Eagle, I don't want to form an alliance anymore.

In a secret meeting room in Tokyo, in those private conversations where no minutes were ever taken, in those words known only to a select few—a word quietly emerged.

nuclear weapon.

Chapter 101 The Illusion of the Greater East Asia Co-Prosperity Sphere

In 1946, just after the end of World War II, the Japanese Economic Stabilization Headquarters assessed the country's situation: 40% of the nation's factories and infrastructure were gone, the country was burdened with a mountain of war debts, and the calorie figures on the food ration books were so low that even doctors shook their heads in dismay.

The Americans officially took over Japan that year, because if they didn't intervene, a socialist country would grow on the island!

Poverty is the soil of communism.

So the United States rewrote the Japanese constitution, accelerated land reform, revised textbooks, and even liberalized labor unions. In 1952, the main force of the American occupation forces withdrew from Japan, but before they had completely left, war broke out on the Korean Peninsula.

The front lines needed trucks, canned goods, blankets, and repair shops; orders poured in from across the Tsushima Strait for three years. Japan's economy began to take off.

What happened next was easy to predict. Japan has a large population, cheap labor, a high literacy rate, and it caught the first wave of globalization. It would be unreasonable for it not to take off!

Japan first sold agricultural products, then cameras, cars, and radios. From 1954 to 1972, Japan's GDP grew at an average annual rate of over 10%, a phenomenon economists dubbed the "Japanese economic miracle."

Right after the war, Japan's GDP per capita was less than one-fifth of that of the United States; by 1973 it had caught up to two-thirds; and by 1987 it had reached ninety percent. It was projected that by 1989, converted to yen after the two exchange rate agreements, Japan's GDP per capita would surpass that of the United States!

Forty years to climb to number one in the world is enough to make the Japanese stand tall with pride.

Since the Meiji Restoration, Japan's economic lifeline has been in the hands of a few families—Mitsubishi, Mitsui, Sumitomo, and Yasuda, known as the four major zaibatsu.

During the heyday of the zaibatsu, the government had to consult with them before using any money. Many people in later generations believed that the zaibatsu were behind the wars that Japan launched in the 20th century.

After Japan's defeat in World War II, the Americans dismantled the Japanese zaibatsu, confiscating their assets and purging their families. Although the Americans dismantled the zaibatsu, the concept of sticking together was already ingrained in the Japanese character, and within a few years, the broken companies regrouped around their respective banks.

This time they changed their name to conglomerate.

The newly reorganized conglomerates consisted of six companies: Mitsubishi, Mitsui, Sumitomo, Fuyo, Dai-ichi Kangyo, and Sanwa. These six conglomerates dominated the Japanese economy for the next half-century.

The heart of Japanese conglomerates is the bank.

Deposits come in, loans go out; if any subsidiary is short of money, a phone call is all it takes for a low-interest loan to arrive on the same day—isn't that wonderful?

A conglomerate can simultaneously cover the electronics, food, oil, automobile, and semiconductor industries. Companies under the conglomerate hold shares in each other, and the presidents frequently exchange ideas and support one another.

Most manufacturing giants, such as Toyota, Toshiba, and Nissan, band together from raw materials to production and sales. A single conglomerate can contain tens of thousands of companies. This is a typical example of crony capitalism, also known as bureaucratic capitalism.

During the period of rapid economic growth in Japan, this conglomerate's economic system was very advantageous, improving efficiency, integrating resources, reducing unnecessary competition, and providing employees with lifetime employment. This is why Japan's rapid economic growth miracle occurred in the 60s.

The government manages this financial machine with only two levers: one is the interest rate, and the other is called window guidance—the central bank tells banks how much to lend this quarter and in which direction, a tactic that has proven effective time and again.

However, the oil crisis struck in 1973 and 1979. Japan imports more than 95% of its oil, and when oil prices rise, inflation flows in through the oil pipelines.

