Los Angeles Times, January 30, 1989, Monday
For Japan, Gilded Age Of Riches
By KARL SCHOENBERGER, Times Staff Writer
TOKYO -- Just two days after the death of Emperor Hirohito, Japanese
investors cast aside a thin cloak of mourning to indulge in a bit of
The Tokyo stock market went through the roof. On Jan. 9, the Nikkei average
scored its largest single-day gain in a year, closing at a record high as
speculators expressed bold confidence that the economy will grow, cash will
continue to flood in from abroad and stock prices will soar, maybe forever.
Japan thus opened the imperial era of Heisei, or "attaining peace," a
phrase carefully crafted to distance the country from the shadow of its
belligerent past. But if a theme came with the new era, it had less to do
with geopolitical ideals than with money. Lots of money.
'Like California in 1849'
"It's a gold rush," stock market commentator Masakazu Kobayashi said. "It's
contagious, like California in 1849."
In fact, the gilded age arrived well before the end of Hirohito's 62-year
Over the last three years, as Japan's massive trade surplus peaked and the
value of the yen doubled against the tarnished dollar, Japanese have shown
signs of becoming bewildered and consumed by their considerable riches.
Accompanying the shock of economic success was perhaps the start of a
dramatic change in the way Japanese think about money.
Traditionalists lament that the old samurai values of frugality and
forbearance are being replaced by American-style ostentation and avarice.
Pundits warn that a financial mania has spread to all sectors of society,
creating a huge speculative bubble. Economists acknowledge there may be a
bubble but maintain it is not likely to burst any time soon in the Heisei
The money boom has already sent waves overseas, where Japanese investors are
jumping into, and arguably distorting, real estate markets, fine art
auctions and the corporate acquisitions game. At home, it manifests itself
in a number of peculiar ways that may tell of things to come elsewhere.
Golf club memberships, for instance, have been divorced from the activity of
swinging irons and putting on greens to be traded as speculative
commodities, fetching astronomical sums.
The national average cost of a golf membership in the middle of this month
was $206,000, about 20% higher than a year earlier, according to Nikkei
News/Retrieval, a financial data bank that monitors the golf certificate
market among other economic indicators. The going rate to join Tokyo's
exclusive Koganei Country Club was $2.4 million, highest in the land.
The phone company is another anomaly. The price for a single share in the
former state-owned monopoly boiled up to $24,000 in 1987 before chilling
down significantly. Nippon Telegraph & Telephone Corp. stock still trades at
about $15,000, making it on paper the world's most valuable company, though
it is far from the most profitable.
Collectors, meanwhile, have spent up to $8,000 for rare specimens of prepaid
magnetic cards, adorned with a variety of designs and photographs, that
allow one to make $4 worth of calls on an NTT public pay phone.
The latest craze is for terehon kaado that carry pictures of teen
idols, especially when the cards have printing errors. Like valuable stamps
or coins, telephone cards must be in mint condition.
"If you use it once, it's trash," said Kazuo Osawa, manager of a telephone
Speculative trading in stocks, once the vocation of an obscure and
not-so-reputable demimonde, has become the obsession of the masses.
"I guess I tend to gamble, especially when I buy on margin," said Shoichi
Hasegawa, 46, an investor who linked his personal computer to a service that
allows him to execute trades at home, where he manages his $80,000
portfolio. "I've made some mistakes, but I'm learning."
Hyperinflated Real Estate
Hyperinflation in the real estate market has been the bedrock of Japan's
financial mania. Land prices in the Tokyo area were doubling and tripling on
an annual basis until early 1987. A choice site in Tokyo's Ginza shopping
district was valued last year at $269,000 a square meter, about the size of
three or four large American doormats.
On average, land in Japan is about 100 times more expensive than land in the
United States, according to the Economic Planning Agency.
Prices in Tokyo have since leveled off, but they continue to rise by 30% to
40% a year in some suburban areas, government surveys show. Land values have
become the driving force behind the frenzy in the stock market, as higher
prices are rationalized by "hidden assets" in land when corporate profits
alone cannot justify investor enthusiasm.
Land Owners Are Lucky
People lucky enough to own land have perfected the art of borrowing against
their property to pump money into the stock market for lucrative capital
gains. So have corporations, which boost profits in controversial practice
called zai-tech, for financial high technology.
"The result is a self-inflating process, which is hard to break before the
bubble bursts," wrote Keniichi Omae, a noted pundit and business consultant,
in a recent article.
The speculative climate is made dangerous by an "almost childish
irresponsibility," wrote Gregory Clark, another pundit and a professor at
Tokyo's Sophia University. "In Japan, it is assumed the boom will last
forever and that any excuse, no matter how silly, is justified to keep it
But there are some tangible props holding the mania together. Land, an
extremely scarce commodity on these overcrowded and mountainous islands, is
not expected to crash in value. Foreign exchange earnings from Japan's
seemingly unstoppable trade surplus keep the cash piling up in corporate
treasuries and in individual savings accounts, and the money is looking for
a place to be invested.
No Fear of Disaster
Also, a culture of optimism, collusion and manipulation in the securities
industry, all carefully orchestrated by the Finance Ministry, inspires
confidence that disaster cannot strike. Bears do not exist in Kabutocho, the
local version of Wall Street, as evidenced by the blithe manner in which
Japan bounced out of the October, 1987, stock market panic that gripped the
rest of the world.
