My opinion this week(90)
The moral hazard of bankers
Cabinet Secretary Nonaka criticized the management of Japanese banks for
the lack of moral as management leaders at the press conference conducted
last week. In relation with the start of finance system stabilization laws
the Government expected that most of major Japanese banks would decide to
introduce public fund to improve the rate of the own capital in the total
equity and to be able to avoid to decrease loans to business firms. Since
the start of the above mentioned laws, some number of banks expressed to
introduce the fund but many other major banks were still very reluctant to
respond to the Government guidance. Then, Mr. Nonaka got angry about that.
Needless to say, in order to introduce public fund, each banks must
disclose their financial conditions exclusively to the market place. Although
it is quite attractive for them to introduce public fund itself, disclosing
their management information is to be done carefully for any banks. By the
disclosure of management information, leaders of bank management are said
to be responsible for the present bad condition of their financial condition.
It is natural that they would avoid such circumstance. Otherwise, they
would be more aggressive to introduce such public fund under the present
financial condition of the economy.
There is a word "moral hazard" these days. The word expresses the concern
of deterioration of moral of those bank leaders. The moral would further be
deteriorated if those banks in bad financial conditions were saved just by
the injection of public fund. Until quite recently, the Government has paid
the utmost attention to extinguish the fire itself rather than analyzing
the reason for the fire. They have insisted to stabilize the financial system
first by injecting public fund to those banks at stake. The moral and ability
of the leaders of banks would be questioned later on after the fire is extin-
guished. But the Government have finally realized that their thought is not
necessarily right.
Who is really responsible for an unstable condition of financial system at
the moment? The lack of moral and management capability of bank leaders are
main reason for it. In those bubble economy days, they kept investing their
money into nominal real-estate and created a huge bad debt as a result. If
they are ordinal business firms, they would went bankrupt much earlier. But
they were not placed into such conditions because they were protected by the
so called convoy ship system guided by the Ministry of Finance in Japan. Their
moral had been deteriorated under such financial system.
Such convoy ship system do not exist any more today. Long Term Credit Bank
was finally been nationalized according to the new law put into effect
recently. As we see in this case, any banks which face financial difficulty
and cannot stabilize their management status by introducing public fund with
information disclosure will surely become the second and the third LTCB in
the long run. We do hope that not all leaders of banks are lacking the moral
standard which is required for managers of all ordinal business firms.
Until recently all of such guidance to banks have been conducted by
bureaucrats of the Ministry of Finance. But this time, the Government and
the political leaders have taken initiative to proceed a recent movement
We should appreciate at least that such change was the first step for further
improvement of such finance system stabilization in the future.
1998/11/1
Tadashi HAYASE
My opinion this week(91):
New cultures by PC
November 3 is the Culture Day. The order of Cultural Medal and of Order of
Cultural Merit have been announced. It is common that the persons who had
made a great achievement in various cultural area such as literature,
paintings, music, entertainment, sciences and so forth are appointed to such
prizes. However, if we see those who got such prizes in the past, they are
mostly quite unfamiliar with us common people. Take this year, for example,
only Miss Mituko Mori, a TV actor and Mr. Issei Miyake, a dress designer are
kind of familiar people for public.
When we say the culture which geared to common tastes of people, they sound
to have less values. But that is not true. What we call them culture are some
representative manners, customs and values which closely related with
their way of life. In this respects, the people who were appointed to the
prizes every years do not quite fit to that definition.
It is very difficult to define what good manners, customs and values of the
way of life mean. It is also very difficult to say which arts, literature and
sciences have values and which do not. It is also generally agreeable that
any of such cultures which have common value throughout any ages and any
parts of world have higher values by themselves.
However, I would like to point out that contemporary cultures are changing
greatly in their context. Or it is predicted that they will continue to change
greatly. Needless to say, the background for such changes are the change of
media to express cultures. Concretely speaking, the award won by Miss Mituko
Mori will have never happened, if such new mass media as TV did not appear
in this world.
The appearance of TV was quite epoch-making. But today, the newer and
bigger new media are born in our world. They are, for examples, Internet and
other new networking technologies which are called digital innovation. The
value of literature, arts and sciences today will be affected by the
application of digital technologies .
