ShabuShabu and Sandwiches

September 19, 2008 by gbrown

Stories of the Bubble: Shabushabu and sandwiches - property tales from the credit crunch Japan and Thailand 1996-1998

When I moved to Tokyo in 1996 I caught the end of the bubble.

They had just seen one of their retail banks go bust, a spree of financial mergers plus a severe downturn in asset prices. These are times when you expect governments to provide leadership. Japan’s ministry of finance were however just about to see 40 of their ministers exposed for accepting corporate bribes from corporations in the form of “no pan shabushabu”. Without going into too much of the details “shabushabu” is a popular meat dish and “no pan” is how the schoolgirl waitresses dressed ie “no pants”. It seemed the cavalry were out to play.

It was unheard of at the time for banks in the west to gamble so unabatedly in real estate prices and I was shocked that the system had let it go on unfettered. But 12 years on we are seeing a similar scenario play out in the UK and US.

The Tokyo situation was however a little more profound (I hope). It was the time of exuberance. $1m bought you a years membership to Kawasaki golf club or 1 square foot of commercial office space in Shinjuku.

It was the era of rich Japanese magnates such as Hori (husband of designer Hanae) and japanese buyers of western art (such as The Sunflowers). It was an era when mitsubishi would fly its senior managers on a private jet to korea or hawaii just for a round of golf. The Nikkei edged 38,000 back then (it currently stands at 11,000)

A duplex home in Number 2 City would have cost you $180,000 back in 1996 when I moved there. The same property would today, 12 years on, set you back half that.

Japan was/is different. The financial system was more fragile on the basis that much of what went on was sheer fraudulent as opposed to reckless. Furthermore when western investors witchhunt out exposure to toxic credit default swaps and other investments, Japan brushed it under the carpet.

Denial it seemed was endemic. I read of one salariman who had spent 2 years going through the motions of getting up early and going to work to convince his unwitting wife that he was still in employment. He was only found out when they picked his remains off the track when he decided one day it was too much.

Whereas the west has committed financial harakiri and begins the process of disembowlment, Japan’s recession has been a death by a thousand cuts a - decade of stagnation much as a result of government inaction and lack of accountability in its financial systems.

But even in dire times hope springs eternal. A friend who worked for a Japanese trading company shared with me that they had invested billions in propping up real estate in Thailand that had subsequently lost billions in a succession of.bubbles - first Japan then the “Thai flu” 5 years later. Their Thai partner was a well known and respected developer ruined by the withdrawal of funds.

Having laid of 5000 staff he was down to a handful of stalwarts who rallied round him like a family. Faced with the unenvious tasks of answering the question “how do I pay off my debts?” his band of half a dozen compatriots suggested making sandwiches and so the entrepreneurial spirit was reborn.

One minute property magnate the next sandwich boy on the streets of bangkok selling to office workers and commuters.

Bubble or not, you can’t keep a good man down.