"The bubble can't be justified by economic fundamentals," said Masahiro
Fujiwara, an economist at Tokyo University. "But I'm not really sure if this
is the kind of bubble that has to burst."
The downside of the phenomenon is that it has caused some profound social
inequities, particularly where real estate ownership is concerned. Many
ordinary Japanese who did not own property before the spiral began cannot
dream of buying any now, when a modest home on the outskirts of Tokyo sells
for upwards of $2 million.
Lifetime of Renting
The have-nots must resign themselves to a lifetime of renting. In many
cases, they have started spending money that they ordinarily might have
saved for housing. But the high yen only truly benefits the landless when
they go outside the local economy, which might explain why 8.4 million
Japanese traveled abroad last year.
A boom in the sale of luxury items, meanwhile, is being driven by the young
offspring of people who own land and can easily borrow against it for a
windfall in riches, according to trend watchers.
Accordingly, imports of Mercedes-Benz autos and construction of leisure
homes are up sharply. After decades of being held in check, Japanese-style
conspicuous consumption has taken on some absurd trappings.
People are eating gold, for example.
About two years ago, Seiichi Omura, a sushi chef in rural Chiba, outside
Tokyo, started offering his customers raw fish delicacies wrapped in
razor-thin gold foil. He charges about $40 for a small serving.
A Taste for Gold
Gold leaf is also applied to fancy little beans at some high-brow kaiseki
restaurants or flecked into rice wine to titillate the senses. It is
reportedly tasteless, odorless and harmless to the body.
"The tuna still tastes like tuna," said Omura, who claims to be the first
sushi alchemist. "The point is to make the food attractive to the eye."
A Japanese firm has developed a gold card that would turn heads at American
Express. Mitsubishi Metal Corp. started making business cards out of pure
gold last October and so far has sold 12,000 of them -- laminated in plastic
-- at $48 apiece. One client, a company president, bought a stack of 100 to
flaunt his status.
"We wanted people to feel more intimacy with gold," a Mitsubishi Metal
Japan has hardly been a stranger to gold. It imports about 300 tons of the
precious metal a year and was the world's largest consumer until being
overtaken by nouveau riche Taiwan in 1988. Japan remains the biggest
importer of platinum, however, buying 70% of the global market last year.
Then There's Diamonds
Diamonds have not escaped the inexorable grasp of the high yen either.
Imports doubled from 1.18 million carats in 1985 to 2.36 million carats in
1987 worth $1.43 billion, according to the Diamond Information Center in
Tokyo, run by South Africa's De Beers Consolidated Mining Ltd. Japan
imported 3.13 million carats in the first 11 months of last year, rapidly
gaining on the United States as the top importer of the gems.
Sudden wealth and the accumulation of disposable cash has a darker aspect,
too. There has been a boom in financial fraud as confidence tricksters prey
on the elderly population, housewives and novice investors.
Between January and November of last year, police made arrests in cases
involving 24,700 small investors who were bilked out of $340 million. The
most popular type of scam was one in which aggressive "bucket shop"
operators persuaded gullible clients to speculate in overseas commodities
futures, then pocketed the money.
"We're wealthier than we've ever been before, and people don't know what to
do with all their money," said Kenji Oyama, an investigator at the National
Police Agency. "They're not happy with the low interest paid on bank
accounts, and they're changing the way they appraise risk and return.
'Some Latent Greed'
"There's also some latent greed that's coming out and getting taken
advantage of by unscrupulous operators," Oyama added.
The financial boom also has resulted in alleged corruption at the highest
echelons of the political world. An escalating stock-trading and
fund-raising scandal has rattled the government of Prime Minister Noboru
Takeshita, forcing the resignation of three Cabinet ministers over the past
Ironically, foreign investors are now regaining confidence in the Tokyo
stock market after several years of bailing out in the belief that it was
overinflated and risky. Foreigners bought more stocks than ever before --
$2.1-billion-worth more than they sold -- in the first week of the Heisei
This comes as some prominent Japanese are beginning to admit they worry a
little. Masaru Yoshitomi, director of the government Economic Planning
Agency's research institute, noted that the rules are changing with the
gradual disappearance of ultra-low interest rates that gave the Tokyo stock
market resilience in 1987.
"I detect a fever in Kabutocho," Yoshitomi said. "I'm relaxed about Wall
Street, but I'm getting nervous about Japanese stocks. I have a hunch we
might be seeing the beginning of a bubble. But nobody can know for sure
whether or not it is a bubble until it bursts."
JAPAN'S 'GILDED AGE' OF CONSUMERISM
Euphoria over economic success is causing many Japanese to jump into
consumer and investment markets, causing some wild distortions in peculiar
ways. Among them:
GOLF CLUB MEMBERSHIPS are being traded as commodities, with the average
national cost of a membership listed at $206,000.
PHONE STOCK in Nippon Telegraph & Telephone Corp., a former state-owned
monopoly, is trading at about $15,000 a share.
HOMES on the outskirts of Tokyo -- even of modest proportions -- are running
at about $2 million. Land prices around Tokyo are about 100 times more
expensive than in the United States.
LUXURIES and imports are spiraling, especially cars and gold. Some chefs
reportedly are charging customers to eat food wrapped in gold; a Japanese
firm has developed a gold business card; diamond imports are way up.FOAnne