Prawns and other similarities

Apart from innumerable mouth-watering varieties of his favourite fish delicacies, when he visits Japan later this week, Prime Minister Atal Bihari Vajpayee will have several other reasons to feel completely at home. Forget for the moment the fact that Japan is the world’s second-largest economy (a decade of near-recession has made its citizens forget it certainly), and most of the woes that beset Japan are ones Vajpayee is familiar with. Whether it’s the rotten state and near-collapse of the country’s financial system, the extent of corruption and favouritism that makes Indian politicians look like rank amateurs, or the antiquated laws, Japan looks frighteningly like India in many respects.

Stores with liquor licences have to wait three years before they can sell local beer, for instance, though vending machines outside sell this freely to everyone, even minors. And supermarket chain Daiei had to apply for two separate licences to sell hamburgers and hot dogs in order to display them in different areas of the same store. Declan Hayes, a professor of international business at Tokyo’s Sophia university says that Japan is both a developed and an underdeveloped economy. And yes, something that will make Vajpayee feel he has never left his country’s shores — even they have their fair share of controversies over the content of school textbooks.

As with Indian financial institutions, politicians play a big role in deciding who is to get loans from banks, generally for unviable projects. Estimates differ, but it is estimated that Japan’s dodgy loans range from anywhere between 16 to 25 per cent of its GDP - despite generous government bailouts, various banks like
the Hyogo Bank, and Hanwa Bank folded up in the mid-90s.

While the government claims the situation is manageable, that’s a vast exaggeration — Japanese corporations have been known to hide their bad assets, often with the tacit blessing of the Ministry of Finance. Four months before it failed, for instance, the Long Term Credit Bank of Japan had publicly posted a capital-asset ratio of 10.32 per cent, way over the prescribed prudential norm of 8 per cent. And when Yamaichi Securities went bust, it alleged the Ministry of Finance had told it to hide $2 bn of losses in offshore accounts. Similarly, Sanyo Securities’ bad loans turned out to be 220 billion yen, and not 80 billion when 14 unlisted accounts were discovered. This, most agree, is Japan’s real crisis.

While India’s just about discovering, thanks to various conversations on tape, the link between industrialists and organised gangsters like Abu Salem and Dawood Ibrahim, the Japanese came alive to this reality quite some time ago. To cite one example, close to half the loans given by housing finance firms, or around $7 bn, were lent to Yakuza or gangster-related firms in the economic boom of the ’80s; Yamaichi’s collapse really began when its core clients began to desert it in the wake of a series of scandals linking its president and top officials in payoffs.

As for the powerful Ministry of Finance that was supposed to monitor all this, it was getting seduced by money and sex — when Harunori Takahashi’s (the head of the Tokyo Kyowa Credit Association) empire collapsed, the MoF bailed him out with 685 billion yen of taxpayers’ money. Takahashi gave Yoshio Nakajima, a senior MoF official, over $1 million in bribes and introduced him to the favours of various waitresses. The Bank of Japan, the other watchdog, came into serious disrepute when a senior official, Yasuyuki Yoshizawa was arrested for bribery and corruption in March 1998.

Though different in nature from the VHP kind of problems India faces, Japan’s text-book problems are also legion. The ministry of education reviews all textbooks and standardises their contents across the country, an he history of the world war especially saw huge protests from the Chinese and the Koreans. For instance, Japanese books described Japan’s ‘invasion of the continent’ as an ‘advance into the continent’; officially approved texts mention ‘comfort women’ but don’t say they were prostitutes for Japanese soldiers, nor is there any description of Japan’s colonial rule in Korea, and so on. Of late, textbooks are not to mention divorce, single-parent families, late marriages, or curiously, pizza — bet the BJP’d love to be able to do that.

The wrong lesson: There’s a very real danger that, having heard all these stories, Vajpayee could take home the wrong lesson — it doesn’t happen only in India, and so it’s okay. He would do well to recall his Japanese counterpart was chosen for the job only because he promised to clean things up and carry out major structural adjustments in his country. Second, faulty policies at home have played a huge role in Japan’s decade-long recession, in a colossal financial crisis that’s yet to play itself out fully.

Koizumi’s reforms are an uphill attempt to fix all this, though given the deep-seated problem, his success is bound to be slow, and patchy. Amidst his discussions on fighting global terror, nuclear non-proliferation, Kashmir and the CTBT, perhaps Vajpayee will like to take some notes from his Japanese host on this matter.

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