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Offline Ted Azarmi

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Dogs and Demons
« on: February 14, 2011, 03:31:13 pm »
From Book discussions at the Department for Japanese studies, Wilhelm Strasse. 90 when I served as a PhD committee member.

My first observation about Japan:

1.   Major problem with innovation: best students go to Tokyo work hard in high school and find an old mentor. Then there are dis-incentives for innovation in Japan, as one's mistakes may cause the mentor to lose face! There are no great financial incentives for innovation.

2.   Compare Japan vs. Germany not USA. Similar size economies. Germany does well with innovation and environment.

3.   Cleanness: Both Germany and Japan are two of most clean countries in the world. Japan cleans each stone in the Kyoto brook with a toothbrush. Inefficient, bad for the environment, extreme, low tech public works.

4.   Does Kerr imply that Japanese are the arch enemy of the "Greens"? Is that the Japanese government's political position? From Whaling to burning garbage and Dioxin in landfills, Japanese government seems to have positions that only protect industrial factories against environmental interest.

5.   "Japan still has a lower crime rate, a healthier diet, cleaner city streets, longer life expectancy, better mass transit, higher literacy and more equitable income distribution than virtually any other industrial nation."

6.   There is a link between consensus building vs. decision by in-fighting and disagreement. Example: my work on How Japan lost Nikkei 225 trading to Singapore.

7.   David and I have looked at the law on two-stage spin offs in Japan and USA. Basically, the law has changed several times reversing itself and each time partially copying the US.

8.   The lower rank Japanese workers are some of the best in the word! The higher up you go the worst it gets.

9.   Inner beauty vs. ugly exteriors of buildings with many mismatched colors in Japan.

Alex Kerl points (with mostly direct Quotations from his book)

1.   Economic Distortion: Spending in Japan on public works in the next five years will exceed that in the United States by 300 to 400 percent, despite there being only a twentieth as much land area to be manipulated. The Japanese lay 30 times as much concrete per square foot as does the United States, and Japanese spending on public works exceeds American spending on the space program.

2.   Dual Technology: Environmental studies, medicine.

3.   Inertia: "Japan's way of doing things-running a stock market, designing highways, making movies - essentially froze in about 1965. For 30 years, these systems worked very smoothly, at least on the surface. Throughout that time Japanese officialdom slept like Brunnhilde on a rock, protected by a magic ring of fire that excluded foreign influence and denied citizens a voice in government.

4.   Social pressure to comply, conform, and accept: Love for Japan, Someone who spend time there as a child
Too many people who claim to be friends of Japan are more interested in mouthing platitudes and tired stereotypes so that they might not lose their university grants, symposium invitations or business contacts.

5.   Control: Japan simply cannot avoid carrying things to extremes. Control of the environment.

6.   Skewed Data: 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 tobashi, «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.

7.   Funshoku kessan, «cosmetic accounting: another technique in «book accounting,» whereby banks value their holdings at purchase value, although they may be worth much less today than what was paid for them. 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.

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.

Only with such techniques can the banks maintain the capital-to-assets adequacy ratio of 8 percent mandated by the Bank of International Settlements (BIS), failing which they cannot lend abroad.

Ishizawa Takashi, the chief researcher at Long Term Credit Bank's research institute, says, «Even if we told the truth people would think there is more being hidden. So we put out lower numbers on the assumption people believe the true figure is higher.»

8.   Honesty: Japan has a problem with honestly looking at and dealing with unpleasant truths. Tatemae (an official stated position) and honne (real intent), they tend to view the discrepancy as a negotiating ploy. It hasn't occurred to them that the fundamental Japanese attitude toward information might differ from what they take for granted in the West. But it does differ, and radically so. Traditionally, in Japan «truth» has never been sacrosanct, nor do «facts» need to be real, and here we run up against one of the great cultural divides between East and West. We can see the two approaches clashing in the Daiwa Bank scandal of 1995, when the Federal Reserve ordered Daiwa's American branches closed after finding that Daiwa, in collaboration with the Ministry of Finance, had hidden more than a billion dollars of losses from U.S. investigators. MOF reacted angrily with the comment that the Fed had failed to appreciate «cultural differences» between American and Japanese banking. The cultural difference goes back a long way, to a belief that ideal forms are more «true» than actual objects or events that don't fit the ideal. When an Edo-period artist entitled his screen painting A True View of Mount Fuji, he did not mean that his painting closely resembled the real Mount Fuji. Rather, it was a «true view» because it captured the perfect shape that people thought Mount Fuji ought to have. This principle of valuing the ideal above the real is far-reaching, and one may see it at work in the play between tatemae and honne that dominates daily life in Japan. People will strive to uphold the tatemae in the face of blatant facts to the contrary, believing it is important to keep the honne hidden in order to maintain public harmony.

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.
Tatemae requires an element of reserve, for it presumes that not everything need be spelled out. It relies on communication through nonverbal means, and in interpersonal relations there is much to be said for tatemae, for from it springs the flower of harmony.
Japan's ministries have at their disposal a further «management of information» technique, perhaps the strongest: denial. Shiranu, zonsenu, means «I don't know, I have no knowledge,» and it is the standard response to most inquiries. We saw an example of this when Asahi TV questioned a section chief at the Ministry of Health and Welfare about dioxin pollution, and he responded, «I don't know, I have no idea.» A similar process was at work in the same ministry when for seven years its officials denied that they had any records of AIDS-contaminated blood products which had infected more than 1,400 people with HIV in the 1980s. In March 1996, however, when Health Minister Kan Naoto demanded that the «lost» records be found, they turned up within three days.