Japan is one of the world's top three economic powers, its stock market has been established for more than 100 years, and Japan is also one of the countries with the highest number of stock market crashes in the world. In the past 50 years, Japan has had 7 stock market crashes, of which 3 have occurred since the 80s of the 20th century, the most serious is the bubble economy stock market crash in 1991~1992

Since the 80s, the Japanese economy has had two extremes. In 1986, Japan's economic trend was stable, driven by automobiles, electronics, integrated circuits and other industries, and its strength gradually increased, and by the end of the 80s, Japanese automobiles had dominated the world, Japan's industries bloomed everywhere in Western Europe and Latin America, and almost all countries were forced to submit to Japan's strong economic strength. The unusual economic boom that began in December 1986 is known as the "Heisei boom". The Nikkei Stock Average (pictured) continued to rise from 12,000 points in 1985, and was the first to "revivenation" after a short-term sinking in the Western stock market storm on October 17, 1987 during the "Black Monday" storm, thus driving the recovery of the global stock market. Since then, the stock price has been rising strongly. It reached 38,915 points on December 19, 1989, more than three times higher than the lowest point in 1985. It was 1 of Japan's GNP that year. 6 times, per capita GNP surpasses that of the United States, Germany, France and the United Kingdom, and Japan's GNP share of the world has also increased from 6 in 1970. 4% rose to 13 in 1990. 7%, and the amount of net external assets reached 383 billion US dollars in 1991, ranking first in the world. In the face of Japan's economic boom and the soaring stock market, the Japanese people are fascinated and have thrown themselves into the stock market. How does the United States feel about Japan on the other side of the ocean at this time?

In the words of US Treasury Secretary Summers during the Clinton era, "an Asian economic area with Japan at its peak has created fear among most Americans, who believe that Japan poses an even greater threat to the United States than the Soviet Union."

Song Hongbing described in his book "Currency Wars" that when the whole country was immersed in a euphoric climax of "Japan can say no", a strangulation war against Japanese finance was already in the midst of the deployment of international bankers.

In September 1985, international bankers finally got their hands on it. The "Plaza Agreement" was signed by the finance ministers of the United States, Britain, Japan, Germany, and France at the Plaza Hotel in New York, with the aim of allowing the dollar to depreciate "in a controlled manner" against other major currencies. In October 1987, the New York stock market crashed. Baker pressured Japanese Prime Minister Nakasone to keep cutting interest rates. Soon the yen rate fell to 2. 5%, a large amount of cheap capital flocked to the stock market and real estate, with the annual growth rate of stocks in Tokyo being as high as 40%, and real estate even exceeding 90%. By this time, the Tokyo stock market had risen by 300% in three years, and the total real estate market in one area of Tokyo exceeded the total value of real estate in the United States at that time. A huge financial bubble began to take shape.

Without external destructive shocks, Japan may have been able to achieve a soft landing with moderation of austerity, but what Japan did not expect was an undeclared financial strangulation by international bankers. The Americans buy with a lot of cash, and the Japanese think that the possibility of a collapse in the Japanese stock market is impossible, and the two sides bet on the direction of the Nikkei, if the index falls, the Americans make money, the Japanese lose money, and if the index rises, the situation is reversed.

At the end of 1989, the Japanese stock market reached an all-time high, the Nikkei index rushed to 38,915 points, and a large number of stock index short options finally began to gain power. Goldman Sachs' stock index options from the Japanese insurance industry were resold to the Kingdom of Denmark, which sold them to the purchasers of the warrants and promised to pay the proceeds to the owners of the "Nikkei put warrants" if the Nikkei index went lower. The warrant immediately went viral in the United States, and a large number of American investment banks followed suit, and the Japanese stock market could no longer afford to be strong. The uncontrollable plunge is like an unexpected storm that hits people, and the dream of becoming rich overnight turns into an abyss of nightmare, and panic hangs over the hearts of investors. By April 2003, it had fallen to a low of 7,607 points. The cumulative decline is as high as 63. 24%, the largest decline in the history of the Japanese stock market. Real estate has fallen for 14 consecutive years. The wealth of the country as a whole has shrunk by nearly 50%.

The stock market crash wiped out almost all of Japan's achievements over the past few years. Its harmful consequences in Japan are comparable to those of the Great Depression in the United States in the 30s. In his book Financial Defeat, author Mototada Yoshikawa argues that the consequences of Japan's financial defeat in 1990 were almost equal to those of its defeat in World War II in terms of the proportion of wealth lost.

The United States is determined to puncture Japan's stock market and real estate bubbles

In the eyes of American entrepreneurs, one of the important reasons for the strong international competitiveness of Japanese companies is the low cost of capital. In the 80s, the average cost of raising funds for Japanese companies was about 2%, while for American companies it fluctuated between 5% and 8%. The ultra-low level of corporate capital costs has contributed to the international competitiveness of Japanese products.

