Chapter 494: Signs of Great Change
1989 was a special year in the history of the neon bubble.
This year the bubble entered an unprecedented period of expansion, and people's carnival reached a new level.
The stock market is rising day by day, setting new historical records every day. Even more exaggerated than that, the real estate market is also soaring.
The land prices in Tokyo as a whole are now far beyond the affordability of ordinary wage earners.
However, although the land price has skyrocketed, people are not in a hurry at all. In fact, the higher the price goes, the happier people are.
Because everyone's money is in the stock market and the property market, if they rise, their assets will rise as well.
Since a few years ago, we have watched the stock market and the property market continue to rise.
Unable to resist the temptation of friends and various reports, everyone gradually moved their savings previously deposited in the bank into the stock market and the real estate market.
Today, Japan has entered a hot state where everyone is speculating in stocks and real estate.
Not only them, but also the overseas hot money, seeing the booming situation in Japan, of course they also want to come in and get a piece of the pie.
With the support of overseas capital, Japan's twin bubbles continued to expand.
According to the latest statistics from the Ministry of Finance, the total market value of the Japanese stock market was 686 trillion yen in the first quarter of this year.
686 trillion yen, based on the current exchange rate of 128, is 5.36 trillion US dollars.
Is this number exaggerated? Just look at Japan’s GDP last year.
Last year, Neon's GDP was 3.07 trillion US dollars, and this year is roughly within the same range.
That is to say, the total value of Japan's stock market is about 1.7 times its GDP. Even in the 2020s of the millennium, Japan's GDP was only around 4 trillion US dollars.
This comparison shows how crazy Japan's stock market is now. Its total value is higher than Japan's GDP at any period in history.
However, this is not the most exaggerated. The more exaggerated real estate industry has a total value of 150 trillion US dollars, which is 500 times the current GDP of Neon!
150 trillion US dollars, not Japanese yen!
No wonder people outside are saying that Baichuan Feng does not deserve the title of the world's richest man.
According to the land value, Yoshiaki Tsutsumi is worth 1 trillion US dollars, which is close to one-third of Japan's GDP.
Such a huge amount of wealth cannot be compared with Baichuan Feng's two or three hundred billion US dollars. The difference between the two is more than an order of magnitude.
"Tokyo alone can buy the entire United States!", "Chiyoda Ward in Tokyo can buy the entire University of Kansas!".
These jokes that have been passed down to later generations are a true reflection of Neon today.
Some experts even calculated that if Japan were included, it could probably take over four United States countries.
The land area of Neon is about one twenty-fifth of that of the United States. In other words, the average land price in Neon is 100 times that of the United States!
The stock market and real estate market have all exceeded the GDP values, and both are calculated in multiples.
Especially the latter, which is hundreds of times larger than GDP.
Compared with the land price in the United States, the difference is a hundred times. All these things can really make us feel the booming situation in Japan.
GDP cannot catch up with the stock market and the property market, which shows how weak the economic situation is at the moment.
So is the Japanese government aware of this?
Japan seems to have safely weathered all kinds of trade wars.
The semiconductor agreements signed in the past few years have not reduced much in global market share to date.
Looking only at the surface data, everyone can still enjoy a luxurious life with confidence.
Although the yen has appreciated and the real economy has suffered setbacks, these are all within the government's tolerance range.
So now it seems that Japan has safely survived this exchange rate crisis.
But no matter what, the phenomenon of the stock market and real estate market exceeding GDP is abnormal no matter how you look at it.
The Japanese government also realized this, so internally, especially the Ministry of Finance, began to discuss raising interest rates.
In the past, interest rate cuts were intended to boost domestic demand and create a loose economic environment to allow funds to flow into the real manufacturing industry.
However, the reality turned out to be the opposite of what was expected. Compared with the physical industry which requires large investment and has a long payback period, the financial industry and real estate industry which make money quickly are obviously more attractive.
As a result, hot money, bank funds, overseas hot money, and residents' household deposits all flowed into the real estate and stock markets.
The overheated market performance of these two companies is now making the Japanese government a little scared.
So after weighing the pros and cons, the word "interest rate hike" returned to the eyes of the Japanese government again after 27 months.
In addition, the current international environment also prompted the Japanese government to consider this.
In the late 1980s and early 1990s, the world situation changed dramatically.
The Cold War came to an end, East and West Germany were unified, and the world moved from bipolarity to multilateralism.
Those international hot money began to look for their next target.
In order to alleviate the impact caused by capital flight, the Federal Reserve raised interest rates.
The Federal Reserve increased its policy rate, and Britain also started to increase its policy rate.
Everyone else has added it, will you, Neon, follow suit?
If you don't add it, there is a risk of domestic capital outflow.
In addition, the domestic real estate prices were out of control at the time, and in order to curb its inflation, the government was also arguing over the issue of raising interest rates.
"The Japanese economy is like sitting on dry firewood. The overheated economy needs to be cooled down.
With the current land prices, ordinary people simply cannot afford to buy a house.”
In the National Assembly Hall, Yasushi Mieno stood up and made an impassioned speech.
He is a typical "austerityist" and is very disgusted with inflation in his economic advocacy.
In 1985, when the United States asked Japan to appreciate the yen, Yasushi Mieno strongly opposed it.
He struggled for this for a while, but finally compromised under international pressure.
