September 6, 2002.
The briefing room of Japan's Financial Services Agency in Kasumigaseki, Chiyoda Ward, Tokyo, was packed to the brim with people, leaving no space to move.
The heat radiating from what seemed to be well over a hundred reporters, combined with the murmur of voices coming from all directions, created a noisy atmosphere.
Large television cameras were set up on tripods at the front and on both sides of the podium, while the front seats were tightly packed with journalists.
Meanwhile, the photographers at the back stood on ladders, waiting to capture shots from even slightly better angles.
After some time had passed like that— the door opened, and Minister Sato of the Ministry of Finance—now also serving as the head of the Financial Services Agency—appeared together with FSA officials.
"He's here!"
"Minister! Please look this way!"
A barrage of shutter clicks erupted all at once, and camera flashes burst brilliantly.
Click-click-click! Flash-flash!
Under the blinding flashes that made his eyes ache, Minister Sato walked forward in silence with an expressionless face and stepped onto the podium.
Standing before the prepared lectern, he gave a slight bow toward the reporters and cameras, prompting another wave of shutter sounds to ring out.
Click-click-click! Click! Click!
As Minister Sato raised his head, an FSA staff member standing at the far left of the podium picked up a microphone and spoke.
"From this moment, we will begin the first press conference of the newly appointed Minister Kazuyasu Sato. Please remain quiet."
Standing before microphones bearing various broadcast network logos and the cameras, Minister Sato's face was as rigid as stone.
From his tightly pressed lips and serious gaze, it was clear that what he was about to say was by no means trivial.
The reporters sensed this as well and fell completely silent, their eyes fixed on him.
Amid the countless gazes upon him, Minister Sato looked straight into a broadcast camera with its red recording light on—signaling that it was live—and began to speak in a deep, heavy voice.
"Dear citizens, first of all, I feel a profound sense of responsibility in taking on the role of Financial Services Minister during this critical time."
As Minister Sato began speaking, the room fell silent, with only the sounds of pens scribbling in notebooks and fingers tapping on laptop keyboards being heard.
"Japan's financial system is currently suffering severe complications from a prolonged economic downturn. In particular, since 1992, despite injecting an enormous amount of public funds—amounting to 80 trillion yen—to resolve non-performing loans, the fundamental issues have not been addressed due to delays in corporate restructuring. As a result, as of last month, the ratio of non-performing loans among banks nationwide has worsened significantly for three consecutive years, rising from 6.93% to 7.31%, and the total scale of non-performing loans burdening the financial sector has reached its worst level in history."
Although they had expected to some extent that he would bring up the issue of non-performing loans, the room erupted into a commotion as he boldly laid bare what was essentially a disgrace of the ruling Liberal Democratic Party.
Watching the reporters' typing grow even faster, Minister Sato steadied his voice and continued speaking.
"Prime Minister Gotō Yūjirō, the cabinet ministers, and I have concluded that, to resolve the non-performing loan problem that is placing a heavy burden on Japan's economy, it is not enough to rely on temporary stopgap measures. The only certain and definitive solution is to boldly inject public funds and restore economic vitality through swift restructuring and the reallocation of resources."
"...!"
At this shocking statement—one that could overturn the Japanese economy—the reporters had already forgotten to keep writing. Their eyes widened as they stared at Minister Sato on the podium in astonishment.
"It will be painful, but unless we resolve to cut to the bone and restructure failing companies, we cannot fundamentally solve the chronic problem of non-performing loans. Addressing this issue is an urgent task for normalizing Japan's economy; at the same time, it is something we must accomplish to escape the prolonged recession and once again become a nation that leads the global economy."
Looking at the reporters—each either gaping or swallowing nervously—Minister Sato spoke in a firm tone.
"The responsibility for the creation of non-performing loans lies with both the banks that issued reckless loans and the companies that failed to repay them. Therefore, in the process of injecting public funds, any banks or companies where restructuring is not properly carried out, or whose prospects for recovery are low, will be eliminated—even if they are megabanks or major corporations with significant economic impact."
At Minister Sato's shocking remarks, the reporters wore expressions of utter disbelief, as if a bomb had just gone off.
But Sato paid no heed to the restless atmosphere in the room and spoke again with firm resolve.
"Though it will be a difficult and thorny path, it is something that must be done for great Japan to rise again. I ask for your understanding, and I urge you to trust the cabinet and lend us your support."
As soon as he finished speaking, a barrage of camera flashes burst forth, and reporters raised their hands like a swarm, firing off questions.
"Are you saying that even megabanks could become targets for bankruptcy during the process of handling non-performing loans?"
"Please specify the exact amount of public funds that will be injected into resolving non-performing loans!"
"Minister!"
"If things proceed as you've said, there is a strong possibility that the already weak foreign exchange and stock markets will be shaken during the process—what is your view on that?"
At the question from a middle-aged reporter wearing gold-rimmed glasses, Minister Sato hesitated for a moment before hardening his expression and responding in a firm tone.
"As I mentioned earlier, to resolve the non-performing loan problem that has become a chronic disease eating away at Japan's economy, we have no choice but to endure a certain degree of pain."
