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~~~~ ” ….The real driver in the consumption problem is Mrs. Watanabe, the Japanese equivalent of the “soccer mom” in the US.

She is frightened.

If you took Mr. or Mrs Watanabe’s pulse in terms of job security, it has tripled in the last two years.

The reason for the fear probably is the collapse of Yamaichi Securities.

At no time in the last 50 years would anyone have imagined that the government would allow a big, national institution like Yamaichi to close.

It has had a massive impact.

We have seen the savings rate actually increase as a result….

…. The banks are very, very sick.

They have taken on far too much.

The bottom line is that the Japanese government  has injected 60 trillion yen or 13% of the economy to rescue the banks.

Some have said there have been no changes in these institutions.

I take great exception to that.

If you compare the rescue, last autumn of Long Term Credit Bank and the recent rescue of Nippon Credit Bank they were handled very differently.

LTCB was allowed to see its stock price go down to one or two yen.

It hovered at that level which is clearly bankruptcy.

They had to put an act through Parliament and eventually they forced the nationalization of the bank.

In contrast, Nippon Credit Bank was nationalized when the stock price was still 150 yen.

There were quite a few people hanging in the City in London saying, “This bank is completely viable.”

Overnight, no act of Parliament, Hino nationalized it. That is a radical difference in six months.

The second point concerns the enormous recycling of wealth.

From an investors point of view you have to question at what stage you write off an economy.

Going back to our 19th century UK analogy you may have written off the UK as an investment location in 1870.

You would have been foolish, too.

That began the start of the UK’s role as the prime investor in the emerging market of the time which was the United States.

Thanks to that investment overseas, increasingly higher rates of return were being made on capital in the UK.

The point I found most interesting in this analogy was just how long that wealth could last.

Despite economic problems, the UK had the highest wealth per capita from 1870 to 1960.

That is an outrageous statistic.

There were some very, very wealthy people.

I will say that in 2050, whatever happens to Japan, even if they go over the precipice, there are going to be some very, very rich Japanese….

….It has been said that there are more entrepreneurs in Shanghai than Tokyo.

I am sure that is absolutely true.

But I don’t look for entrepreneurs in Tokyo.

I find them in Osaka, in Nagoya or Hokkaido.

Tokyo is not the place.

Tokyo is for the rich, corporate spoiled brat.

They go and join Nomura Securities or one of the various ministries…”~~~~

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Comments by a British hedge fund manager to the Greenwich Roundtable, 1999…