Atsumi Foundation Get-Together 2008

The Atsumi Scholarship Recipient get-together for the fiscal year 2008 was held on November 4th (Tuesday) from 6PM at the Atsumi Zaidan Hall. The Chairman of Shinsei Bank and one of the Directors of the Atsumi Foundation, Mr. Masamoto Yashiro gave a timely talk about the once-in-a-century financial crisis that we are now experiencing, based on his rich experience in this field.

Mr. Yashiro’s comparison of the current US-epicentered financial crisis with the financial crisis that struck Japan in the 1990s was particularly noteworthy. According to his explanation, the US-epicentered and the Japan-epicentered financial crisis had in common the fact that these both occurred after the bursting of a real estate bubble. The bubble economy of Japan in the second half of the 1980s was triggered by the need to adopt a loose money policy so as to avoid a slowdown of the Japanese economy as a result of the strengthening of the yen after the Plaza Accord. The flooding of the economy with money prompted the irrational investments into real estate, causing real estate prices to skyrocket. Eventually, the bubble burst and banks that embarked on aggressive lending during the bubble became saddled with bad loans. As with the US-epicentered subprime problem, the US banks rode on the real estate bubble in the US, and engaged in prolific lending to finance the American dream of owning one’s own house. Eventually, the rapidly increasing real estate prices went into a nose dive and the US banking system faced the burden of bad loans. Similar to what happened in the Japan-epicentered financial crisis, the banking sector was forced to implement a credit crunch.

Regarding the cause of the US-epicentered financial crisis, Mr. Yashiro cited the lack of control of the financial sector by the US authorities. As a result, the financial sector in search of higher profits took on excessively high risks. Such high risks presented the possibility of high returns, but this means that the probability of obtaining such high returns correspondingly drops. Moreover, with the development of hi-tech financial services as seen in the US-epicentered financial crisis, it became increasingly difficult to clearly grasp the risk given the complicated schemes of such services.

There was a point made from the floor that the Japanese financial sector did not ride on such complicated services as much as the US did. While criticizing the excessive investment techniques of investment banks, Mr. Yashiro suggested that Japanese banks may not necessarily be in a sound position.

Mr. Yashiro cited at least two points wherein the US- and Japan-epicentered financial crises may be different. The Japanese crisis was relatively more limited as it basically stayed within Japan. On the other hand, the US crisis has been infecting the whole world at a terrific pace. This is evidence of the progress of globalization of financial services between the 1980s and the 2000s. The subprime loans have been incorporated into several investment packages and sold worldwide. Another point of difference is the comparatively slow response by the government and the banks in the Japan case. A slow pace could be seen in the injection of public funds into, and the writing off of bad loans in the debt-ridden banks.

There were a number of questions made from the floor, to which Mr. Yashiro replied in length. One common thread in the questions, including that asked by Mr. ..Akashi, was about Mr. Yashiro’s opinion on the current financial system. On balance, Mr. Yashiro appeared to remain optimistic of the system to solve various problems.

(Text and Translation:F.Maquito)

Photos by Tanihara