AN ODD MARRIAGE OF EAST AND WEST

Murray Sayle dredges the latest

Japanese scandal for signs of hidden meaning

Tokyo SHOULD you ever be asked to a Japanese wedding, go. You will be entertained, possibly appalled, and in any event illumin- ated about the people who turn out such a relentless stream of cars, televisions and financial scandals whose complexity tests the stamina of Western weekly journalism even to describe, let alone to analyse.

Weddings are easier to follow. They normally begin with a simple, ancient Shinto ceremony, bride and groom dressed in traditional Japanese outfits, a Shinto priest who chants a blessing, the exchange of a solemn toast, three times three sips of sake from tiny porcelain cups, and the knot's tied — almost.

Bride and groom then disappear (with the priest) to return minutes later done up in full Western wedding tackle, long white dress, veil, orange blossom, dress shirt, dinner jacket and the type of oversize velvet bow-tie favoured by the mature Mickey Mouse. The company then moves to another part of the premises (all this takes place in one of the many specialised wedding halls which, at £10,000 for a production-line ceremony, are among the most profitable of Japanese investments) and into an imitation Western ambiance stained glass, crosses, a lectern with an ominous black book. Another blessing, Mendelssohn swells from loudspeakers, and a kuromaku, a man dressed in black so you are not supposed to see him (a convention borrowed from the kabuki theatre) guides the bridal pair from the pseudo-chapel to the nearby reception, through the cutting of the cake, the lifting of the veil and the (to Japanese) altogether bizarre kissing of the bride.

The wedding guests, meanwhile, have ample time to meditate. Japanese, almost none of them Christian, clearly like having the best of both worlds, and surprisingly often lately they have been getting it. Cultural pastiche is, however, only part of the story. The only marriage legally recog- nised in Japan is a brief registry-office job, much patronised by thrifty foreigners. The wedding-hall extravaganzas are actually media events, noisy with flashbulbs and videocameras. Children, grandchildren and descendants beyond will revere those wedding pictures. What sort of place will Japan be then? More Western, or will the world, perhaps, have become more Japa- nised? Better safe than sorry, and hence the double (or, counting the legal one) triple nuptials.

A poil, marriage is of course much the same everywhere, but the preliminaries vary as much as the human species. In the Japanese version we can see old and serviceable native tradition overlaid with foreign trappings, superficially plausible, but not really understood au fond. Who would guess from the Japanese travesty that Christian marriage is a promise re- corded in heaven to forsake all others until death do us part? (Curiously enough, Japanese marriages actually last longer than ours, which only shows how far behind the times they are.) This metaphor, of quaint old customs peeping out through ill-fitting modern dress is one that illumin- ates much more of Japanese life than simple, or even compound weddings. Armed with this insight, let us brave the labyrinth of the current Japanese scandal.

Japan had grasping merchants, a central rice market in Osaka and a crude banking system in its Middle Ages, long before the first stock exchange was opened in the 1870s on the European model to sell government bonds. The Osaka merchants were at the mercy of the Shogun's officials `We've expelled three double-glazing salesmen and a Jehovah's Witness.' who ruled, not by law, but by force, tempered by custom. They survived by obedience, hard bargaining and doing favours for authority. The officials, all of samurai warrior origin, despised the mer- chants, but they needed them to keep a cumbersome economy turning over. 'The morals of an Osaka merchant' is a taunt still heard in Japanese aristocratic circles (not, however, in Osaka.) Rich merchants married their daughters into impoverished samurai families, and occasionally even employed ronin, unemployed samurai liv- ing on their wits, to collect debts from each other.

The firm of Nomura Securities Ltd was founded in Osaka in 1925, when Japan was, like the rest of the capitalist world, entranced by bangs, bugle beads and fast fortunes. Over in the United States a young corporation lawyer named John Foster Dulles was about to launch his Blue Ridge Investment Trust, a company uni- que even in those dizzy days in that its only assets were shares in itself. Blue Ridge duly soared and, like the rest of the 1920s bubbles, duly burst. Nomura has never pulled off anything quite that spectacular, but the infant brokerage did quite nicely in bonds, adapted to the military regime of the 1930s, went into the investment trust business itself in 1941 and even prospered during the second world war, as much as anyone in Japan could under the bombs.

