2010-8-19

Since I began writing this column, there is something I have repeatedly recalled.

After the introduction of the quantitative restrictions on real estate lending on April 1, 1990, it was as though capitalism had suddenly come to an end for those of us in the real estate business…
Financing had disappeared.

At a time when I worked like a horse from morning till night, leading a group of companies that earned an annual average of just under 500 million yen in real estate brokerage fees alone and was said to be among Japan’s leading firms on a per-office basis, my only respite was going to Hawaii in summer, winter, and spring…
It was the one place where the telephone would not ring.

Over the year-end and New Year holidays, when Japan was beginning to suffocate and I did not even feel like going to Hawaii, I thought that, with the banks in a state almost tantamount to all of them having failed, the only way to continue in real estate was to form a fund.

I bought four books on the subject and kept reading them, even taking them to Senri no Yu, a natural hot spring with an open-air bath operated by Mainichi TV.

My conclusion was that this would not solve the problem of real estate that had become nonperforming debt throughout Japan…
They would securitize first-class buildings occupied by first-class tenants, with first-class securities firms and trust banks acting as intermediaries…
Ninety percent of the nonperforming properties were multi-tenant buildings… including many that violated the Building Standards Act…

Even so, at the end of January that year, I telephoned the ministry with jurisdiction over the matter—was it the Financial Services Agency, which had split off from the Ministry of Finance?…
Unless the limit of 50 people in a fund could be raised to at least around 100, there was nothing we could do…
At the time, Japanese households should have had average savings of 5 million yen…
Because the amount sought from each investor would be large, forming a fund would be difficult…

I asked to speak to the section chief, a University of Tokyo graduate… Over these twenty years, government offices and large companies have shut themselves away as though inside fortresses, but at that time things were still as they had been before.

We spoke for about an hour and a half, with some laughter mixed in…
At various points he even replied, “I agree with your thinking, President KISARA”…
In any event, forming funds was the only way to resolve the mountain of nonperforming debt, but why was the limit on the number of people in a fund 50?

I pressed him: was this the thinking of the authorities—that raising money was the state’s business and that ordinary people must not be allowed to raise it, but the 47 Akō rōnin had once rebelled against the state and nothing had happened, so 50 people should pose no problem? He laughed and said that I was not far off the mark…
The reason for setting the number at 50 was the assumption that, when someone thought of starting a business and tried to raise funds from their entire extended family, there would be 50 people.

When I criticized the media, saying that the chorus of righteous indignation led by the Asahi Shimbun in 2006 had resulted in a mere 850 billion yen being injected as a stopgap, postponing a solution and bringing about today’s national crisis…
He responded as though he had been waiting for me to say it: “I agree completely. The media are to blame.”
But it was you people who imposed the quantitative restrictions too late and too abruptly, so you cannot escape responsibility either…

Some time later, a short item appeared in the Nikkei newspaper: “Fund investor limit to rise from 50 to 100.”

In any case, thinking that Japanese money alone would no longer suffice, I set out with A, a client of my company who had introduced me to the wealthy Singaporean I mentioned earlier, to visit ethnic Chinese businesspeople in Singapore and Bangkok…
A had spent many years doing business with ethnic Chinese companies in Bangkok and Singapore while working for a mid-sized trading company… In his younger days, he had lived in Singapore for more than five years…

As I have already written, the opinion advertisement that I spent 10 million yen to distribute as an insert to every Nikkei-subscribing household in Tokyo had the desired effect, and the exceptionally heavy tax was abolished.

If we could form a fund with a large amount of money, we could resolve the nonperforming-debt problem and also generate substantial profits
…And since Japan is, of course, part of Asia, I thought it would be better, if possible, for Asian investors to earn those profits…
The investment destination would be Osaka, the city I had chosen as the stage of my life… At the time, it was a treasure trove of properties offering higher yields than Tokyo… But insisting on Osaka was also a mistake, as I will write later when I recount my meeting with the elder statesman in Bangkok.

I headed first to Singapore, intending to form a 50-billion-yen fund…
G, the wealthy Singaporean I mentioned earlier, understood my intentions instantly and introduced me to one of Singapore’s very richest people. With G, his wife and eldest son, A, who had introduced us, and that wealthy woman, a wonderful lady, I spent one of the finest evenings of my life at a very good Chinese restaurant in a place known only to them…

G said, “KISARA, you’re a good singer, so sing us a Japanese song.”
In response, I sang Chiyoko Shimakura’s “Karatachi Diary” like an opera singer. That prompted G to sing one beautiful Chinese love song after another, and even his wife began to sing (I had never known she had such a lovely voice).
Then, at last, the lady—who had played the piano since childhood and was also exceptionally beautiful—began to sing, of all things, my beloved aria “Un bel dì, vedremo.”
I joined in partway through… When that truly enjoyable dinner ended and we left the restaurant, the lady and I were still singing the aria as we walked out—she in English and I in Japanese.

To show what a wonderful evening it was… A, whom I mentioned at the beginning, was older than I was, and because I had long lived as the sort of person who hides his talents, he sometimes treated me like an elder brother…
Yet in the car on the way back to the Shangri-La Hotel, he said something extraordinary: “She is someone I have wanted to meet for twenty-five years but never could. You captivated her in a single evening… From now on, I shall call you the greatest magician.”

After that, we visited one of Bangkok’s leading ethnic Chinese companies… I will write on another occasion about the welcome we received from its elderly patriarch, whom I can only describe as a truly great Chinese man.

Let me return to the subject of the title and to where I began.
Whenever I spoke with a rising ethnic Chinese businessman in Bangkok… He and I were close in age, became very good golfing friends, and met many times… he would always say, with gestures, “Because it’s you, KISARA, I trust what you say one hundred percent, but… when it comes to investing in Japan, the exchange rate… The yen fluctuates far too much…”
At the time, I was focused entirely on real estate, so I understood the true meaning of what he was saying only vaguely…
Well, if the business discussion came to nothing, so be it.
I would enjoy the friendship.

Now, naturally, I understand it clearly…
Even if Osaka real estate at the time offered yields of more than 15 percent… They would be investing sums measured in hundreds of millions of yen… If the yen frequently moved by 20 or 30 percent, investing in Japanese real estate was too frightening.

There was no possibility that the quality properties I could recommend to them would yield 20 or 30 percent; and even if there had been such properties, from their point of view the yield would have been virtually nonexistent…
In that case, they would be better off using their ethnic Chinese connections to invest in neighboring countries, Australia, the United States, or Europe…
I think this remains their fundamental view even now.