Japan's response was economic transformation, shifting from an extensive production-oriented approach to a technology-oriented one. During this period, influenced by high oil prices, Japan began designing fuel-efficient cars. As global oil prices soared, the demand for fuel-efficient vehicles increased, leading Toyota's car production to rise from 15 in 1960 to 330 million in 1980. Meanwhile, other Japanese companies such as Sony, Panasonic, Toshiba, and Hitachi all became regular customers for consumers worldwide.

Just as Japan's economy was growing rapidly, Americans gradually became fed up with it.

In the 70s, the United States first unilaterally announced its decoupling from gold and its departure from the Bretton Woods system. Then, two oil crises plunged the United States into high inflation, with the inflation rate once reaching 14%. At the same time, the economy stagnated and fell into a very serious stagflation.

At the time, Federal Reserve Governor Paul Volcker was very aggressive and decided to raise interest rates to curb inflation, raising the federal funds rate to 20% in 1981!

The result was that inflation was contained, but the large amount of currency stored up also hampered the US economy, directly causing a recession in US manufacturing. At the same time, it also caused currency appreciation and a trade deficit, because the dollar appreciated significantly, making exported goods more expensive and harder to sell. Therefore, the US was very uneasy about Japan's good fortune.

Paul Walker was very decisive, willing to sacrifice economic growth, foreign trade, and manufacturing exports in order to curb inflation.

As the dollar soared, Japan's inexpensive and high-quality electronics and automobiles flooded into the United States, which is when the American auto industry began to decline.

Japan took off during the two oil crises of the 70s, but the United States was mired in a quagmire. How could this be allowed?

Under pressure from domestic auto giants and giant corporations like IBM, the United States began a trade war with Japan. Reagan directly limited the number of Japanese cars imported each year and imposed tariffs as high as 100% on Japanese electronic products, but the actual effect was not good.

There's no other way; we have to devalue the dollar!

In May 1985, the United States and Japan reached the Plaza Accord, jointly selling off dollars to devalue them and alleviate the U.S. trade deficit.

The Bank of Japan's solution followed the textbook approach perfectly—interest rate cuts. In 1986, the Bank of Japan slashed interest rates by more than half, and a large amount of money began to flow into the market. The economy recovered, and inflation miraculously did not skyrocket—because a large amount of yen went elsewhere.

As we all know, excess liquidity in the market has only two destinations: either it flows into the real economy, resulting in inflation, or it flows into the financial industry or real estate, resulting in a bubble.

Japan chose the latter.

From 1985 to 1988, commercial real estate prices doubled, with land in Tokyo's Ginza district fetching as much as $22 per square meter in 1988! The Nikkei index quadrupled in four years, reaching 39000 points.

This huge bubble isn't just being inflated by banks and individual investors; conglomerates are also involved.

Since the 1970s, Japan's financial system has become more market-oriented. The Americans have been coercing and enticing Japan to learn from the United States and develop its financial market, allowing the invisible hand to enter the market.

As a result of the booming financial market, bond issuance became more common. Coincidentally, the central bank cut interest rates, leading large companies to find that issuing bonds directly to the market was much faster than borrowing money from banks!

As a result, customers who went to the bank for loans left in droves. The banks were struggling, but the central bank didn't care. The central bank's lending targets, set through window guidance, were still in place; targets were targets, and they had to be met!

Banks, having no other option, resorted to aggressively promoting their loans, practically begging people to lend money. In this climate, banks naturally lowered their standards to meet targets, lending to companies with poor credit and even providing large sums of money to individuals.

Banks will lend money to anyone who can draw a picture of a piece of land on paper—land prices are rising every day, and banks feel they can make a sure profit; at worst, they can just take back the property!

Meanwhile, a new regulation was introduced in 1988: unrealized profits from bank stock holdings could be included in the current year's profits. As a result, companies within the consortium bought each other's stocks, one buying from the other, all showing profits on paper, inflating each other's bubbles.

By the end of 1988, two-thirds of the shares in the entire stock market were held cross-shareholdings between companies, and the core banks of conglomerates held half of the market.

Even a pig sitting in the central bank could see that this kind of economy, where banks lend to each other and inflate stock prices, is absolutely problematic. But what can the Bank of Japan do? Raise interest rates?

Other countries would not allow it.