Reviving with Japanese industry after the war, Nomura pulled off a quiet coup in 1961 with its first stock exchange flotation in the United States — the bonds of an unknown electronics firm, Sony. Three more securities firms, Nikko, Daiwa and Yamaichi, emerged from obscurity to join Nomura as Japan's Big Four — the same quartet who were doing penance last weekend, closed down for four days by order of the Ministry of Finance for myste- rious transgressions about to be described, their combined absence bringing an embar- rassed, unnatural hush to the mighty Tokyo Stock Exchange.

The glory days of the Big Four date from, and are intimately connected with, Reagano-Thatchernomics, the decade of the Big Borrow in the English-speaking world. With their phenomenal diligence and world-beating rate of personal savings the Japanese were well placed to feed the bulimic hunger of our debt-fuelled econo- mies while still leaving so much surplus capital back in Japan that the Japanese discount rate (and therefore the return on bonds) fell below 3 per cent, barely enough to keep up with the rate of inflation. The rivers of excess company ash were diverted into the nearest sinkhole, the Tokyo real estate and share markets.

Land is in short supply in Japan and only a fifth of Japanese stocks and shares are ever traded, the rest being locked per- manently in the vaults of big companies who all own pieces of each other, thus constituting the seamless garment famous as Japan Inc. The result was that Japanese shares and real estate, both scarce, zoomed to heights never before seen by mortal eyes, the companies put in more of their surplus cash, the markets zoomed some more, and so on, until Japanese land and industry were theoretically worth four times those of the United States, with Britain thrown in as the waiter's tip.

The Ministry of Finance itself spurred these earth-shaking developments in 1983 by permitting securities firms not simply to buy shares for clients, but to manage portfolios of shares bought and sold on clients' behalf, offering (as they did for years) a better return than debts. Readers seasoned in the ways of markets will at once spot two ways in which a brokerage firm ready to stoop to such practices could make itself some additional money - either by buying and selling shares simply to earn commissions, a practice known to the trade as 'churning', or by buying shares for itself, using its discretionary power to buy the same shares for clients, and, when the price had duly risen, selling out at a handsome profit. Such a firm would be said, in the jargon minted in Wall Street in the 1920s, to be running a bucket shop.

After 1945 Japan theoretically had an independent watchdog organisation mod- elled by once-bitten Americans after the US Securities and Exchange Commission and specifically charged with preventing such abuses. As soon as the American occupiers left, however, the Japanese SEC was allowed to atrophy, the Ministry of Finance preferring to govern its subject territory by the same mixture of friendly collusion and gentle correction used by the Ministry's forebears, the Shogun's men, on their subjects, the rich Osaka merchants. Once again, to revive our matrimonial metaphor, trusty Japanese underwear was covered by Western wedding finery. The cosy relationship prospered, and some time in the mid-1980s Nomura achieved the secret dream of all Japanese companies and became Dai-lchi Sekai, Number One in the World.

What goes up eventually tends to come down. `Black Monday', the October 1987 market crash, ushered in, for the rest of us, busy days in the bankruptcy courts and Open prisons. Only in Tokyo was the stock exchange, it seemed, immune to the world- wide panic. Most people think that the Big Four, prodded by the Finance Ministry, used the buying power of the discretionary accounts they managed to shore up the market. The MoF, by Japanese etiquette, owed them one. The next two years climaxed what the Japanese themselves call their 'bubble economy'. Envied by a bruised world, the Tokyo market continued soaring towards the stratosphere. The Big Four, particular- ly Nomura, opened sales branch after branch in the Japanese suburbs, complete with deep armchairs and screens blinking the latest share prices. The butcher, the baker, the retailer of small electrical ap- pliances got aboard, as they always do in the terminal days of a boom. Deserted now, the share boutiques look like betting shops whose customers have all gone broke, which, come to think of it . . .

Early in 1990 Japanese punters learnt that the law of gravity had not been repealed specially for them. The post- poned crash was as big as anywhere else, and the Tokyo market today stands 40 per cent below its historic highs, with much of the froth of a delirious decade wiped away. Nothing much else has happened, howev- er. Japanese business continues brisk, ex- ports flourish and there is a labour famine in place of the unemployment that dogs the rest of the industrialised world.

