Asian Financial Meltdown: Round Two

The land of the rising sun is sinking in a sea of red ink! It seems Japan is unable to save itself, its Asian neighbors or the world from financial collapse. Has round two of the Asian financial meltdown arrived?
From the June 1998 Trumpet Print Edition

In an article entitled, “If Japan Should Crash,” The April 11 Economist stated, “Flat on its back for years and showing few signs of life, Japan’s economy was nonetheless still in the world of the living. When we last checked, that is. Reports of its imminent demise are now coming thick and fast. A world that had grown bored with the ‘Japan isn’t growing’ story is suddenly paying attention to the new ‘Japan will collapse and take the rest of us with it’ story.”

The April 15 Wall Street Journal (WSJ) paints quite a picture of Japan’s faltering economy when it states, “The accumulated debt of Japanese corporate bankruptcies in the fiscal year ended March 31 soared 64 percent from the year before, hitting the highest level in five decades, according to a leading credit-research firm.

“Swollen by instability in the Japanese financial system, a weak overall economy and the reluctance of banks to extend new loans, total liabilities from corporate bankruptcies reached 15.1 trillion yen ($115 billion), Teikoku Databank Ltd. said.

“The number of bankruptcies rose 17.4 percent to 17,439, the highest level in 12 years. Of those, 11,675 were directly attributable to Japan’s economic downturn. They were the result of sharp sales declines, bad loans, flagging exports and difficulties collecting payments, Teikoku said.

“Japan’s economy experienced one of its worst stretches in decades during the past fiscal year. The year began [in April 1997] with an increase in the consumption tax that eventually ravaged consumer spending and sent the economy into a tailspin. Then, in November, the failure of Japan’s tenth-largest bank and the fourth-largest securities company led to a credit squeeze for other companies perceived to be weak. Finally, banks began restricting lending to meet capital requirements as the end of the fiscal year approached….

“The situation may not improve in the coming year. Despite a large injection of public funds into the banking system at the end of the fiscal year, banks ‘will be forced to deal stringently with their customers’ as Japan’s economy teeters on the brink of a deflationary spiral, Teikoku warned.”

Should We Care?

Does such a scenario of a collapsing Japanese economy actually pose any real threat to the United States and the rest of the world? The answer is a resounding yes! Japan’s economic problems are America’s problems! For the last 15 years, Japan has financed America’s mountainous national debt. If that financing stops, America’s $5 trillion indebtedness will most likely crush the life out of its economy. And if the first and second largest global economies, America and Japan respectively, are teetering on the brink of disaster, that means the rest of the world is also on the crumbling edge of the same financial abyss.

The Economist of April 11 discusses some worrisome direct effects of an impending “severe Japanese recession.” And then it states, “But two possible indirect effects are more worrying—a rise in [U.S.] protectionism as Japanese imports rise, and the risk of a [U.S.] stock market crash.

“America’s trade deficit is likely to widen sharply as a result of problems in Japan and the rest of Asia. If this encourages America to raise trade barriers and others to retaliate, a global recession may follow. But the biggest risk to America, and hence to the world economy, lies on Wall Street. It [the stock market] looks dangerously overvalued, yet share prices continue to climb. Some unexpectedly bad news from Japan might just be the event that brings investors back to reality and so causes a crash. Awkwardly, America’s economy is more vulnerable to a drop in share prices than ever before. Almost twice as many Americans hold shares today as in the mid-1980s (either directly or through mutual funds or pension funds). A fall in share prices will make a much bigger dent in the economy.” Actually, such a reality check by investors will likely mean a panic and a global stock market crash more severe than even the Great Depression!

Total Collapse Is Possible

The Washington Times of April 12 says, “The chairman of Sony Corp. sharply criticized [Japanese] Prime Minister Ryutaro Hashimoto April 2 as a modern-day Herbert Hoover leading his nation toward collapse and the world into recession.

“‘The Japanese economy is on the verge of collapsing,’ Sony Corp. Chairman Norio Ohga told reporters. If Japan’s economy doesn’t improve, he said, it could lead to a dangerous deflationary spiral that would damage the world economy.” As we will read later in this present article, Jeremiah 25:32 prophesies that “evil shall go forth from nation to nation….” Deflation in Japan could spread insidiously and unhaltingly to other nations like a rapidly growing financial cancer!

The Washington Times article continues, “In an attempt to balance the budget, Mr. Hashimoto’s government raised the national sales tax last spring [1997], a move that most analysts credit with turning a fledgling economic recovery into a full-fledged recession.”

More Financial Crises Foreseen

Associated Press writer Harry Dunphy wrote in the April 15 Houston Chronicle that “International financial crises are like the sinking of the Titanic. No one can see disaster coming but afterward everyone can agree on the iceberg.” Long-time readers of The Trumpet know that this magazine has proclaimed for years that such a financial crisis was in the world’s future. The late Herbert W. Armstrong warned the world for over 50 years of this impending disaster! And now it looks as if it is finally going to occur. The Chronicle article continues, “Economists and bankers say they know the financial firestorm that swept through Asia last year will happen again, but they can’t say where or when.”