The U.S. semiconductor industry was crushed by Japan. U.S. semiconductor companies have complained to the U.S. Congress and the U.S. government that they simply cannot compete fairly with Japanese companies, because the difference in capital costs between the United States and Japan greatly affects the competitiveness of U.S. companies.

In order to enhance the competitiveness of the U.S. manufacturing industry and prevent the U.S. industry from being completely destroyed by Japan, the U.S. government should find ways to raise the cost of capital for Japanese companies. In other words, the U.S. should find a way to burst Japan's stock market bubble and real estate bubble, because it is precisely because of rising stock prices and real estate prices that Japanese companies have extremely low financing costs.

A decline in the Japanese stock market can increase the cost of equity financing for Japanese companies.

In the second half of the 80s of the 20th century, due to the particularly prosperous stock market, Japanese companies raised large amounts of low-cost capital through the issuance of shares. In the first half of the 80s, the Japanese manufacturing industry raised an average of 800 billion yen a year through the issuance of shares, and in the second half of the 80s, the amount of equity raised increased year by year, reaching 5,000 billion yen in 1989.

At the same time, there is an increasing number of corporate bonds, most of which are issued in the form of convertible bonds or with warrants attached, making the financing costs of the bonds very low. During a bull market in the stock market, the issuance of convertible bonds or bonds with warrants can significantly reduce the cost of financing.

Due to the low cost of securities financing, Japanese manufacturers had a clear preference for financing through the securities market in the 80s.

From this perspective, a prolonged bear market in the Japanese stock market is good for improving the competitiveness of U.S. companies. The United States was very unhappy with the irrational rise of Japanese equities in the second half of the 80s, and the continuous rise of Japanese equities for four consecutive years made the cost of domestic and international securities financing very low for Japanese companies.

In the autumn of 1989, at the suggestion of President Bush, the United States and Japan held consultations on the economic structure of the United States and Japan in order to resolve the problem of the long-term imbalance in the development of trade between the two countries. In 1990, the United States strongly criticized the long-standing closed trading of the Japanese stock market and the practice of mutual shareholding within enterprise groups or in the same industry, and demanded that Japanese enterprises change the practice of mutual shareholding, and put forward specific demands to Japan: (1) reduce the standard of bank shareholding in Japan from 5% to 2%; (2) Abolition of the restriction on general trading companies not holding shares in manufacturing enterprises; (3) Strengthen the restrictions on the shareholding of the parent company by the subsidiary.

This trick of the U.S. government hides infinite killer intentions, and directly points to the source of long-term upward momentum in the Japanese stock market.

The mutual ownership of companies is a major feature of the Japanese stock market and one of the reasons for the long-term growth of Japanese stocks. If Japan adopts the U.S. demand to abandon cross-shareholding between companies, the number of shares entering the market will increase dramatically, and stock prices will fall sharply.

In Japan, stocks held by companies are generally held for a long time and are not easily sold due to the rise or fall of stock prices, so stocks held by companies are generally not listed and circulated.

In particular, the demand for Japanese banks to reduce their holdings of corporate stocks is sinister. In Japan, banks hold a large number of stocks, and once they hold them, they hold them for a long time and do not sell them easily. After a long period of bull market, the profits on the stocks held by the banks are very large, and if the banks sell their stocks, the Japanese stock market will inevitably collapse.

This demand from the United States was enough to cause a sharp drop in the Japanese stock market. In the first half of 1990, these demands from the United States frequently appeared on the front pages of Japan's major economic media, putting pressure on the Japanese stock market. The information released by the United States through the US-Japan Conference on Economic Structure has enabled Japanese investors to understand that the United States did not want the Japanese stock market to remain high for a long time, and investors' confidence in holding stocks began to waver, and some investors who were keen on Japan-US policies began to sell their stocks, and the stock market fell, which then turned into a panic flight, and the four-year-long bull market in the stock market came to an end and entered a long bear market that lasted for more than 10 years in the future.

The United States is also very dissatisfied with Japan's real estate bubble and has repeatedly demanded that Japan take measures. At the same time, it has provoked dissatisfaction among the Japanese people and the media with the sharp rise in real estate. It is true that the Japanese people have complained a lot about the soaring prices of real estate, and the ordinary people simply cannot afford such a skyrocket. Under the slogan of raising the living standards of the Japanese people, the US media wantonly attacked Japanese real estate, and the Japanese people also felt the same way, and the Japanese media also took advantage of the situation to hype up. Under the joint international and domestic speculation, Japan's real estate bubble will inevitably burst.