Japan raising interest rates now is like finding a platform to jump off before reaching the top of a building—it's better to fall and break your leg than to fall to your death, right?

As a result, with the collusion of the Soviet Union and the United States, the G7 convened and signed the Global Economic Recovery Agreement, which the market called the Second Plaza Accord. The yen appreciated strongly again in December 1989, rising directly to 75 yen to the dollar!

Some people wanted to raise interest rates, but the CIA and KGB didn't ignite it because of the Licourt incident. The US and the Soviet Union had a list of more than 7000 people in the Japanese political and business circles, and they would release a small portion of the list if anyone disobeyed.

The CIA is extremely adept at this kind of thing. During the Great Depression, the CIA's budget was heavily cut in the US. As a mature intelligence agency, learning to be self-reliant is an essential skill. Extortion, blackmail, and kidnapping are all done seamlessly. Many CIA agents have made a fortune in the Japanese stock market using insider information.

Thus, Japan's only hope right now is that the next US president will have a change of heart and, for the sake of the free world, for the sake of democratic unity, and for the sake of confronting communist ideology, will not allow the yen to appreciate!

On December 19, the U.S. Electoral College cast its final vote. Democratic candidate Dick Gephart defeated Republican candidate George W. Bush by a landslide of 170 votes, utterly crushing the hopes of the Japanese.

Since raising interest rates cannot reduce yen liquidity in the domestic market, Japan has no choice but to choose another method—to let money flow out of the country.

Sigrún has taught at the Iceland University of the Arts as a part-time lecturer since and was Dean of the Department of Fine Art from -. In – she held a research position at Reykjavík Art Museum focusing on the role of women in Icelandic art. She studied fine art at the Icelandic College of Arts and Crafts and at Pratt Institute, New York, and holds BA and MA degrees in art history and philosophy from the University of Iceland. Sigrún lives and works in Iceland.

The night of January 10, 1989, Akasaka, Japan

In front of the famous ryotei "Rangetsu," a row of luxury cars were lined up in order. Leading the way was Hashikawa from Mitsubishi Bank, and the last one was Mr. Saegusa from Industrial Bank. Yanagida Tsuneo, the finance officer of the Ministry of Finance, stood inside the entrance hall counting the number of people.

Distinguished guests were all present, including representatives from the core banks of the six major financial groups, the Bank of Japan, and various giant corporations.

The restaurant staff had never seen anything like this before. These people attending the meeting controlled more than 80% of Japan's economy; even a cough from them could bring down Akasaka City! The female stewards of the ryotei bowed their heads and reverently accepted the coats from these adults.

Tonight's event is called the "International Balance of Payments Research Conference," but the conference has no bylaws and no records.

The representative of the First Bank Foundation also brought a young secretary. Yanagida Tsuneo glanced at her, and the secretary was left in the outer room.

A calligraphy scroll hangs between the beds, which reads "Harmony, Respect, Purity, and Tranquility".

"Gentlemen," Yanagida said after all the other irrelevant people had left, "both Prime Minister Takeshita and the Ministry of Finance want to hear about the allocation of foreign assets..."

Where else can we put it?

Soichiro Kamiya of the Bank of Tokyo put down his cup and said, "We've been buying dollar assets for forty years. The US market is now bottomless. The only thing to worry about is the anti-Japanese populist sentiment in the US—but that's okay. We can stop sending Japanese laborers. I think now is a great opportunity to buy up US assets at rock-bottom prices."

He took out a Dupont lighter from his inside suit pocket, struck it twice, and lit it.

"The whole of America is having a clearance sale right now, Rockefeller stuff is all on sale, ha! Let me tell you, the price of office buildings in Manhattan now is the same as the price when the Empire State Building was completed, this is a once-in-a-century opportunity!"

The female general brought in two more dishes, but no one touched them.

"Speaking of which—how far has Kamiya-kun's California project progressed?" Kusakabe Itsaburo, representative of Marubeni Corporation, picked up a piece of sashimi.

There was a moment of silence on the table.

