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

The external signals are clear: Mieno won't work, switch to a more dovish candidate.

The Bank of Japan operated entirely without independence under the wartime banking law of 1942. The appointment of the central bank governor was decided by the government; a single, legal, and procedurally sound appointment was sufficient.

All the Prime Minister needs to do is nod.

So Mieno was reassigned to an international organization to sit on the sidelines. The new central bank governor was a dove from the Ministry of Finance.

The prize pool is still growing.

...

In March 1990, the Japanese Ministry of Finance attempted another act of resistance.

The bureaucrats of the Ministry of Finance have a draft document in their hands—the "Total Volume Regulation" document. The contents of this document are:

Limit the total amount of bank loans for real estate.

To put it simply, it's about cutting off the land credit cycle of "bank loan → land purchase → land price increase → using the appreciated land as collateral to borrow more money from the bank → buying more land."

If this directive had been issued, its effect would have been more devastating than an interest rate hike. It was already drafted and ready to be issued on March 21st. But it wasn't issued because the US wouldn't allow it.

Another thing the United States did in Japan was called the "US-Japan Structural Agreement"—SII.

This agreement requires Japan to undertake 430 trillion yen in public investment over ten years, described as a large-scale expansionary investment. The US logic is:

Japan, you need to spend money, you need to develop infrastructure, you need to expand domestic demand! Only when you expand domestic demand will you buy more things from the United States, and only then can the United States reduce its trade deficit!

Within this expansionary framework, any contractionary agreement, including restrictions on real estate lending, is characterized as a betrayal. You restrict lending? That's contraction! Contraction is going against SII, and going against SII is going against the United States!

What should Japan do? Endure it.

As for the grievances of ordinary people suffering from skyrocketing land prices, the Japanese government uses a different set of words to dilute them—"Industries are shifting overseas, and domestic costs will gradually decrease," and "The island redevelopment plan will make your lives better."

Draw a pie in the sky, an even bigger pie in the sky, to cover up the resentment.

But behind this, both the KGB and the CIA are issuing warnings to their respective countries: Japanese right-wing groups are making plans. They have received substantial financial support from conglomerates. If Japan's bubble economy collapses and civil unrest is directed outward by these right-wing groups, the situation in Japan could very likely spiral out of control!

As Japan's close neighbors, the Soviet Union and China had to make military preparations for this.

In April, the Soviet military deployed four divisions to the Primorsky Krai in the Far East, while the Pacific Fleet in Kamchatka began preparations. At the General Staff, a larger plan was being formulated, codenamed—

Climbing Naroda

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 the spring of 1990, Japan's bubble economy reached its peak.

In Tokyo that spring, an atmosphere of unbelievable madness permeated the air:

A real estate developer bought a golf course for tens of billions of yen and then resold it for double the price the next day; bank loan officers went to golf courses and begged club presidents on their knees to get loans; at an art auction, a Japanese buyer purchased a Van Gogh painting for an astronomical price...

All of this is based on the assumption that land prices will always rise.

At the same time, the hollowing out of Japanese industry is already clearly visible. Those manufacturing companies that once supported Japan's status as the world's factory—auto parts, electronic components, precision machinery—have moved overseas in batches, to the Soviet Far East, to Southeast Asia, and to the United States.

Those remaining in Japan are increasingly from the finance, real estate, and speculative industries—industries that don't create tangible products but only manipulate numbers on paper.

A country's economy is like a tree. The real economy is the root, while finance and real estate are the branches and leaves.

The branches and leaves can be lush and beautiful, but if the roots are pulled out little by little, no matter how lush the branches and leaves are, they are all empty. A gust of wind will blow them all down.

Now, those roots have been almost completely pulled out.

Slava sat in his Moscow office, Tokyo stock market figures flashing on his terminal.

The industrial transfer was almost complete; a large number of Japan's best factories, best machines, and best technologies had been moved to the Soviet Far East.

Slava turned off the terminal screen.

it's time!

"Get me Washington."

Chapter 104 The Dream of Japan's Golden Age Should End.

Yuji Tanaka worked at the Tokyo Stock Exchange for eleven years.

He is a back-office clerk in charge of clearing. His daily work involves checking numbers, confirming settlements, and processing the thousands of buy and sell orders pouring in from the trading hall.

This job is tedious and mundane, like a screw in a machine. But this screw has been turning for eleven years without a single mistake, and he is proud of it.

On a May morning in 1990, he got up at six o'clock as usual, left home at six-thirty, and arrived at the stock exchange at seven-fifteen.

He changed into his work clothes in the locker room, nodded to a few colleagues in the corridor, and went into his liquidation room.

There was a row of screens in the clearing room. Numbers were jumping on the screens, numbers that had been constantly rising over the past few years. The Nikkei index was rising, trading volume was rising, and the settlement amounts he handled were getting bigger and bigger every day.

