TOKYO — If you want a pep talk
about the Japanese economy, don't go see Atsushi Saito.
The head of the
Tokyo Stock Exchange doesn't hold back
when a Canadian visitor comes by his office expecting a simple rundown
on the Japanese markets. Japan, he says, is walking toward the edge of
a cliff. Unless it changes direction, the world's second-biggest
economy faces financial ruin.
In an hour-long interview, Mr. Saito painted a grim picture of a
country with a crushing national debt, a diminished stock market, a
shrinking, aging work force and a ruling class too blinkered to learn
from its mistakes.
Mr. Saito worked on Wall Street in the 1970s and remembers when New
York faced bankruptcy. “We are in the same situation,” he said. “We are
the City of New York.”
The difference is that New York had the U.S. government, which,
first refusing, helped rescue it from bankruptcy. “We don't have any
Washington,” he said. So unless something changes, “we will have to
sell our country to someone else.”
Mr. Saito's comments come at a time when Japan's economy has been
enjoying a modest rebound after years of trouble, growing by about 2
per cent a year for four years. But in its twice-yearly forecast
Wednesday, the Bank of Japan lowered its growth forecast to 1.5 per
cent for the year ending next March.
Mr. Saito said Japan's long-term problems are severe. The markets he
presides over as president of the Tokyo exchange mirror the fall in
Japan's fortunes, he said.
At the peak of Japan's boom years in the 1980s, he recalled, the
combined worth of the stocks on the Tokyo exchange was $6-trillion
(U.S.). The figure for the New York exchange was 30 per cent lower.
Today, Tokyo's market capitalization is about $4-trillion and New
York's is five times that. China's stocks, meanwhile, are worth 150
times what they were in 1989. Combining the markets in Shanghai,
Shenzhen and Hong Kong, he said, the value of the Chinese markets now
exceeds Japan's, still rated second in the world by market
“Our market has really lost its position in the world,” he said,
reclining in a brown leather chair in his spacious office in the
fortress-like exchange building. “This is a kind of warning to Japan
In the industrialized world, only Italy's stock market performed worse
than Japan's last year.
A second problem, he said, is Japan's immense national debt, which has
climbed to 11/2 times its gross domestic product, the highest rate for
an industrialized country. Throughout the “lost decade” that followed
its 1989 market crash, Japan used floods of public money to try to
spend its way back to economic health.
It has funded that debt partly by issuing bonds. In the next 30 years,
Mr. Saito said, the government will somehow have to redeem
$5.7-trillion worth of those bonds, a sum greater than Japan's current
“And we have to do this with an aging society and a shrinking work
force,” he said. “How can we really redeem this debt – unless we raise
productivity and economic growth.”
To do that, he said, Japan's conservative-minded business and political
leaders will have to open the country to the world as never before,
taking down many of the barriers to competition and investment that
have made it what he called the “Galapagos of the world” – an isolated
Japan, he noted, has the world's most advanced cellphones, capable of
delivering TV shows and paying for things at stores. But because they
are on the unique Japanese protocol, incompatible with the rest of the
world's, Japan has not been able to sell them abroad, missing out on
the explosive growth in cellphone use in neighbouring China and other
“We should open the door,” he said. “We need to be much more
Japan's accepts a pathetic amount of foreign investment, he noted – 2.5
per cent of gross domestic product as of 2006, compared with 47 per
cent for Britain or 33 per cent for France.
Such views are unpopular among Japanese nationalists and the powerful
anti-reform elements of the long-ruling Liberal Democratic Party. Mr.
Saito said they dismiss him as “that noisy guy.”
They say to him: “You always side with foreigners. Are you really
Japanese?” he said.
But he insists he is a fierce patriot who is only trying to head off a
catastrophe by speaking up. During New York's bankruptcy crisis, he
remembers seeing people lining up on the street to get their money back
on city bonds. The sight made a deep impression.
“Unless we open the door, unless we co-operate with foreign friends, we
will repeat the history of the City of New York,” said Mr. Saito
(pronounced sigh-toe), a genial man with a broad face and a wave of
grey-white hair. “Our sons or grandsons will face disaster.”
Mr. Saito said that, with good pensions and health care and a
still-high standard of living, Japanese have been protected from the
realities of their country's economic troubles. “We are isolating
ourselves from the problem. But the reality is that we are standing on
junk paper: debt.”
He said he is dismayed that many Japanese leaders still talk as if
Japan was No. 1, as it seemed to be back in the 1980s.
“I remember the same sort of talk before the war: ‘We are No. 1,'” he
said, referring to the hubris of Japan's leaders in the runup to the
attack on Pearl Harbour. “We haven't learned anything.”
Mr. Saito was appointed president of Tokyo Stock Exchange Inc. last
June. A former vice-president of Nomura Securities Co., he was fresh
off a tough assignment as head of the state-owned Industrial
Revitalization Corp. of Japan, set up to help restructure troubled
He is 69, well past retirement age, and he said retired friends are
always urging him to come out and play golf on weekdays. He said he
feels obliged to stay at his post, working for reform despite the
taunts of those who dismiss him as a servant of foreigners.
“I don't care,” he said. “I don't have long to live and I want to do
this for my country.”