same time, the U.S. stock market rose from 75 points in 1921 to 370 points in 1929, an average annual growth of 33 percent. Many American investors at the time believed that "of course there is a magical stock dream in the magical United States."

But on October 28, 1929, the U.S. stock market fell sharply, closing the day at 260 points, a one-day decline of 12.82%, which is known in history as "Black Monday". Many investors' money evaporated in an instant, and they lost all their money. Economic panic hung over every American, news of bank failures kept coming out, factories closed, large numbers of unemployed workers camped on the streets, and a tense and lost social atmosphere brought the United States to the brink of civil war. From the collapse of the U.S. stock market in October 1929 to 1932, there were only 63 points left, down 47% from its peak in 1929. It can be said that the U.S. economy has regressed at least 10 years.

Nasdaq foam

The Nasdaq market has been flat since its inception in 1971, breaking through 1,000 points in 1995 and almost rushing to 5,000 points in the next five years. After doubling in 1999, it took a sharp turn in March 2000, resulting in a once-in-a-century stock market crash. Total market capitalization shrank by nearly three-quarters in 18 months, 80 percent of stocks fell more than 80 percent, and nearly 40 percent were forced or voluntarily delisted. Sohu, Sina, and NetEase fell below one yuan at that time.