“The hearings are now over,” Kamiya said. “The Federal Deposit Insurance Corporation (FDIC) came to us; that savings institution was going to be liquidated in two months. Our proposal saves taxpayers $11 billion compared to government takeover, and Congress will naturally agree to our offer.”

It's ridiculous that Donald Trump said he'd rather the company rot in American hands than benefit foreigners! He almost went bankrupt himself—by the way, this troublesome congressman, maybe we should try to lobby him…”

“The Ministry of Finance has already investigated. This person previously received several million dollars in relief funds, but we don’t know who sent them. We need to be careful,” Yanagida said.

"Alright, alright, everyone knows that business is tough in America right now, and the new president isn't someone who can be easily fooled. We should focus on Asia." Toshiba's Masao Akiba poured himself some wine.

Kamiya put the lighter back in his pocket, struck a match from the ryotei (traditional Japanese restaurant), and lit a cigarette.

"What about Europe or Southeast Asia? Perhaps the dream of the Greater East Asia Co-Prosperity Sphere can really be realized in our generation."

"Europe isn't a good option. There are too many restrictions. It's the front line of the US-Soviet rivalry, and the Americans won't let us get involved there," Kusakabe said. "As for Southeast Asia? How much can Thailand absorb in a year? We need to send hundreds of billions of dollars out. Vietnam, Laos, Cambodia, and Thailand are either China's backyard or within the Soviet Union's sphere of influence. Are we going to spend our money in Indonesia or Taiwan?"

“We can’t touch Taiwan. Have you forgotten the Soviet Union’s attitude when China and the Soviet Union were on friendly terms? Secretary Ivanov fully supports the CCP’s reunification with Taiwan. It’s too risky for us to keep our assets there.”

“I understand, so Kusakabe-kun will take everyone to Vladivostok,” said Mr. Saegusa.

“It’s the Nakhodkat district,” Kusakabe corrected quickly. “And Khabarovsk. The Soviet Union offered a very high discount on electricity, and tax exemption for the first seven years. They said that if many companies came, they could negotiate a 50-year land use right with us.”

The Soviet Union's natural gas was buried under the land of Sakhalin, and the pipelines to the Far East Special Zone were 4,000 nautical miles closer than oil transported from the Persian Gulf!

I've heard that over 2 million people in the Soviet Union are experiencing severe shortages of consumer goods, and Americans say that Soviet citizens have to queue for four hours to buy a single television set—ladies and gentlemen, that's an enormous market!

Kamiya suddenly asked, "Can Soviet orders be predicted? If we're going to sign one, it will definitely be a long-term order."

"The Soviet Union had a planned economy, Kamiya-kun. Under the planned economy system, the state-owned '705u.com-reading club's first release' orders are the most stable. We only need to worry about not having enough orders."

"And what about the risks?" asked the representative of the First Bank Consortium.

"They're pretty much the same; the equipment is all on their land. This is no different from California."

Someone chuckled.

An employee from Sumitomo Bank said, "There is a difference. The Soviet special economic zones couldn't operate without yen. They were tied to us."

Everyone laughed, and that's how the tone of cooperation with the Soviet Union was set.

At this moment, Mitsubishi's representative, Hashikawa, turned the cup back onto the saucer: "The United States will not allow Mitsubishi to go to the Soviet Union. The previous negotiations with the US Congress regarding the new fighter jet have been completed. We will make our own fighter jet - codenamed Shinshin. Our Self-Defense Forces' own tanks, destroyers, and helicopter destroyers will all begin to be independent and self-reliant."

"In this regard, the Americans will not allow Japan's military to align itself with the Soviet Union," he said. "That's enough for me tonight. Farewell."

He bowed slightly to Liu Tian and left.

“The Mitsubishi Group has staked everything on Washington,” Kusakabe said, picking up the last piece of tempura from the plate and placing it on his own plate.

Mr. Sanzhi from Industrial Bank coughed and had something to say: "Gentlemen, what we are doing now is essentially taking the patient to our neighbor's house to be cared for. The root of the problem is interest rates! We must restore interest rates to what they should be—even if the Nikkei falls from 4 to 2, even if land prices are halved, it's still a fall on our own floor, and the bones are still our own!"