PCs themselves are not just like home electric appliances. I would like to
suggest that we will start discussing a lot more on the value of PCs as tools
to create such new cultures in this new era.
1998/11/7
Tadashi HAYASE
My opinion this week(92):
The effective measures of tax reduction
Various tax reduction measures are being discussed to stimulate consumption
to cope with long stagnant conditions of economy. Some of those tax reduction
measures conducted so far in the past one year or so, did not turn out to
be quite effective. There are many reasons for that. Firstly, there are
no goods and services which people want to buy definitely at the moment.
Secondly, most people have some fears about today's employment condition
of economy , some worry about their life after they get older, and worry
about the present pension schemes which face some financial difficulties,
and so forth.
Without eliminating such fears and concerns about the future of their life
and without showing some concrete ways to solve those issues, any of such
income tax reduction measures conducted recently were not quite effective
ending up with more saving rather than more spending. Specifically
speaking, such idea to distribute \30,000 coupon to people to increase
consumption is quite silly indeed. After all, people will save the money
equivalent to the valued of the coupon distributed. The Liberal Democratic
Party and the Koumei Party that is proposing such idea are arguing the ways
and means to conduct such measures into practice. But it seems that there
is only little effects expected from such practice.
The area which is expected to have a bigger effect on economic recovery
is the one concerned with durable goods such as home electric appliances,
automotive and housings. When it comes to automotive, the circulation
rate has already reached to a kind of high so that further increase will
be limited to a certain extent. Another big area is electric and electronic
appliances such as PCs and peripherals connected with telecommunication. But
the biggest possibility of all in consumption is housing without any doubt.
What is the best way to stimulate spending in housing? Needless to say,
the one of the most effective means to increase the sales and construction
of houses is to decrease the rate of consumption tax rather than some
general cut of income tax. Two political parties , i.e. the Liberal Party
and the Communist Party are suggesting to make cut of consumption tax rate
to 3% from the present 5% rate. However, there is a great difference in the
future course of actions between two parties. While the Communist Party
asserts to abolish the consumption tax itself in the future, the Liberal
Party suggests to increase the rate again even to higher rate than the pre-
sent level of 5% in the future. And the important point of their assertion
is that the revenue to be gained from the consumption tax is to be used
only for welfare purpose.
I agree with this idea of the Liberal Party. They say that the most
important policy to recover economy at the moment is to stimulate consumption.
The consumption of durable goods such as housing may be the effective area
to increase total consumption. And to increase spending in housing, consumer
tax reduction is the one most effective means. After the recovery of economy,
the consumption tax rate will be increased again and be further increased
to even higher rate in the future. But the revenue to be gained from such
increase of tax is used only for welfare purpose. It is expected that
the consensus of people will be acquired even with higher rate such as 10%,
if the revenue of the tax is used only for welfare purpose.
The one big issue concerning Japanese tax system is that the ratio of direct
tax is much higher than that of indirect tax compared with any other advanced
countries in the world. Furthermore, if they are used only for welfare purpose,
any abuse of tax will be avoided. People will surely agree with that
procedures, I guess. In connection with this, my another suggestion is that
consumption tax rate for foods and other indispensable goods for life should
be kept at the present level of 5% for those older people who make their life
by pensions and other limited income.
1998/11/14
Tadashi HAYASE
My opinion this week(93):
A new meaning of labor union
Three consecutive holidays start today. This is the last three consecutive
holidays in this year. I have no complaints for two holidays every weeks.
But in such three holidays, I am usually able to do some thing new which I
cannot do in ordinal weekends. The last day of those holidays, November 23rd,
is the Labor Thanksgiving Day. Whichever occupation you are now in, you should
appreciate for the work opportunity you get now, getting some income to
support a family, enjoying the life with family and making even some savings
preparing for the future of the life.
So far, it has been quite natural to have some jobs at somewhere and some
income out of them. Frankly speaking, the Labor Thanksgiving Day is not quite
meaningful to many labors, especially to white color people in the past.