The bursting of the stock market bubble

In 1989, Japan's Tokyo stock market was still immersed in the "creditor country market", and stock prices continued to rise. In May 1989, Japan began to implement a tight monetary policy, but the Nikkei 225 index continued to rise without reacting to it. However, some people later analyzed that the rise of the Nikkei index in the second half of the year was suspected of being manipulated. Because during this time, only a few stocks that rose were constituent of the Nikkei 225 Index, and most stocks began to show signs of weakness during this time.

During the 1990 stock price crash, it was believed that U.S. securities companies and U.S. hedge funds had manipulated the Japanese stock market.

The assumption is that after Japan began to tighten monetary policy in 1989, experienced U.S. institutional investors continued to buy the constituents that had a strong impact on the Nikkei 225 and kept the Nikkei 225 index on the rise by driving a few constituents higher. At the same time, there was a large short selling of Nikkei 225 futures in the Nikkei 225 futures market.

After accumulating enough selling positions in the Nikkei 225 index futures market, they began to sell a large number of constituent stocks that had a great impact on the Nikkei 225 index, pushing the Nikkei 225 index down rapidly. At the same time, there was a large number of short selling in the Nikkei 225 index futures market, which caused Nikkei 225 index futures to fall rapidly. In this way, the stock market and the stock index futures market push each other, triggering panic in the stock market, causing both markets to continue to fall.

Institutional investors in the United States made a fortune by popping the Japanese stock bubble. According to Robert Setron, a senior analyst at the Tiger Fund in the United States, the Tiger Fund began to short the Japanese stock market in the early 1990s, and until the Asian financial crisis in 1997, it still held a large number of short positions in the Japanese stock market. The Nikkei 225 index fell from about 39,000 points to around 16,000 points in '97, and the profits were unimaginable.

The end of 1989 and the beginning of 1990 were just the beginning of a nightmare for the Japanese stock market, which was mired in a bear market that lasted for more than a decade. By March 12, 2003, the Nikkei Stock Average had fallen below the 8,000-point mark and closed at 7,862. 3 points, which is the lowest point since January 1983, that is, it fell below the lowest point in 20 years. The Japanese stock market has lost 80% of its value from its peak in 1989.

The long-term decline in the stock market has become a fatal disease for the Japanese economy. Japanese banks and insurance companies hold a large number of Japanese stocks, and a sharp decline in the stock market will cause hidden losses to the banking and insurance industry, further triggering the possibility of a financial crisis.

According to statistics from the Tokyo office of the Boston Consulting Group (BCG), as of September 13, 2002, 854 of the 1,505 listed companies on the Tokyo Stock Exchange in Japan had their stock prices below their net assets, accounting for 57% of the total number of companies. Among the companies listed on the First and Second Sections of the Tokyo Stock Exchange, there are 577 companies with a market value of less than their net assets for three consecutive fiscal years, 192 companies with a significant decline in profits for two consecutive fiscal years, and 95 companies that have incurred losses. Due to the economic downturn, the profits of Japanese listed companies fell sharply in 2002. According to March 2002 statistics, the total profit of Japanese listed companies increased from 7 in March 2001. 2 trillion yen (about 59 billion U.S. dollars) fell to 1 in March 2002. 9 trillion yen (about 15.6 billion US dollars), a drop of 74%.

Generally, when the market value of a company's shares is less than 1% of the company's net assets. At 7 times, the company is worth being acquired. Therefore, in the past few years, first European and American companies, and then Asian companies have come to Japan to acquire companies. In 2001, according to the Tokyo Industrial and Commercial Survey, there were more than 150 mergers and acquisitions of Japanese companies by foreign investors. These include France's Renault Motor's acquisition of Japan's Nissan Motor, Ford's acquisition of Japan's Mazda Corporation, and Shanghai Electric Group's acquisition of Japan's Akiyama Company, Japan's third largest printing press company.

The bursting of the real estate bubble

In 1990, Japan's real estate bubble burst. There are two reasons for the decline in real estate prices: one is the successive large increases in bank interest rates. The second is the government's tightening of lending to real estate companies.

In April 1990, Japan's Ministry of Finance began to control the total amount of real estate loans from Japanese financial institutions. Since then, Japan's real estate has entered a recession winter that has lasted for more than 10 years. The chart shows that land prices in Japan began a long decline that began in April 1990. By 2002, land prices in Japan's six largest cities had fallen by about 80 percent from their peak in 1990, similar to the decline in Japan's stock market and largely back to the price levels of 20 years ago. In particular, the decline in 1991-1992 was the largest, with a decline of more than 20 percent in March 1992 compared with March 1991, and an annual decline of around 10 percent since 1995.