He was used to those numbers—they were like the tides of Tokyo, rising and receding every day, only to rise even higher the next day.

The stock exchange opened at nine o'clock in the morning.

Everything was normal for the first few minutes, then the numbers suddenly started to drop. Yuji Tanaka looked up at the large screen on the wall—the Nikkei index had fallen 300 points in the tenth minute after the market opened.

It's nothing, just a technical adjustment. The Nikkei is at 54000 points now, so it's not afraid of a drop of a few hundred points. These kinds of fluctuations happen every day, and usually when it drops by a few hundred points, buying will come in to catch it.

But no buyers came.

The numbers continue to drop.

Ten minutes later, the Nikkei fell by 600 points.

Yuji Tanaka's hands stopped on the keyboard. He felt something was wrong, as if the rationality that had been hidden in his heart by economic frenzy had suddenly risen to the forefront of his thinking.

He could see the crowd moving about in the trading hall through a glass wall.

Five minutes later, the Nikkei had already fallen by 1,000 points.

He heard people shouting, banging on doors, and throwing things in the hall. He quickly put on his headset and connected to the trading hall's communication channel.

The world began to collapse.

...

Sell ​​orders flooded in like a torrent. Everyone was selling; nobody was buying!

Yuji Tanaka stared at the clearing system's processing queue in front of him, a system expanding at a rate he had never seen before. Dozens, even hundreds, of settlement orders flooded in every second, and the system had begun issuing warnings, indicating that the influx of data had pushed its processing capacity to its limit.

"This...this...!"

He turned to look at the screen in the lobby. In the few seconds he looked at it, the Nikkei index had dropped another two hundred points, and the entire screen, densely packed with stock codes, looked like it had been doused with a bucket of blood—almost entirely red!

The traders in the hall had faces full of fear.

He saw a trader drop his phone receiver on the ground. He crouched down to pick it up, his hands trembling violently. After finally managing to pick it up, he saw the trader yell something at the other end of the line and then smash the receiver.

He slammed down the phone on the other end of the line. His client was urging him to sell, but he couldn't—because no one was willing to buy!

His order was hanging there, and he watched helplessly as the Nikkei fell below his stop-loss line, below his clients' margin lines, and below everything.

The sound coming from Tanaka Yuji's headphones became increasingly chaotic:

"Sell! Sell! Sell them all!"

"No sales! No buyers! Not a single one!" "Damn it! Is the machine malfunctioning?" "The Nikkei has dropped two thousand! Two thousand!"

"The special accounts of those big securities firms—their stop-loss lines are about to be breached!"

That last sentence was like a bucket of cold water poured over Tian Zhong's head.

Special Gold Accounts are a unique feature of the Japanese financial system. Major Japanese securities firms—Nomura, Daiwa, Nikko, Yamaichi, etc.—manage assets for corporate clients and promise guaranteed returns.

"Specific Money Trust," or TFT for short. This means that the brokerage firm signs a contract with the client: you give me your money, I invest it in the stock market for you; if you make a profit, it's yours, but if you lose money, I'll compensate you up to a certain extent!

This is one of the most absurd products of the bubble.

In an era when the stock market only went up and never down, such a guarantee was practically free money—because there was absolutely no risk of loss! As a result, major securities firms signed astronomical contracts, injecting trillions of yen into the stock market. This money had a stop-loss line—if the price fell to a certain level, the contract would be triggered, and the securities firms would have to compensate their clients as agreed.

Once the stop-loss line is breached—it's not just a simple financial loss. A triggered stop-loss means the brokerage firm must sell shares to cover the losses, and these large-scale sales will drive the stock price even lower, triggering even more stop-loss orders...

A death spiral just like the one that hit the US back then.

The only difference is that in the US, the problem was that the local optimal solution of the computer trading program led to the overall worst solution, while in Japan, the problem is that the stop-loss line keeps plunging downwards.

Yuji Tanaka suddenly remembered something else—the Basel Capital Accord. That agreement allowed banks to include unrealized gains on stocks in their capital.

The stock price is falling, and unrealized profits are evaporating. The bank's capital adequacy ratio is visibly dropping below the red line, second by second.

He finally understood what was wrong!

This is the collapse of the entire system.

By noon, the Nikkei index had fallen by more than 3,000 points. This was unprecedented in the world at the time; no stock market had ever dropped so much in a single morning, not even during the Great Depression in the United States!

But this is just the beginning.

In the afternoon, something even worse happened: bad news came from the bond market—government bonds began to plummet.

The decline in government bond prices means that yields have soared, which means that the cost of borrowing money for the Japanese government has suddenly skyrocketed.

If the stock market crashes, you can say it's the work of speculators; but government bonds are the cornerstone of a country's credit! A drop in government bonds means the market is beginning to doubt whether the Japanese government can repay its debts, and the country's credit is being questioned.

