Chapter 538: Action
This Congress in early 1993 will not only discuss relief measures for the financial industry, but also announce the economic situation of the previous year.
Not to mention other data, the GDP in 1991 alone is enough to make many officials shudder.
In 1989, Japan's GDP was still around 5%, but in 1990 it dropped to 2.2%.
However, in the most recent year, that is, last year, this figure has become -0.34%!
If we look at the numbers alone, Japan's economy is in decline.
Since its take-off in the 1960s, Neon's economy has maintained rapid growth most of the time.
When the growth rate was the fastest, GDP even exceeded 12%. However, after a round of blows from the bubble, the economy has already completed negative growth?!
From heaven to hell, such a rapid reversal that many government officials couldn't even react.
But the headaches don’t end there. The bubble has just burst and many negative impacts have not yet appeared.
The current situation in the financial industry is also extremely worrying. Under the various blows, many officials in Congress have extremely solemn expressions.
After several days of discussion, the Ministry of Finance took the lead in preparing a thorough inventory of Japan's financial industry.
If we want to save the banks and maintain the "myth of banks not failing", we must understand the real situation facing the financial industry at this moment.
Therefore, any bank that reported huge losses and any bank that had sought assistance from the Ministry of Finance had to accept the working group assigned by the Ministry of Finance.
These working groups do not do anything else but to find out the asset situation of each bank.
Faced with the Ministry of Finance's sudden tough attitude, major banks could only accept it silently.
Because Japan's financial industry has indeed been in turmoil in the past two years, with various blows coming one after another.
If we don't do something, something unexpected might happen.
So starting from the beginning of 1992, civil servants from the Ministry of Finance began to mobilize and fly to cities big and small in Japan.
Changyin, which had originally resisted, had no choice but to accept the investigation obediently.
After nearly three months of investigation, the data brought back by the civil servants shocked the Ministry of Finance so much that it almost jumped up.
Last year, 21 banks announced bad debts of around 110 billion US dollars, which is equivalent to around 15 trillion yen.
However, this year this figure has tripled or quadrupled, reaching a terrifying 50 trillion.
Coincidentally, this number coincides with the estimated number that Kiichi Miyazawa distributed to many bank heads in the villa more than a year ago.
However, Miyazawa was still conservative at the time. The estimated figures by the expert group he convened were based on the late 1990s.
But we are just getting there now; 1992 was only the early 1990s.
The reason for such a big discrepancy is that land prices continue to fall rapidly.
As time goes by, the banks' non-performing assets are also expanding rapidly.
Another reason is that all major banks are covering up their bad debts.
Cooking the books is a traditional skill in the banking industry, okay?
Especially the Changyin Bank, after the Ministry of Finance conducted a thorough inventory of it.
Faced with those accounts, the civil servants who came fell into silence.
After reviewing the assets of Chang-Bo Bank, Finance Minister Haneda also fell silent.
What 4 trillion in losses and bad debts? That's simply nonsense.
Previously, the total loan amount announced by Long-Term Credit Bank was around 12 trillion yuan, of which bad debts were approximately 4 trillion yuan.
It was only because the information was exposed by the media that they were forced to publish the data honestly.
However, both the media and Baichuan Feng and others who had been keeping an eye on Changyin for two years underestimated Changyin.
According to the survey, Long-Term Credit Bank's total loan assets were 26.6 trillion yen.
Under normal circumstances, banks should be happy to have such loan business.
After all, bank lending is one of its main means of profit, whether you are a special bank or an ordinary bank.
But what is puzzling is that 55% of the 26.6 trillion yuan in loans from China Everbright Bank are related to the real estate industry.
Need I say more about the current situation of the real estate industry ?
According to optimistic estimates, nearly 40% of the 26.6 trillion yen in loans may become bad debts.
With over 10 trillion in non-performing assets, it is no wonder that the 2.8 trillion in relief funds previously allocated by the Ministry of Finance to Long-Term Credit Bank seem to have been wasted.
This amount of money is just a drop in the bucket for Changyin.
Changyin was a huge pit, a bottomless pit. The moment Finance Minister Haneda saw the report, he sentenced Changyin to death.
Ten trillion yen is something the Ministry of Finance can come up with if it grits its teeth.
But what about other banks? More than 50 trillion in debt is enough to destroy the entire Japanese financial industry.
At this time, even though he was at odds with the Miyazawa Cabinet, Haneda had to pick up the phone and ask the Prime Minister for help.
Miyazawa was also numb when he heard the numbers reported by Haneda.
How can we save this? The economy is in a downturn and the country has no surplus food.
Besides, the annual national budget is limited, and education, medical care, agriculture, industry and commerce, transportation, and scientific research all cost money.
We can't give up other industries just to save the financial sector. I don't know whether Miyazawa dares to make this decision.
Congress will definitely not agree to this. Why should other departments share the responsibility for finance's own scandals and bad debts?
Faced with this extremely headache-inducing number, Miyazawa thought about it again and again and decided to let the Ministry of Finance save itself first.
No matter what, we must stabilize the situation first and there must be no signs of further deterioration.
