Untitled Essay Research Paper The Economy of — страница 6

Financial System”, MacMillian Press, New York 1995, pg. 178 (13) Cao Man Kit, “The Strategic of Japan Enterprise”, Ming Chang, H.K. 1992, pg. 135 This period of high exchange rate continues until the bubble burst. The decline of the bubble economy occurs during the Gulf war period, the economy in Japan was very quite and at the same time the government had tighten their policy. (Both tax policy and restriction in loans) As a result, the land speculation market and land prices fall continuously. The real estate market is totally frozen. The National Land Agency measures that land price of Tokyo and Osaka has dropped 30 to 50 percent. (Total land wealth is near 2000 trillion yen which is really a lot) Many real estate properties were unable to be resale and at the time many

companies were unable to pay such high interest payment therefore many of them went bankrupt. While the banks rarely make any loan, many companies cut back in their capital spending. In fact this had dampen the recovery of economy. Most of these companies that went bankrupt were either small or medium size enterprise which lack of its separate bank center. Large enterprises with separate bank center also suffer from non performing loans by the borrowers (small and medium size enterprise). Others large lending institution also suffer largely, since the major economic powers at the bubble period was on the land market therefore any decline in land values would strongly influence the balance sheets of Japan*s lending institution. As reported in June 18 1996 The News Times

International News that the (14) “parliament approves a $ 6. 3 billion bailout for bankrupt housing lenders. The vote clears the way for the establishment of an institution to liquidate the assets of the housing lender which collapsed under bad loans made to real estate speculators before Japanese land prices plummeted in the early 1990s. The seven companies are believed to have more than $65 billion in bad debts.” This $.6.3 billion is only a piece of the big picture because (15) “the Finance Ministry said that Japan*s financial institutions held about $324 billion in bad loans as of March 31 1996. Analysts believe the total could be considerable higher. The government in recent days has been working to persuade banks and farm cooperative to agree to take on a bigger share

of the bailout burden to reduce the cost to taxpayer”. According to a current financial post in Tokyo: (16) “Most of the financial banks declare yesterday that with the experience of deficit in last year, this year (ended till September) they had turn deficit into net profit. (14) – Kenneth V. Smith, “Inman News”, June 1996 Version, Section B4 email address: InmanNews@aol.com (15) – Kenneth V. Smith, “Inman News”, June 1996 Version, Section B4 email address: InmanNews@aol.com (16) – Herman Li, “Sing Tao News”, November 23 1996, Toronto, Section B 12Banks had systematically write off many of the un collectible accounts. But their revenue is still not very high because of low interest rate and the incremental of bad debts. Therefore financial institution will

still probably experience quite a long period of recession.” Therefore residue effects of the land speculation spill over still continues. Land developers also suffer largely. Before the land market crash was expose to the public, there were nearly 1,200 golf course was either approve or under construction. Many pre-member ships were sold but unfortunately many of the construction are never finish because of banks were pulling back the loan. At peak, the total value of golf member ships market in Japan was near 200 billion for 1,700 golf courses. Therefore closing down 1,200 golf course construction was quite a lost for the economy. Another aftermath of the bubble burst is the high vacancy rate in the office buildings in Tokyo. During the late 1980*s, the new constructing rate

(for the office buildings) was double compare with the tradition. After the bubble burst, the value of asset decreases and demand for space also decreases. Therefore many office buildings are unoccupied. As you can see, the after math of the bubble burst did not only affect the business enterprise, government but also the grass root people. (17) “In last year the economic growth rate was only around 1% or less and the government had introduce economic revitalization policies such as lowest ever interest rates and increased public investment but judging by the fact that consumer demand has cooled off and capital investment by the corporate sector is not making headway as expected therefore the outlook for economic recovery in Japan remain hazy”. The bubble bursting has