Even as questions continued to pour in, Minister Sato maintained an uncompromising stance throughout.
Already, Japan's stock market—where Seok-won's short selling had drawn in numerous hedge funds and Wall Street investment banks, pushing it to hit new lows almost daily—was completely gripped by fear following his announcement.
The exchange rate also absorbed the shock, surging by more than 10 yen in an instant and shooting upward vertically.
***
Following the government's sudden announcement of a large-scale non-performing loan cleanup, the Nomura Securities trading center was, quite literally, in total chaos.
On a television screen on one side, footage of Minister Sato's press conference was repeatedly playing, accompanied by bold breaking-news captions.
Amid all this, the incessant ringing of phones and the frantic shouts of traders placing urgent sell orders pierced through the air.
Ring! Ring!
"Tokyo Electron, sell all 5,700 shares at the current price!"
"290,000 yen? It was over 300,000 yen just this morning for NTT DoCoMo—how does that make any sense?!"
"Sell all 12,000 shares of Mizuho Holdings! What, 257,320 yen? This is insane. Just dump it at that price!"
Amid the clatter of keyboards and shouting voices, someone screamed again.
"Ahhh! It's dropped another 10,000 yen already!"
"Damn it. Dump everything before it collapses further!"
As investors, gripped by fear that even megabanks—once considered too big to fail—might collapse, rushed into a full-scale sell-off, the Nikkei index plunged by more than 2%, with financial stocks leading the decline.
With stock prices plummeting before they even had time to react, Nomura Securities traders frantically poured in sell orders.
"What do you mean it won't go through at that price?!"
"How far is this even going to fall? It's going to turn into complete trash at this rate!"
Clutching their phones, veins bulging in their necks as they shouted in desperation to sell their holdings before prices dropped further, the numbers flashing on the market boards and monitors continued to collapse endlessly—like tumbling off a cliff.
Not only the Nomura Securities trading center, but the entire Japanese stock market had descended into complete chaos.
***
At the same time.
Wearing a vest over his dress shirt, Seok-won stood with his arms crossed, watching Minister Sato's announcement being broadcast live on NHK satellite TV on a large screen installed in one corner of the chairman's office.
As soon as the news broke, an anchor—displaying a graph of the rapidly plunging Nikkei index—summarized Minister Sato's remarks with a stiff expression. Watching this, Seok-won muttered in a cold tone.
"Cleaning up the non-performing loan problem before it turns into a full-blown financial crisis is the right move, but the timing is far too late."
If they had acted decisively like this a few years earlier, rather than relying on stopgap measures and delaying it, the impact would have been far less severe.
But the non-performing loan problem had already festered to its limit, and the damage required to cut out the rot was now far too great.
What could have been cured with simple medication had been concealed and patched over repeatedly, leaving them no choice but to undergo major surgery.
"The mass collapse of financial stocks—those that need to write off enormous amounts of accumulated non-performing loans and receive injections of public funds—is only the beginning. Fear will quickly spread to construction, real estate, and retail companies, where a large number of firms are likely to be forced out during the loan cleanup process."
If that happened, banks would rush to dump the stocks they were holding onto the market before the value of their real estate and equity assets—needed as resources to resolve non-performing loans—fell even further, accelerating the market crash.
"Once you fall into that endless vicious cycle, it's not easy to escape."
Of course, if the Japanese government were to swiftly pour massive public funds into the market to calm investor panic and respond decisively, it might be possible to limit the shock to the short term.
But Seok-won curled his lips into a crooked smile, as if to say that was wishful thinking.
"Sometimes, even a minor wound can worsen and end up threatening one's life."
At that moment, as his phone vibrated, Seok-won walked over and picked up the phone from the desk.
[Boss. Did you see Minister Sato's press conference?]
Seok-won glanced at the television screen, which was repeatedly replaying the press conference footage, and replied.
"It was even more aggressive than I expected."
[Thanks to that, the Nikkei and the yen are getting completely crushed.]
Landon laughed loudly from the other end of the phone.
"This is only just the beginning, so there's no need to get overly excited. We're still far from the target."
[That's true. After all, you said the Nikkei would plunge below 8,000, so it still has a long way to fall. But at this rate, we might end up seeing that sooner than expected.]
"What do you mean by that?"
Landon lowered his voice slightly as he replied.
[In four days, President George Bush is scheduled to give a speech at the United Nations.]
"At the UN?"
[Do you know what the topic of the speech is?]
As a thought flashed through his mind, Seok-won tightened his grip on the phone in his hand.
"Is it related to Iraq?"
[You caught on right away. That's correct. He is expected to condemn Iraq's development of weapons of mass destruction and its support for terrorist organizations, and to call for international support to overthrow the regime.]
"So giving a speech like that at the United Nations means the U.S. intends to formally move toward attacking Iraq."
[That's right. After the UN speech, he is expected to request congressional approval for a military strike on Iraq.]
Holding the phone to his ear, Seok-won watched the television replaying Minister Sato's press conference, a glint appearing in his eyes.
"If the Japanese government learns of this, they'll realise too late what they've walked into."
[Exactly.]