Understanding the Bubble Collapse
Chapter 34
The Financial Crisis Described Early in This Novel
In the real world, it unfolded as follows:
- November 3, 1997: Sanyo Securities collapses
- November 17, 1997: Hokkaido Takushoku collapses
- November 22, 1997: Yamaichi Securities collapses
While the collapse of Hokkaido Takushoku Bank had the largest scale and impact, for the generation that experienced this in real-time, the collapse of Yamaichi Securities—a member of the "Big Four" securities firms—dealt a significant psychological blow. This event created a pervasive sense of despair, with people feeling, "Ah, this country is finished." This sentiment paved the way for the collapses of Long-Term Credit Bank of Japan and Nippon Credit Bank in 1998.
So, why did these banks fail? The reason was non-performing loans (NPLs). The Bank of Japan’s website explains NPLs as follows:
"Non-performing loans refer to loan assets whose economic value has decreased, such as when principal and interest payments are not received as agreed."
These loan assets with decreased economic value largely originated from real estate transactions during the bubble period. During the land-craze era of the bubble, many companies bought land at high prices for resort development and other projects. When the bubble burst, the value of these lands plummeted, leading to the failure of these projects. Banks that had lent money to these companies could not recover their funds.
Banks desperately tried various means to recover their funds, but the decline in land prices after the bubble burst was far greater. Let’s take a look at a specific example: a property at Echigo-Yuzawa Station in Yuzawa Town, Minamiuonuma District, Niigata Prefecture.
The Reality of a "Nearly Zero Yen" Yuzawa Property Originally Priced at 30 Million Yen
Echigo-Yuzawa Station, connected to Tokyo by Shinkansen and popular as a ski resort during the bubble period, saw a large number of resort condominiums built around it—about 15,000 units in total. These properties, which were priced over 30 million yen when sold, are now valued at almost zero. Even accounting for the 23 years since 1997, this price is abnormally low.
Let’s look at some actual land transaction data:
According to this data, the price per tsubo (approximately 3.3 square meters) in 1992 at the end of the bubble was 660,000 yen, but by 1997 it had halved to 380,000 yen. Such a decline in land value caused long-term evaluation losses that troubled banks.
[T/N- 660,000 yen = 3850.29 euro
380,000 yen = 2216.83 euro]
These non-performing real estate loans ultimately surfaced with the Accounting Big Bang in 2000. This led to mandatory non-performing loan disposal, and financial institutions were forced to seek public capital injections.
Those who are astute will understand. I just wanted to us
e the slow-paced explanation given.
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Translator Note
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I know it's not much of a chapter, I Just don't want mesh up my chapter count with .5 so treat it like full chapter