The advantage of the Ministry of Finance's self-rescue is that the money does not need to be discussed by Congress and can quickly have the effect of intervening in the market.
Knowing that the matter could not be delayed, Haneda immediately allocated 2 trillion yen in relief funds to help the major banks survive.
On this side, Miyazawa took the lead in discussing the rectification of the banking industry with Congress. The facts were in front of them, and it would be too late if no change was made.
However, there has been collusion between officials and businessmen since ancient times, especially in Japan, which is famous for nepotism.
The data that Haneda had just seen was placed on Shirakawa Kaede's desk the next day.
In fact, it's not just him, several other chaebol leaders also have corresponding information.
After seeing how big the bomb in the banking industry was, Baichuan Feng also took a breath.
My previous calculations with Arai Yu were still conservative, and Changyin has deceived too many people.
Among the top ten borrowers of Changyin, there are five real estate companies, three financial companies and two industrial companies.
In other words, finance and real estate account for 8 out of the 10 places, and the only two industrial companies are Tokyo Electric Power and Kawasaki Heavy Industries.
Moreover, their ranking is relatively low, and financial real estate is the hot spot for China Merchants Bank.
Looking at the list, Shirakawa Kaede and Arai Yu both smiled bitterly.
“I didn’t expect that Changyin, which started out as an asset-heavy company, would end up losing even its basic foundation…”
"In the golden age, faced with the huge profits in the stock market and real estate, few banks could remain calm and unmoved."
Arai Yu was not surprised by the situation of Changyin. The financial industry was naturally fond of pursuing high-risk, high-profit financial products.
However, no one expected that the scale of Changyin’s loans would far exceed initial expectations.
"Mr. Arai, with the current bad debts of Changyin, can Kitato Bank absorb them?"
Faced with over 10 trillion in bad debts, Baichuan Feng also became unconfident.
This is far from what was originally expected. He wants long-term silver, but not at the cost of sacrificing himself.
“If all the 10 trillion are bad debts and non-performing assets, Kitakyushu Bank will not be able to handle it.
Chairman Shirakawa, please do not forget where the financing of Changyin comes from. It is essentially different from Hokuto Bank. "
Hearing Arai Yu's reminder, Shirakawa Feng smiled bitterly again. He almost forgot that Chang Hwa Bank was formerly a special bank.
Unlike commercial banks such as Kitato Bank, 80% of Changyin's financing is obtained through issuing bonds.
The ratio of interest-bearing bonds to discount bonds is about 3:1. The difference between the two is that one has a repayment period of five years and the other has a cashback period of one year.
The former are mostly held by institutions, while the latter are mostly purchased by individuals.
A simple and rough understanding is that the money that Changyin lends to major companies comes from crowdfunding.
Long-Term Credit Bank makes profits through the interest rate difference between loan interest and bond interest.
If the loan target is industrial groups, this should be a very stable loan income.
But the difficulty lies in the fact that Changyin has gradually transformed and invested all the money in financial real estate.
Now these bad debts and non-performing assets are all earned from issuing bonds.
In other words, this money needs to be returned to the institutions and individuals with interest later.
In essence, Changyin itself is also a debtor, and it owes money to those who buy Changyin bonds.
Now there is such a huge shortfall. When the one or five years mature, how will Changyin use the money to pay its creditors?
If it cannot come up with the money, bankruptcy will be waiting for it.
To be honest, even Beidu Bank cannot afford such a huge deficit of 10 trillion yuan.
The cold wave of the bubble has not yet demonstrated its power. Who knows whether Changyin’s bad debts will increase.
Just when Baichuan Feng was in a dilemma, the phone on the desk suddenly rang.
"Moshimoshi?... So it's Miyazawa-san... Okay, I'll be there for sure."
After hanging up the phone, Baichuan Feng had a complicated expression.
“The Miyazawa Cabinet would like to invite the Kitato Bank to discuss the Neon banking industry restructuring plan.
The Long-Term Credit Bank is one of the key issues under discussion, and it seems that the Ministry of Finance is ready to give it up.”
"Huh?" Arai Yu was caught off guard by the news.
He did not expect the Ministry of Finance to act so quickly. Hasn't the "bank invincibility myth" always been its creed that it has been trying hard to maintain?
In fact, the Ministry of Finance had no other choice because the media had revealed that the banking industry had more than 50 trillion yen in bad debts.
Now the stocks of major banks in the market are plummeting.
The share price of Long-Term Credit Bank, which was originally struggling at 200 yen, has now fallen to around 120 yen.
If it falls below 100 yen, then Changyin will be really finished.
According to the procedures of the Tokyo Stock Exchange, stocks that fall below their issue price will be delisted after a certain period of time.
A top-notch bank that was delisted was simply a joke, and neither the Ministry of Finance nor the Cabinet could afford to lose face.
"President Shirakawa, what should we do now?"
Ten trillion yen, Long-Term Credit Bank... these made Arai Hiroichi unable to make up his mind for a while.
The more sudden the situation is, the calmer Baichuan Feng becomes.
He paced back and forth in front of the window for a while, then turned back and said in a firm tone.
"Looking for external assistance, we will make a detailed plan for the acquisition of Changyin!"
