Kasumigaseki, Chiyoda Ward, Tokyo, Japan.
Following the Japanese government's sweeping reorganization and consolidation of central ministries last year, the Ministry of Finance—newly rebranded after the abolition of the former Ministry of Finance—was now enveloped in tension.
Kazuyasu Sato, the Minister of Finance under the newly inaugurated Gotō Yūjirō administration, sat on the sofa in his office, his face filled with irritation as he spoke.
"Why is the exchange rate suddenly behaving like this?!"
At the sharp, demanding question, Seiko Yasuda, Director-General of the International Bureau—his hair already half gone—broke into a cold sweat as he replied.
"As I reported previously, once the Eldorado Fund began massively selling off the yen, other hedge funds joined in with large-scale short positions, driving the exchange rate upward."
Minister Sato frowned deeply and raised his voice.
"Those bastards are wreaking havoc on the Nikkei too by dumping stocks like crazy!"
At that, Administrative Vice Minister Okawara, seated on the sofa to his left, quickly responded.
"Yes. They've been continuously pouring in short sales along with options, and the Nikkei has ended up breaking below the 10,000 line."
"They're just a single hedge fund, and yet both the yen and the stock market are being shaken at the same time—does that even make sense?!"
As Minister Sato slammed his palm hard against the armrest of the sofa and shouted, everyone flinched and shrank back.
Amidst this, Administrative Officer Yoshikawa, who was seated beside Director Yasuda, stepped forward with a grave expression.
"Although we are going through a difficult period due to the collapse of the bubble, as you said, Japan is not so weak that it would be swayed by a single hedge fund."
"And yet why are both the exchange rate and the stock market in such a state?!"
"The timing is extremely unfavorable, and the opponent attacking us is no ordinary player."
Yoshikawa, an administrative officer known by the nickname "Mr. Yen" and regarded as the top expert in foreign exchange within the Ministry of Finance, continued in a firm voice.
"Over the past four days, the Eldorado Fund has sold off more than 5 trillion yen in the foreign exchange market alone. In the stock market, I understand that an even larger volume of short positions has been taken."
"..."
"No matter that we possess the world's second-largest foreign exchange and stock markets after the United States, if that level of capital is poured in to suppress us, it is inevitable that we will be shaken."
"Hmm."
At the staggering sum—enough to make one's jaw drop—Minister Sato let out a low groan.
As he, who had been relentlessly pressing everyone, suddenly fell silent, Administrative Vice Minister Okawara gauged the mood before carefully interjecting.
"The more serious issue is that Park Seok-won—the world's richest man, known on Wall Street as the Midas hand and capable of moving astronomical sums of capital—is backing the Eldorado Fund. Considering that, this is unlikely to be the end, and there's a high possibility that the sell-off will continue."
Even now, the situation was difficult to handle, and at the mention that the selling could continue, a curse slipped out of Minister Sato's mouth.
"Damn it! This is driving me insane."
Director Yasuda wiped the sweat forming on his forehead again and again with a handkerchief, his expression troubled.
"Even more concerning is that the number of hedge funds joining in to sell the yen and the Nikkei—following the Eldorado Fund—is rapidly increasing as time goes on."
He glanced sideways at Minister Sato before adding in a hesitant voice.
"It's not just hedge funds. Major Wall Street investment banks like JP Morgan and Goldman Sachs are also showing signs of joining the short positions."
"These damn it."
Minister Sato's face twisted in frustration, and as if unable to bear it, he roughly loosened the knot of his tie in irritation.
"Eldorado Fund—no, Chairman Park—just what kind of grudge does he have against us to go this far?!"
"It seems Chairman Park has realized that we're trying to clean up the non-performing loan problem, which has grown too large for us to handle."
Yoshikawa replied with a subdued gaze.
At that, Minister Sato flinched in surprise and raised his eyebrows.
"How could he have caught on to something that only a select few know—even within the Ministry of Finance and the cabinet?"
From the Japanese government's perspective, it was inevitable that they would be flustered, as the efforts they had been secretly carrying out to normalize deeply troubled banks had been exposed before they could even be implemented.