Then, three weeks ago, a torrential leak from the National Tax Bureau, an arm of the Ministry of Finance, brought strange news to the Japanese media, the city and the world. In 1990 alone, we learnt, some 50 billion yen, or £215 million, had been repaid by the Big Four to discretionary fund clients — Eigyo Fokkin — to compen- sate them for losses suffered in the market crash. Such refunds are not illegal, certain- ly not to receive and probably not to give, but the Ministry of Finance supposedly discourages them, and there is a law on the Japanese books forbidding securities sales- men promising their clients that shares or bonds will not lose their value.

Someone up there clearly doesn't like Nomura. Fresh leaks have disclosed odder goings-on: all the Big Four had attempted to deceive the tax sleuths by describing the refunds as `business expenses'. Nomura in particular had allegedly sent money on a dizzying laundry run around the world, first to an oil dealer, then to the London subsidiary of a shipping firm, thence to the New York branch of an Osaka bank and finally back via Hong Kong to the Japanese affiliate of the Shell Oil Company, the original investor, as a bond which Nomura repurchased at a higher price, thus closing the circle with an impeccably laundered refund.

By pure co-incidence (or is it?) the Tokyo Metropolitan Police and one of the provincial forces also have the squirming Nomura and Nikko securities firms cur- rently under the magnifying glass in con- nection with another complicated deal. This one happens to be highly newsworthy, establishing, as it appears to do, a tenuous link between Prescott Bush, older brother of the better-known George, and a certain Susumu Ishii, recently `retired' boss and bagman of the Inagawa-Kai, Japan's second biggest gang of yakuza, a prosper- ous organisation of 12,000 hoodlums. These picturesque pests specialise in gamb- ling, blackmail, protection, shareholder intimidation, traffic accident adjudication, deal negotiation and similar services to business, and, by claiming direct descent from the bands of bent samurai who once collected bills for the merchants of Osaka, are another illustration of the ancient lineage of modern Japanese business prac- tices.

Ishii is accused of having exported the yen equivalent of £16 million to the United States without informing the Ministry of Finance, as the law requires for a sum of that size. The money was used, it is reported, to finance the purchase of Amer- ican shares and golf club sites innocently scouted by Bush, a real estate agent una- ware that he was dealing with dubious people, in return for a commission of $250,000 negotiated at a slap-up dinner at the Okura Hotel in Tokyo.

Where did Ishii or his merry men get the money? According to the police, by pledg- ing memberships in Japanese golf clubs they happen to own to Nomura and Nikko, which in turn became collateral for Ishii to buy 23.81 million shares in Tokyu, a railway company and operator of a chain of department stores. The shares of this very same company, according to the police, were the subject of a concerted sales drive by Nomura, including a series of lectures to institutional investors on the exciting pros- pects of railway shares delivered by a director of Nomura's Tokyo head office.

Tokyu shares rose 50 per cent, making Ishii's parcel worth £165 million, enough for several more golf courses, before abruptly falling again. Nomura have con- ceded that Ishii was indeed their client, although the firm say they dealt with him `more cautiously' after learning of his line of work. His account, according to Nomura, has now been closed.

All this has, to say the least, had an unsettling effect on Tokyo financial circles. On 1 July the Bank of Japan dropped the discount rate half a point, from 6 per cent to 5.5 per cent, but the tonic effect on the market lasted little more than one trading day. Investors appear to be watching the market nervously, an ear cocked for the sound of some second, unnamed shoe to drop.

A week earlier the chairman of Nomura, Setsuya Tabuchi (`Big T' in the firm), announced that the Finance Ministry had known nothing of the compensation re- funds, and that his number two, Yoshihisa Tabuchi (`Little T', no relation) would be resigning to accept responsibility. Refusing to take his medicine, Little T told a meeting of Nomura shareholders that the Ministry had approved the clandestine payments and also knew that Nomura had reported them as 'business losses' to the tax authorities, who had, in turn, blown the whole story. Angry about something, the Federation of Economic Organisa- tions, the Japanese equivalent of the Con- federation of British Industry, has summari- ly dismissed Big T as its vice-chairman although he had already tried to resign. A baker in Osaka is suing Yamaichi, smallest of the Big Four, claiming that he lost £52,000 on shares sold to him by a Yamaichi salesman who refused to com- pensate him — as they had the big punters — when they crashed.