Japan's land prices and housing prices have continued to fall for a long time, which has dealt a serious blow to Japan's construction industry, and many construction companies in Japan have gone bankrupt and closed down, taking 2000 as an example, in 2000, the number of bankrupt enterprises in Japan's construction industry reached 6,214, accounting for one-third of all bankrupt enterprises, and the number of bankruptcies of construction enterprises in 2000 increased by 33 compared with 1999. 6%, which is also the first time since 1984 that the number of annual bankruptcies in the construction industry has exceeded 6,000.

Huge bad debts of the Bank of Japan

In the era of skyrocketing real estate prices, banks lended huge amounts of real estate loans. The bursting of the housing bubble turned huge real estate loans into bad debts.

According to the 1998 bank statistics, the non-performing assets of Japanese banks exceeded 100 trillion yen, and it is estimated that the non-performing assets that need to be written off are roughly 60 trillion yen. Goldman Sachs believes that the bad debts of Japan's banking sector have reached the level of 237 trillion yen, accounting for about half of Japan's annual gross domestic product (GDP).

Since 1985, Japan's interest rate has been declining, and since January 1986, in order to stimulate the domestic economy and curb the continuous sharp appreciation of the yen, the discount rate of the Bank of Japan has been lowered five times in a row, from 5% to 1987.2 The ultra-low interest rate level of 5%, which is the lowest level since Japan's post-war period. And this ultra-low level of interest rates continued until May 1989. During this period, there are two main reasons for Japan's long-term implementation of the low interest rate policy: one is the requirement of international policy coordination of the United States, and the other is to support the dollar, because the low interest rate policy can guide Japanese funds to continue to flow into the United States, provide funds for the United States' fiscal deficit, and prevent the dollar from depreciating under the pressure of huge trade deficits.

It was the low interest rate policy during this period that led to the big bubble in Japan's real estate and stock market.

Due to Japan's ultra-low interest rate monetary policy, a large amount of social funds need to find new investment directions. In Japan, land and stocks are the main investment targets for Japanese investors, and they are worth investing in because their supply is limited.

Due to the rise in the stock market, the cost of financing corporate shares is constantly decreasing. In anticipation of a bullish interest in stocks, many companies have begun to issue convertible corporate bonds and corporate bonds with warrants attached to them, and the interest rates on bonds are very low. If a convertible corporate bond in the European bond market is issued, there are times when negative interest rates occur. This is because after the Plaza Accord in 1985, investors' expectations of a stronger yen were high, resulting in a much higher forward exchange rate than the spot exchange rate, and the expected appreciation of the yen exceeded the interest rate on bonds. In fact, many large Japanese companies prefer to issue yen bonds in the European bond market for financing than in Japan, because the financing cost in the European bond market is lower than in China. In 1994, for example, the total amount of Euroyen bonds issued was 108,600 trillion yen, while the total amount of domestic "samurai bonds" issued in Japan was 11,100 trillion yen, and the amount of Euroyen bonds issued was nearly 10 times that of domestic "samurai bonds".

Due to the low cost of financing through the issuance of stocks and bonds, many companies have shifted their financing methods from bank financing to securities market financing. After raising huge sums of money from the securities market, these enterprises are used to repay bank loans, in addition to equipment investment, land and stock speculation. As a result, banks not only lose customers who have good corporate loans, but the money they lent out is also returned. As a result, banks are seriously overfunded and urgently need to find investment directions.

As a result, bank funds were heavily invested in real estate companies and construction companies. During the land bubble, banks provided loans to anyone who had land as collateral. And when calculating the guaranteed value of the land, it is calculated at 120% of the market price of the land, and the reason for this calculation is simple: the price of land is rising. This is also something that can only be seen in Japan, which is an economic fanatic.

This is true not only at home, but also abroad. As the yen continues to appreciate sharply, banks feel that all real estate abroad is cheap. As long as the enterprise proposes that the loan funds are used for real estate acquisition or construction, the bank will generally provide loan support very easily, and the review conditions are very relaxed.

During the real estate and stock price bubbles, the assets of the Japanese people increased by 1,000 trillion yen, and many Japanese became big capitalists and became very wealthy for a while. High-end entertainment activities are popular, and high-end tourist hotels are overcrowded. The developer is developing luxury tourist facilities not only in Japan, but also luxury hotels, restaurants, and tourist facilities around the world.

After the stock bubble burst in 1989 and the real estate bubble burst in 1990, stock and real estate prices entered a rapid decline.

In addition, due to the rapid decline in housing prices, the market price is much lower than the mortgage value of the house in the bank, and many Japanese people choose to refuse to repay the loan and give up the ownership of the house to the bank. If you need to live, you can buy a house at a low price from the market. This has turned a large number of mortgage loans from banks into property assets that are shrinking in value.