But the situation is changing these days. In such a very bad business
condition, an unemployment rate has raised up to 4.3% recently, the worst in
the post War period. There are now over 2.5 million people unemployed in the
labor market. Many people who work and support families are included in such
unemployed group. Furthermore, the ratio of job providers against job seekers
is very low as 0.49. In other word, only 0.49 employer offer a job against a
man who wants to have some jobs. There is very little jobs, although you
eagerly want one in these days.
In Japan, it is said that the unemployment rate is actually much higher.
Many business firms still keep a number of excess people in their firms
without letting them go to jobless. Japanese firms have traditionally taken
a life time employment system so far, but the breakup of such system itself
has just begun. Many Japanese firms are obliged to take the step to reduce
the labor cost which has been a kind of untouchable area for many years.
Many offered such measures as early retirement as well as the direct
designation of the termination of employment.
Most labor unions which were strong in high economic growth days, have
lost their power overall. They just accept any offers from management
concerning the reduction of employees without much resistance. I understand
that it is too difficult to resist. But it is not right if every employment
practices and policies are decided by management side only without any or
much consultation with labor unions. It is generally understood that any
business firms will make any sort of decisions including any employment
measures to continue to survive in business. However, keeping the current
number of employment is to be the top priority among various expense cut
or cost reduction alternatives. That has been one of the best advantage of
so called Japanese management system in the past. It is true that Japanese
labor unions has just enjoyed the the advantage of such systems without
studying much management issue as they face today.
Contrary to such past history, Japanese labor unions is greatly loosing
their strength these days. It seems that they just accept the offer from
the management side without much deliberation. It is suggested that all
labor unions should study again what is the purpose and meaning of labor
unions under the current situation. I am not suggesting that they should
come back to have such unreasonable strong power which the then Sohyo, the
Union of General Council of Japan, had had in the post war period.
They should be a such union that are able to make many of the good
suggestion and consultation for management in corporation with them to
solve such difficult issues as employment. It's the time for all unions to
reconstruct the funciton and images of good union activities.
1998/11/21
Tadashi HAYASE
My opinion this week(94):
Sosa and McGwire
I would like to talk again about the topic on American baseball . Sammy
Sosa was elected as the most valuable player of the year in the National
League. He had been competing with Mark McGwire who had renewed the home run
record in one season in 1998. The prize is decided by the popular ballots
of the newsmen of newspapers and broadcasting corporations. I was surprised
a little bit to see the result of the ballots , although the selection itself
is natural.
It was McGwire rather than Sosa who became very famous and popular not only
in America but also in the world . McgGwire extended the number of home run
up to 70. Sosa also broke the world record, but his record was behind that
of McGwire by four. Nevertheless, in the ballots for MVP selection, Sosa
got the unanimous votes over McGwire.
The background for this result is a kind of obvious. McGwire renewed the
home run record, of course. But Sammy Sosa contributed to the team to
participate the play-off game to decide the champion of the National League
by hitting so many number of home runs, recording highest runs by hits
and so on. Needless to say, those overall evaluation criteria are the bases to
select the MVP of the year. Nothing unusual about this, as you see it. But
if we remember the excitement at the time when McGwire was about to make
new world records, many people might have expected that McgGwire rather
than Sosa would be elected as the MVP at this year.
In addition, a number of racial issues had been reported on the competition
of the those two players. There existed some concern that Sosa was expected
to have some disadvantages in this respect in the MVP vote. But this concern
also seem to have no effects after all.
What I was impressed with is the fact that selection criteria for the prize
is defined clearly and they are input into the mind of those voters very
definitely. I can only guess what those criteria are. Such criteria put much
emphasis on the contribution to the victory of the team by each players
rather than individual values of the play. Baseball is basically the team
game rather than the game of an individual player.
Don't say that this is only the story of baseball. Whatever the selection
may be, such selection criteria is be cleared among voters so that they
can select the one which is the most valuable in the light of those criteria.
The same rule apply for the democracy. That is what we call to attain fairness
in the democracy. I would say that the degree of the progress of democracy is
high in this respect.
If the same selection had been done in Japan, I wonder if the result would
have been the same. I had some doubt about that. I have some doubt about
the value judgment and the judgment criteria of Japanese mass media on
various social issues at the present society, while I saw the case of MVP
selection in the Unite States.
1998/12/28
Tadashi HAYASE
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