Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
Why the Japanese Government Can Afford to
It Owns the Largest Depository Bank in the World
By Ellen Brown
Al-Jazeerah, CCUN, April 4, 2011
When an IMF spokeswoman said at a news conference on March 17
that Japan has the financial means to recover from its devastating
tsunami, skeptical bloggers wondered what she meant. Was it a polite
way of saying, “You’re on your own?”
said, "The most important policy priority is to address the
humanitarian needs, the infrastructure needs and reconstruction and
addressing the nuclear situation. We believe that the Japanese
economy is a strong and wealthy society and the government has the full
financial resources to address those needs." Asked whether Japan had
asked for IMF assistance, she said, "Japan has not requested any financial
assistance from the IMF."
how a country with a national debt that was over 200% of GDP could be
“strong and wealthy.” In a
CIA Factbook list of debt to GDP ratios of 132 countries in 2010,
Japan was at the top of the list at 226%, passing up even Zimbabwe,
ringing in at 149%. Greece and Iceland were fifth and sixth,
at 144% and 124%. Yet Japan’s
credit rating was still AA, while Greece and Iceland were in the BBB
category. How has Japan managed to retain not only its credit
rating but its status as the second or third largest economy in the world,
while carrying that whopping debt load?
The answer may be that the
Japanese government has a captive funding source: it owns the world’s
largest depository bank. As U.S. Vice President Dick Cheney said,
“Deficits don’t matter.” They don’t matter, at least, when you own
the bank that is your principal creditor. Japan has remained
impervious to the speculative attacks that have crippled countries such as
Greece and Iceland because it has not fallen into the trap of dependency
on foreign financing.
Japan Post Bank is now the largest
holder of personal savings in the world, making it the world’s largest
credit engine. Most money today originates as bank loans, and
deposits are the magic pool from which this credit-money is generated. Japan
Post is not only the world’s largest depository bank but its largest
publicly-owned bank. By 2007, it was also the largest employer in
Japan, and the holder of one-fifth of the national debt in the form of
government bonds. As noted by Joe Weisenthal,
writing in Business Insider in February 2010:
enormous public debt is largely held by its own citizens, the country
doesn't have to worry about foreign investors losing confidence.
there's going to be a run on government debt, it will have to be the
result of its own citizens not wanting to fund it anymore. And since many
Japanese fund the government via accounts held at the Japan Post Bank --
which in turn buys government debt -- that institution would be the
conduit for a shift to occur.
That could explain why Japan Post
has been the battleground of warring political factions for over a decade.
The Japanese Postal Savings System dates back to 1875; but in 2001, Japan
Post was formed as an independent public corporation, the first step in
privatizing it and selling it off to investors. When newly-elected
Prime Minister Junichiro Koizumi tried to push through the restructuring,
however, he met with fierce resistance. In 2004, Koizumi shuffled
his Cabinet, appointed reform-minded people as new ministers, and created
a new position for Postal Privatization Minister, appointing Heizo
Takenaka to the post. In March 2006,
Anthony Rowley wrote in Bloomberg:
By privatizing Japan Post,
[Koizumi] aims to break the stranglehold that politicians and bureaucrats
have long exercised over the allocation of financial resources in Japan
and to inject fresh competition into the country's financial services
industry. His plan also will create a potentially mouthwatering target for
domestic and international investors: Japan Post's savings bank and
insurance arms boast combined assets of more than ¥380 trillion ($3.2
trillion) . . .
A $3 trillion asset pool is mouthwatering indeed.
In a 2007 reorganization, the postal savings division was separated from
the post office’s other arms, turning Japan Post into a proper bank.
According to an October 2007 article in
The newly created Japan Post Bank will be free to concentrate on banking,
and its new status will enable it to diversify into fresh areas of
business such as mortgage lending and credit cards. To some degree, this
diversification will also be forced upon the new bank. Some of the special
treatment afforded to its predecessor will be revoked, obliging Japan Post
Bank to invest more adventurously in order to retain depositors--and,
ultimately, to attract investors once it lists on the stock market.
That was the plan, and Japan Post has been investing more adventurously;
but it hasn’t yet given up its government privileges. New Financial
Services Minister Shizuka Kamei has put a brake on the privatization
process, and the bank’s shares have not been sold. Meanwhile, the
consolidated Post Bank has grown to enormous size, passing up
Citigroup as the world’s largest financial institution; and it has
been branching into
areas, alarming competitors. A March 2007
article in USA Today warned, “The government-nurtured colossus could
leverage its size to crush rivals, foreign and domestic.”
Before the March 2011 tsunami, that is what it appeared to be doing.
But now there is
reverting to the neoliberal model, selling off public assets to find the
funds to rebuild. Christian Caryl commented in a
March 19 article in Foreign Affairs, published by the Council on
As horrible as it is, the devastation of the earthquake presents Japan
and its political class with the chance to push through the many reforms
that the DPJ [Democratic Party of Japan] has long promised and the country
so desperately needs.
In other words, a chance for investors to finally get their hands on
Japan’s prized publicly-owned bank, and the massive deposit base that has
so far protected the economy from the attacks of foreign financial
The Japanese government can afford its enormous debt
because the interest it pays is extremely
low. For the private economy, public debt IS money. A
large public debt owed to the Japanese people means Japanese industries
have the money to rebuild. But if Japan Post is sold off to private
investors, interest rates are liable to rise, plunging the government into
the debt trap it has so far largely escaped.
The Japanese people are intensely patriotic, however, and they are not
likely to submit quietly to domination by foreigners. They generally
like their government, because they feel it is serving their interests.
Hopefully the Japanese government will have the foresight and the
fortitude to hang onto its colossal publicly-owned bank and use it to
leverage its people’s savings into the credit needed to rebuild its
ravaged infrastructure, avoiding a crippling debt to foreign interests.
A longer version
of this article was posted on Asia Times on March 31, 2011.
Brown is an attorney and president of the Public Banking Institute,
http://PublicBankingInstitute.org. In Web of Debt, her latest of
eleven books, she shows how a private cartel has usurped the power to
create money from the people themselves, and how we the people can get it
back. Her websites are