"Although we've been plugging the gaps with taxpayer money all this time, isn't it already common knowledge that the non-performing loan problem burdening the megabanks is essentially a ticking time bomb that could explode at any moment? As I mentioned earlier, Chairman Park has precisely identified our most vulnerable timing and struck with perfect accuracy."
"Hmm."
Minister Sato spoke with a furrowed brow.
"If, as we suspect, he's pulling this stunt to target our non-performing loan cleanup, then once we proceed with the plan, the shock to the foreign exchange and stock markets will be far greater than we anticipated."
"Considering that the yen and the Nikkei have already fallen significantly due to short positions, the scale of the decline is likely to be substantial."
Yoshikawa responded in a heavy tone.
Administrative Vice Minister Okawara, seated across from him, shared the same view.
"There's a high possibility the Nikkei could fall below 9,000, and the exchange rate could exceed 130 yen per dollar."
As Director Yasuda nodded in agreement, Minister Sato's face twisted in devastation.
It was a natural reaction, given that the impact far exceeded the range they had anticipated when they decided to proceed with the large-scale cleanup of non-performing loans.
"Whew. If it comes to this, I'll have to inform the Prime Minister and postpone the push to clean up the non-performing loans."
"That must not happen."
As Administrative Vice Minister Okawara immediately voiced his opposition, Minister Sato—who had been rubbing his face with his palm—sharply raised his eyebrows.
"Didn't you just say that if we proceed as planned, the turmoil in the foreign exchange and stock markets will worsen?"
Okawara leaned forward in his seat as he spoke.
"That's correct. However, with the non-performing loan problem already having reached its limit, if we delay it yet again instead of resolving it, the losses we'll have to bear will be far greater."
Yoshikawa also added in a sombre tone.
"If the non-performing loan cleanup is carried out under controlled management, we can regulate the risks. But if the bomb suddenly goes off unexpectedly, it will be difficult even to estimate how far the flames will spread."
Director Yasuda, seated beside him, nodded vigorously.
"That's right. Until now, we've been using profits from the sale of assets such as stocks and real estate held by banks as funding to resolve non-performing loans, but even that has reached its limit. The megabanks may still have some capacity to hold out a bit longer, but the relatively weaker regional banks and cooperatives are in such a dire state that it wouldn't be surprising if they declared bankruptcy as soon as tomorrow. Rather than postponing it, we must execute the plan as soon as possible—even if it's just one day earlier."
Since the bubble burst in 1992, nearly 80 trillion yen in non-performing loans had been cleared up, yet new bad loans continued to emerge in even greater amounts, causing the total balance of non-performing loans not to decrease but to steadily rise.
Eventually, as the scale of non-performing loans in financial institutions swelled dramatically over the past two years—surpassing all previous records—the Japanese government recognized the severity of the situation and resolved to implement drastic measures.
"Ugh…"
Fully aware of this situation, Minister Sato let out a groan as he folded his arms.
He knew, as the three of them had said, that this was not something that could be postponed, which made the current situation all the more frustrating.
"Damn it. Why does it have to be now?"
Minister Sato trembled with fury at the actions of Seok-won and the Eldorado Fund, who had precisely identified their weak point and struck with perfect timing.
The more he thought about it, the more his anger flared, to the point that he was grinding his teeth.
Administrative Vice Minister Okawara and Director Yasuda also lowered their heads, unable to present any viable solution.
In a situation where they could do nothing but helplessly endure Seok-won's assault, the atmosphere in the room sank into even deeper gloom.
At that moment, Yoshikawa cautiously opened his mouth and spoke.
"It would have been best if we had moved to clean up the non-performing loans before the Eldorado Fund made its move, but what's done is done—there's no use regretting it now."
"Who doesn't know that?"
"In that case, how about we strike back instead?"
Minister Sato, who had been responding with a sullen expression, furrowed his brow.
"What exactly are you proposing we do?"
As Administrative Vice Minister Okawara and Director Yasuda also looked on with puzzled expressions, Yoshikawa calmly explained the countermeasure he had devised.
"When a wildfire spreads uncontrollably, don't they sometimes set a backfire—burning everything that can be burned in advance to prevent the fire from spreading any further?"
"..."
"Just like that, we should move forward with the non-performing loan cleanup earlier than planned."
Minister Sato was startled and asked again.