What are we to make of this blighted landscape of deceit and double dealing? We could, of course, thank God we in the West are not as other men, that we have stockbrokers who put principle before profit and righteously block their ears when insiders whisper information. Amer- ican publications in particular have pounced on the scandal as offering a possible explanation of Japan's embarras- sing $50 billion trade surplus, and one has linked it to other conveniently current scandals such as a Tokyo lawyer who took fees from both sides and television celebri- ties who hired substitutes to sit university examinations for their not overbright sons.

Viewing the matter more coolly, howev- er, we might wonder whether any of these are really the crimes that cry out to heaven for vengeance. Tax evasion is not unknown outside Japan, for instance. Although some of the snootier London banks are said to refuse the accounts of pop stars and off-course bookmakers, the financial sys- tem would soon seize up if all its institu- tions were required to investigate where their customers got the money. Many investment firms elsewhere in the world offer some form of guaranteed limit on capital losses, usually achieved by simply giving the client some of his own money back. The resentment of the Osaka baker is understandable, but in Osaka of all places he should know that share salesmen are not on oath when they push their wares, and Yamaichi clearly value his future crumbs less than the business of the mysterious major investors they, along with the others, reportedly compensated.

Who are they? Leaks from those who should know say that 234 have been compensated a total of £545 million, or about the price of a small Tokyo office building. One client is known to be the pension fund of the Health and Welfare Ministry. Hitachi, the heavy electrical firm, has also been mentioned. The rest is silence, but, knowing the high self-esteem of the Ministry of Finance (and accepting, as we can, Little T as a witness of truth), it is a fair guess that with few exceptions they are big industrial corporations engaged in export, representing employees who are the elite of the nation's talent, its hope for the future — the very firms who have been pampered, cosseted, encouraged and pro- tected over the years by the Japanese bureaucracy and who have, in return, raised Japan from the wreckage of war to be our only major net exporter of capital still left in the game, the unlikely saviour of the world capitalist system.

Is this official favouritism fair? The Osaka baker, his eye on personal wealth, would unhesitatingly reply, no. But a long line of popes and ayatollahs, literary moralists from Thomas Carlyle to Tom Wolfe have had their doubts about the fairness of joint-stock limited liability capi- talism itself, an economic system whose central institution suspiciously resembles a casino. We insist, however, that the wheel should be reasonably honest, the terms of betting the same for all punters. But let us not deceive ourselves. Our system has not evolved because of its moral appeal, but because of its expediency — it works, or it has up to now.

The Japanese system works too, but towards a different end — not maximising consumption, much less equalising it, but promoting production, particularly for ex- port, the magic manoeuvre that has raised Japan from ashes towards some dazzling but still unachieved place among the na- tions, and carried most Japanese up with it. This is not the sort of aim you advertise to envious rivals, and much Japanese energy is expended in going through the motions of being a nation like the others, whose primary purpose is to give every citizen a fair suck of the soy-sauce bottle. The real justification is expediency, just as ours is, but with a different aim — and by no means an aim all Japanese share, or have been consulted about. Not surprisingly, Western dress and Japanese reality some- times make an odd mismatch, as in the stock market, or at a Japanese wedding.

Who, then, is the invisible man in black? Finance Minister Ryutaro Hashimoto, in pidering a symbolic 10 per cent cut in his own salary of £7,600 a month for the next three months, has plainly signalled in Japanese style that he knew nothing about it so don't go blaming him. Connoisseurs of Japanese scandals will notice that no other politician has yet been mentioned, an astonishing oversight. The opposition is demanding to see a list of the other lucky compensated 231 when Parliament re- sumes in the autumn.

We have yet to see the last act of this year's scandal before they lower the cur- tain and change the props, ready for the next mystery show.

`It's a long shot, but it might just work.'