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02 April 2011 By Ellen Brown
When an IMF spokeswoman said at a news conference on
March 17 that Japan has the financial means to recover
from its devastating tsunami, skeptical bloggers
wondered what she meant. Was it a polite way of
saying, "You're on your own?"
Spokeswoman Caroline Atkinson said, "The most
important policy priority is to address the
humanitarian needs, the infrastructure needs and
reconstruction and addressing the nuclear situation.
We believe that the Japanese economy is a strong and
wealthy society and the government has the full
financial resources to address those needs." Asked
whether Japan had asked for IMF assistance, she said,
"Japan has not requested any financial assistance from
the IMF."
Skeptics asked how a country with a national debt that
was over 200% of GDP could be "strong and wealthy."
In a CIA Factbook list of debt to GDP ratios of 132
countries in 2010, Japan was at the top of the list at
226%, passing up even Zimbabwe, ringing in at 149%.
Greece and Iceland were fifth and sixth, at 144% and
124%. Yet Japan's credit rating was still AA, while
Greece and Iceland were in the BBB category. How has
Japan managed to retain not only its credit rating but
its status as the second or third largest economy in
the world, while carrying that whopping debt load?
The answer may be that the Japanese government has a
captive funding source: it owns the world's largest
depository bank. As U.S. Vice President Dick
Cheney said, "Deficits don't matter." They don't
matter, at least, when you own the bank that is your
principal creditor.
Japan has remained impervious to the speculative
attacks that have crippled
countries such as Greece and Iceland because it has
not fallen into the trap of dependency on foreign
financing.
Japan Post Bank is now the largest holder of personal
savings in the world, making it the world's largest
credit engine. Most money today originates as bank
loans, and deposits are the magic pool from which this
credit-money is generated. Japan Post is not only the
world's largest depository bank but its largest
publicly-owned bank. By 2007, it was also the largest
employer in Japan, and the holder of one-fifth of the
national debt in the form of government bonds. As
noted by Joe Weisenthal, writing in Business Insider
in February 2010:
Because Japan's enormous
public debt is largely held by its own citizens, the
country doesn't have to worry about foreign investors
losing confidence.
If there's going to be a
run on government debt, it will have to be the result
of its own citizens not wanting to fund it anymore.
And since many Japanese fund the government via
accounts held at the Japan Post Bank -- which in turn
buys government debt -- that institution would be the
conduit for a shift to occur.
That could explain why Japan Post has been the
battleground of warring political factions for over a
decade. The Japanese Postal Savings System dates back
to 1875; but in 2001, Japan Post was formed as an
independent public corporation, the first step in
privatizing it and selling it off to investors. When
newly-elected Prime Minister Junichiro Koizumi tried
to push through the restructuring, however, he met
with fierce resistance. In 2004, Koizumi shuffled his
Cabinet, appointed reform-minded people as new
ministers, and created a new position for Postal
Privatization Minister, appointing Heizo Takenaka to
the post.
In March
2006, Anthony Rowley wrote in Bloomberg:
By privatizing Japan Post, [Koizumi] aims to break the
stranglehold that politicians and bureaucrats have
long exercised over the allocation of financial
resources in Japan and to inject fresh competition
into the country's financial services industry. His
plan also will create a potentially mouthwatering
target for domestic and international investors: Japan
Post's savings bank and insurance arms boast combined
assets of more than ¥380 trillion ($3.2 trillion) . .
A $3 trillion asset pool is mouthwatering indeed. In
a 2007 reorganization, the postal savings division was
separated from the post office's other arms, turning
Japan Post into a proper bank. According to an
October 2007
article in
The Economist:
The newly created Japan Post Bank will be free to
concentrate on banking, and its new status will enable
it to diversify into fresh areas of business such as
mortgage lending and credit cards. To some degree,
this diversification will also be forced upon the new
bank. Some of the special treatment afforded to its
predecessor will be revoked, obliging Japan Post Bank
to invest more adventurously in order to retain
depositors--and, ultimately, to attract investors once
it lists on the stock market.
That was the plan, and Japan Post has been investing
more adventurously; but it hasn't yet given up its
government privileges. New Financial Services
Minister Shizuka Kamei has put a brake on the
privatization process, and the bank's shares have not
been sold. Meanwhile, the consolidated Post Bank has
grown to enormous size,
passing up
Citigroup as the world's largest financial
institution; and it has been branching into new areas,
alarming competitors. A March 2007 article in USA
Today warned, "The government-nurtured colossus could
leverage its size to crush rivals, foreign and
domestic." Before the March 2011
tsunami, that is what it appeared to be doing. But
now there is talk of reverting to the neoliberal
model, selling off public assets to find the funds to
rebuild. Christian Caryl commented in a March 19
article in Foreign Affairs, published by the Council
on Foreign Relations:
As horrible as it is, the
devastation of the earthquake presents Japan and its
political class with the chance to push through the
many reforms that the DPJ [Democratic Party of Japan]
has long promised and the country so desperately
needs. In other words, a chance
for investors to finally get their hands on Japan's
prized publicly-owned bank, and the massive deposit
base that has so far protected the economy from the
attacks of foreign financial predators.
The Japanese government can
afford its enormous debt because the interest it pays
is extremely low. For the private economy, public
debt IS money. A large public debt owed to the
Japanese people means Japanese industries have the
money to rebuild. But if Japan Post is sold off to
private investors, interest rates are liable to rise,
plunging the government into the debt trap it has so
far largely escaped. The Japanese people are
intensely patriotic, however, and they are not likely
to submit quietly to domination by foreigners. They
generally like their government, because they feel it
is serving their interests. Hopefully the Japanese
government will have the foresight and the fortitude
to hang onto its colossal publicly-owned bank and use
it to leverage its people's savings into the credit
needed to rebuild its ravaged infrastructure, avoiding
a crippling debt to foreign interests. A
longer version of this article was posted on Asia
Times on March 31, 2011.
Ellen Brown is an attorney and president of the Public
Banking Institute,
http://PublicBankingInstitute.org. In Web of
Debt, her latest of eleven books, she shows how a
private cartel has usurped the power to create money
from the people themselves, and how we the people can
get it back. Her websites are
http://webofdebt.com and
http://ellenbrown.com. |
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