Yuji Tanaka sat in the liquidation room, staring at the numbers in front of him. Some of his colleagues were already too exhausted to stand; some had their heads buried in the table, some were on the phone, and many more were staring in vain at the line, praying for the protection of Amaterasu.

At four o'clock in the afternoon, the closing bell rang at the Tokyo Stock Exchange.

But the market closing doesn't mean it's over. Tomorrow, the day after, next week, next month... it all has to continue!

Japan's economy, which has risen by stepping on its own two feet, will eventually fall back to where it was meant to be; every gift of fate has already been secretly priced.

How could a small island nation with scarce resources possibly surpass a superpower in GDP so easily?

Yuji Tanaka was the last to leave the liquidation room. He locked the door and walked into the corridor. The lights in the corridor were on, but for some reason, they seemed much dimmer than usual.

He walked out of the stock exchange. Tokyo was brightly lit at night, neon lights flashing, and people came and went on the streets, seemingly no different from any other ordinary night.

The bigger ones are yet to come.

...

In the days that followed, Japan began its descent into hell.

The stock market can drop by over a thousand points in a single day, with occasional rebounds followed by further declines. Each rebound offers a glimmer of hope—perhaps it's bottomed out? Perhaps it's stabilized? Then that hope is crushed by the next round of sharp drops.

The stop-loss lines in the special financial account were breached one after another. The astronomical sums of guaranteed contracts signed by those major securities firms became a guillotine hanging over their heads. When the contracts were triggered, they had to pay losses; paying losses meant selling stocks; selling stocks drove the stock price even lower; and lower prices triggered even more stop-loss orders—that death spiral began to spread throughout Japan.

The situation was even worse for banks. With the stock market crash, their paper profits evaporated instantly, and their previously ample capital plummeted below the red line overnight.

When banks lack sufficient capital, they have to tighten their belts—withdrawing loans, suspending loans, and demanding repayment...

When banks withdraw loans, a company's cash flow is cut off. A cash flow disruption leads to bankruptcy, which in turn causes unemployment to skyrocket and consumption to collapse.

Consumption collapsed, the economy contracted, and the stock market plummeted even further;

The stock market fell further, banks lost even more of their unrealized profits, and their capital shortfall widened, forcing them to withdraw even more loans...

The spiral spins faster and faster, dragging Japan deeper into the abyss with each rotation!

The land market followed suit and collapsed. Banks withdrew loans, developers couldn't repay them, so they sold off land, causing land prices to plummet. The devaluation of land as collateral led to a surge in non-performing loans for banks, further exacerbating their capital shortage and resulting in even more aggressive loan withdrawals...

Another spiral.

Stock market, real estate, banking... one giant after another has fallen in this storm, and anything that tries to save it will be torn to shreds by the unstoppable tide!

Yuji Tanaka's face grew paler with each passing day. The same was true for those around him; an atmosphere of despair permeated the entire stock exchange.

One month, two months, three months.

The Nikkei index plummeted from nearly 52,000 points to just over 20,000, losing almost half its value!

The wealth that has evaporated is astronomical. The once dazzling Japanese economic miracle, which was admired by the whole world, is melting at a visible speed, like an iceberg falling into hot water.

Meanwhile, other countries have already begun looting the ruins of the Japanese shipwreck.

The Americans have arrived. Those American assets bought up by the Japanese at exorbitant prices during the bubble economy—Rockefeller Center, Columbia Pictures, those golf courses, skyscrapers...—are now being forced by their Japanese owners to sell them off at rock-bottom prices, one after another.

American capital bought these items back one by one at prices far lower than what the Japanese had paid for them.

The "Japan buys America" ​​scenario that once enraged Americans to the point of smashing Japanese cars has now reversed, with the US buying back all of Japan's war trophies for a pittance.

The Soviet Union arrived. Those auto parts factories, electronics factories, and precision machinery factories that had been completely relocated—their Japanese parent companies were struggling financially after the bursting of the bubble economy. These relocated factories became orphans left unattended. The Soviets quietly took over their operations, "politely" sending the Japanese management teams back to Tokyo one by one, replacing them with Soviet managers they had trained themselves.

Slava's words to the Japanese conglomerate in the restaurant, "I'll be your backer," now echoed like a belated joke in the Far East.

Those machines and equipment, those precision manufacturing techniques accumulated over decades, were firmly planted on Soviet soil and could not be removed. The factories were there, the production lines were there, the blueprints were there; the only change was that the Japanese left and the Russians returned.

The Soviet Union got everything it wanted, and now it has nothing to lack.

The so-called "OGAS orders," which fueled countless Soviet stories on the Tokyo stock market and drew in Japanese investors' money and confidence, naturally became worthless after the bubble burst. Japanese companies holding OGAS contracts, believing they had secured a decade of stable income, discovered numerous withdrawal clauses in the contract's execution conditions. The Soviet side used phrases like "force majeure" and "significant changes in market conditions" to freeze most of the orders.