“Mr. Saegusa!” Yanagida looked at him pleadingly.

The Ministry of Finance has run out of good options. Since raising interest rates is blocked, Japan can only focus on overseas investment! He really doesn't want to see any conglomerates objecting to this.

“I know, Liu Tian.” The old man waved his hand. “Someone mentioned this in October, and less than a week after that, his name appeared in Bungei Shunju, and the company immediately went bankrupt. We all know who’s behind this.”

He looked at Yanagida: "As for the next name to be revealed by the Americans, does CFO Yanagida know who it is?"

Liu Tian sighed, picked up the teapot, and refilled the old man's tea.

He kept pouring tea even when the cup was full, until the tea overflowed the rim and accumulated in a small patch on the lacquer tray.

He put down the pot, took out a piece of paper to wipe the lacquer tray dry, folded it neatly, and placed it beside him.

Sanzhi looked at the folded piece of paper and nodded.

He understood the Ministry of Finance's despair; Japan now possessed the economic power to rival the United States, but not its sovereignty. Having worked in banking since the Greater East Asia War, he left when the young finance minister didn't want to hear more of his discouraging remarks.

The old man turned to look out the window; the snow had covered the stone lanterns in the courtyard with white.

"I remember it was February of Showa 11, and it was snowing just like that."

That morning I was at the Bank of Japan headquarters. My seniors told us newbies to go down into the vault to do the counting, but no one explained what we were counting. At noon, news came that Takahashi had been beaten to death at home by a group of soldiers in their twenties.

Yanagida knew what happened on February 26, 1942: Finance Minister Takahashi was killed by young Japanese officers during the 226 Incident. Saegusa was simply warning him that if things continued this way, he would inevitably meet his end as a sinner who led Japan toward hell.

But he has no choice! Unless Japan can obtain its rightful sovereignty! Unless Greater Japan no longer has to act according to the whims of the Americans! Japan's GDP per capita is now higher than that of the United States, so why should the United States hinder Japan's rise?

Saegusa, seeing that his words had made the assembled representatives of various conglomerates begin to ponder the reasons why Japan had fallen into such a predicament, nodded in satisfaction and rose, supporting himself on the mat.

"That's all I have to say. Farewell, everyone."

The dream of the Greater East Asia Co-Prosperity Sphere has resurfaced.

Sigrún has taught at the Iceland University of the Arts as a part-time lecturer since and was Dean of the Department of Fine Art from -. In – she held a research position at Reykjavík Art Museum focusing on the role of women in Icelandic art. She studied fine art at the Icelandic College of Arts and Crafts and at Pratt Institute, New York, and holds BA and MA degrees in art history and philosophy from the University of Iceland. Sigrún lives and works in Iceland.

In February 1989, Japanese yen began flowing into the Soviet Union in large quantities. By the end of May, the outflow of long-term capital from Japan exceeded the total outflow in the three years prior to the Plaza Accord!

In March, Mitsubishi Estate purchased Rockefeller Center. A photo of the handover ceremony appeared on the front page of The New York Times, showing fourteen people standing in a row, with three Japanese in the middle, further fueling resentment among the American people.

In the same month, Nissan's financial report showed that for the first time, gains from securities investments exceeded those from car sales, indicating a further contraction in the real economy due to outflows. The Nikkei index continued to rise, fueled by news of investment and cooperation with the Soviet Union, reaching 49000 points!

In April, the Tokyo branch of the Soviet Foreign Economic Bank officially opened. The following week, the first Soviet Samurai Bond, worth 4 billion yen, was issued. The First Industrial Development Group of Japan was responsible for underwriting the bonds, and the Japanese people flocked to them, with subscriptions exceeding the issuance amount within five days!

The Soviet Union included a map of gas fields on the Sakhalin continental shelf as an appendix to its bond issuance prospectus—the Soviets stated that bond repayments would be tied to natural gas deliveries over the next fifteen years. In other words, the money Tokyo lent out would be repaid using gas produced from gas fields developed with Tokyo's own funding.

No one thought there was anything wrong with the statement. Or rather, the person who saw the problem simply didn't say it.