Now, taking advantage of the international environment and the overheated economic situation in Japan, Yasushi Mieno once again advocates his own tightening policy, which is to raise interest rates on the yen.
The current Finance Minister, Murayama Ren'o, has also realized that there is something wrong with Neon's economy.
Although the people are jubilant, the general consensus internationally is that Japan's economy is full of bubbles, and the bubbles are getting bigger and bigger.
As the country's decision-making body, how could they be unaware of this?
So now when people heard Mieno Yasushi bring up his old words again, the opposition in the National Assembly Hall was not as intense as before .
Finance Minister Murayama Ren'o really wanted to discuss this issue with Mieno Yasushi.
However, thinking that the latter might very well become the next Bank of Japan president, Murayama Ren'o suppressed the thought of communicating.
Alas, the relationship between the Bank of Japan and the Ministry of Finance is really hard to describe.
The struggle between the two, or the Bank of Japan's road to independence, began in the 1970s.
For a hundred years, the Bank of Japan and the Ministry of Finance have always been in a love-hate relationship with each other.
In particular, the emergence of a strong man, Naoto Ichimanda, known as the "King of Dharma", brought the Bank of Japan to a whole new height.
Under his leadership, the Bank of Japan was even able to bypass its legal superior, the Ministry of Finance.
However, because of his appearance, the Ministry of Finance began to restrict the Bank of Japan in every way.
For example, they can strengthen their control over the Bank of Japan by parachuting in a bank president.
But the Bank of Japan itself is no pushover and it united internally to fight against the president who was parachuted in from the Ministry of Finance.
Over time, the "interchangeable personnel system" was finally started with a compromise between the Tanaka Cabinet and the then-BoJ President.
As the name suggests, the position of President of the Bank of Japan takes turns.
This time it is the Ministry of Finance, so the next president must be selected from within the Bank of Japan.
However, most of the time, due to parachuting and internal confrontations within the Bank of Japan, the president from the Ministry of Finance is often at risk of being sidelined.
The man in front of him, Yasushi Mieno, is a direct descendant of the Bank of Japan, and he is also a loyal follower of Naoto Ichimanada.
That’s right, what Yasushi Mieno has always wanted to do is to make the Bank of Japan independent and implement its own tightening policy.
With thoughts racing in his head, Murayama Ren'o raised his hand to stop the arguing between the Ministry of Finance official and Mieno Yasushi.
“Mie No-san, Neon’s inflation situation is still within controllable range.
However, considering the unusually active real estate market, the Ministry of Finance agreed to raise interest rates. However, the rate hike needs to be carried out in multiple steps and should not be too hasty. "
Alas, there is no way. The bubble in Japan is a problem and it needs to be solved.
Moreover, the United States and Britain are both raising interest rates, and Japan can only follow.
If we don't follow, capital will flee and Japan's stock market will likely experience a hard landing.
So faced with this dilemma, the Ministry of Finance decided to make a small addition first to test the waters.
As for the feud between the Ministry of Finance and the Bank of Japan, let's put it aside for now.
After receiving a positive response from Murayama Ren'o, Mieno Yasushi finally smiled victoriously.
Only by raising interest rates on the Japanese yen can the banking industry be curbed from providing loans to the stock and property markets, which in turn can further curb the continued influx of hot money into these two markets.
As the amount of capital entering the market decreases, investment enthusiasm in industries such as real estate will decrease.
Eventually, housing prices will fall, and ordinary people will be able to afford houses.
What a perfect plan! Yasushi Mieno has long wanted to take action against the extremely high prices of goods and land in Neon.
Although the Ministry of Finance has not completely given in, at least this is a good start, isn’t it?
Yes, although Yasushi Mieno is the designated next president of the Bank of Japan, what he really wants is that people can actually afford to buy houses.
From this point of view alone, his starting point is good and he really wants to do something for Neon's economy.
However, economic regulation, especially economic regulation involving the international environment, has always been unpredictable.
Perhaps his original intention was good, but the final result might not be beneficial.
Yasushi Mieno has his own ambitions and an idealistic side.
However, the impact of these has not yet been reflected.
At this time, he was arguing with officials from the Ministry of Finance about how much the Bank of Japan should raise interest rates.
Naturally, Yasushi Mieno hopes that the more the better, at least to ensure that Neon can withstand the impact of the US dollar and British pound interest rate hikes.
However, as the current vice president of the Bank of Japan, he also knows that he cannot take too big a step, otherwise it is easy to get into trouble.
After several rounds of confrontation, the Bank of Japan and the Ministry of Finance finally reached an agreement:
The Japanese government plans to raise interest rates on the yen at the end of May, with the expected goal of adjusting the interest rate from the original 2.5% to 3.25%.
After the Plaza Accord, in order to implement a loose financial policy and stimulate domestic demand, there was a series of interest rate cuts.
Now, in order to curb the continued expansion of the bubble, Japan is preparing to raise interest rates again.
The interest rate hike discussed today is just a signal. Others may not know what will happen next, but Yasushi Mieno knows it very well.
He has made up his mind that once he takes over the Bank of Japan, he will continue to raise interest rates until the bubble is suppressed.
Yasushi Mieno, who was later regarded as the person who burst the Neon bubble, is also the famous "Heisei Demon".
His ambition and radicalism go far beyond what is revealed now.
In 1989, also the first year of the Heisei era, huge changes were already quietly brewing.