"The exchange rate is already surging, and the Nikkei is shaking, and now you're suggesting we pour fuel on the fire?"
"That's correct. If this situation is unavoidable, then it's better to let all the bad news break at once—take the hit in one go and get it over with."
"And what if the exchange rate really breaks past 130 yen? What then?!"
Minister Sato raised his voice and barked, but Yoshikawa remained completely unshaken, calm as ever.
"As you said, the foreign exchange and stock markets will be shocked and fluctuate greatly, but it will only be temporary—the situation won't last long."
Even as he watched the furrows on Minister Sato's brow deepen further, Yoshikawa remained unfazed.
"If we endure the hardship and complete the cleanup of non-performing loans, Japan's economy will instead become healthier—the exchange rate will fall again, and the stock market will quickly regain stability."
Administrative Vice Minister Okawara, who had been watching the situation between the two, cautiously chimed in.
"Administrative Officer Yoshikawa is right. If this is a pain we have to go through at least once, then even if it's severe, it may be far better to finish it quickly rather than dragging it out while hesitating."
"I agree as well."
As even Director Yasuda voiced his support, Minister Sato clutched his throbbing head and leaned back into the sofa.
"This is driving me insane."
He agonised over it again and again, but no matter how much he thought, there was no real alternative.
Minister Sato let out a deep sigh and pressed his hand to his forehead.
"It seems I'll have to meet the Prime Minister in person and discuss this."
With that, he turned slightly while seated on the sofa and pressed the intercom button on the side table.
"Contact the Prime Minister's residence immediately and inform them that I have an urgent matter to report."
[Yes, understood.]
Straightening himself again, Minister Sato ran a hand through his hair with a bitter expression and muttered in lament.
"In the end, this means Chairman Park and the Eldorado Fund will be the only ones walking away with massive profits."
The three men also wore grim expressions, knowing full well that they had no choice but to endure the situation.
***
A few days later.
The Maybach sedan carrying Seok-won sped along Olympic-daero toward Yeouido.
Dressed in a classic double-striped suit with a pocket square neatly tucked in, Seok-won leaned back into the plush leather seat, gazing at the Han River flowing past outside the window while listening to the news coming from the radio.
[As Typhoon 'Rusa,' which swept across the entire country, has caused property damage exceeding 1.6 trillion won, it is being recorded as the largest property damage ever from a typhoon disaster since such statistics began. In particular, the damage to rivers and farmlands has been severe, with government estimates placing the losses at over 1.2 trillion won... The human toll is also significant, with 113 dead and 71 missing, bringing the total to 184 people affected by the typhoon...]
Even at a glance, the muddy yellow-brown color of the Han River—unlike its usual state—made it clear just how severe the damage from this typhoon had been.
Moreover, all kinds of debris drifting down from upstream floated on the surface, making for an unpleasant sight.
"We should tell President Yoon to make a donation for the typhoon recovery as well."
Just then, as the phone in his inner pocket began to vibrate, Seok-won took it out and answered the call.
"Hello."
At that, John Porter, the head of Eldorado Fund's Japan branch, spoke in an excited voice.
[Boss. An announcement has just been made that Financial Services Minister Yanagisawa has been dismissed, and Minister Sato of the Ministry of Finance will concurrently serve as the head of the Financial Services Agency!]
The moment he heard this, Seok-won's eyes flashed sharply.
"The fact that, following the government reorganization, the former Ministry of Finance was split into the Ministry of Finance and the Financial Services Agency, and now a single minister has been given full authority over both—it's reasonable to see that as a sign that a major change is coming."
[That's what I think as well. Most likely, just as you predicted, a large-scale cleanup of non-performing loans will be carried out decisively.]
"That seems highly likely."
[The market appears to think the same. As soon as the announcement of the dual role was made, both the exchange rate and the Nikkei began to fluctuate sharply.]
Seok-won raised the corner of his lips while holding the phone to his ear.
"They didn't panic and responded quickly—it seems they've put quite a bit of thought into this. It looks like they're trying to take a short, sharp shock with a drastic measure and move past it, but things won't go the way the Japanese government hopes."
As he imagined the Japanese government being dragged even deeper into the mire, unable to escape due to the massive blow that would soon follow, the smile on Seok-won's lips grew even more pronounced.