It appears that the global economic ship of state has struck an iceberg and is soon headed to the bottom! The land of the rising sun is sinking in a sea of red ink and may well take America and the rest of the world with it! Herbert Armstrong clearly understood God’s prophecies; however, he was just off a little on his dates. These cataclysmic events are about to snap shut on an unsuspecting and naive world with the sudden ferocity of a steel bear trap! (See Eccl. 9:12; Lam. 3:45-47; Jer. 4:19-20; Ezek. 12:9-13; 17:19-21 and Luke 21:35.) And the main sitting ducks in the cross hairs are America, Britain and the other nations of biblical Israel. To get a better grasp on this vast subject, write for your free copy of Mr. Armstrong’s booklet, The United States and Britain in Prophecy.

Financial crises like the Asian meltdown are a snare which will weaken the nations of Israel so they may be conquered by a soon-coming superpower the world little understands. Mr. Armstrong wrote on pages 194-195 in his final and finest book, Mystery of the Ages: “It will now be made plain—from God’s own warning prophecies—that this greatest multiplied intensity of corrective punishment will fall on Britain and America—including British peoples in Commonwealth countries. And it will strike them down first!

“But they are not the only nations to suffer corrective disaster. God is Creator of all other nations, too! God is concerned about the people and races we have called ‘heathen.’ They, too, are human. They, too, are made in God’s own likeness, with the potential of being molded into God’s spiritual and character image! God sent the apostle Paul to gentile nations!

“All mankind has rebelled against, rejected, and turned from God and his ways! There can never be peace on earth until all nations will have been turned to God and his ways, ruled by his supreme government!

“All mankind, right now, is caught in the vortex of the swiftly accelerating crisis marking the utter destruction of this world’s man-built, Satan-inspired civilization.

“Through Jeremiah God says: ‘A noise shall come even to the ends of the earth; for the Lord hath a controversy with the nations, he will plead with all flesh’—how?… The next words tell how God is now about to plead: ‘…he will give them that are wicked to the sword, saith the Lord…. Behold, evil shall go forth from nation to nation, and a great whirlwind shall be raised up from the coasts of the earth’ (Jer. 25:31-32).

“God will use a United Europe to punish Britain-America. Then He will use the Communist hordes to wipe out the Roman Europe.

“We are entering a time of world trouble—utter world chaos! There is war, strife, violence in Asia, Africa, South America, Central America, Ireland, the Middle East—as well as Europe and North America. The population explosion is a worldwide threat to human existence. Crime, violence, sickness, disease, inequality, poverty, filth, squalor, degeneration, suffering—these infest all nations!

“But, as salvation is given first to Israel, so is corrective punishment!”

Mr. Armstrong then went on to vividly describe from God’s word the Great Tribulation which is soon to come upon this world. However, he ended that fifth chapter with words of great hope when he wrote, “The time is just before the resurrection of the just, at Christ’s coming. Christ’s second coming will end this world’s civilization and start the wonderful, peaceful, happy world tomorrow.”

Understand What Is Happening

This is the “time of the end” or the “last days” spoken of so many times in the Bible (for example, Dan. 11:40; 12:9; II Tim. 3:1). That time of unprecedented destruction (Matt. 24:21-22; Dan 12:1) immediately precedes the glorious return of Jesus Christ. But during that time prior to the second coming, the nations of biblical Israel, including America and Britain, are going to be severely punished for their godless ways! Today, as part of that corrective punishment, America and other global economies as well, are being besieged financially!

Deuteronomy 28:52 tells of this financial siege on America and the nations of Israel when it says, “And he [foreigners] shall besiege thee [Israel] in all thy gates, until thy high and fenced walls come down, wherein thou trustedst, throughout all thy land: and he shall besiege thee in all thy gates throughout all thy land, which the Lord thy God hath given thee.” The word “besiege” primarily means a financial attack through commerce and trade, as can be seen by the context in verses 43 and 44. Verse 15 tells us why. “But it shall come to pass, if thou wilt not hearken unto the voice of the Lord thy God, to observe to do all his commandments and his statutes which I command thee this day; that all these curses shall come upon thee, and overtake thee.” And as verse 52 shows, being “besieged” financially is one of those curses. This is exactly what is occurring today, and it appears that Japan may be the tool which God has chosen to bring America and the other nations of Israel to their knees financially and open the way for a military conquest by a German-led united Europe.

Japan on the Brink

The April 11 Economist uses an interesting choice of words when it writes, “The invisible hand is giving Japan an almighty whack. First to feel the pain were the country’s banks. Having lent immoderately large sums to just about anyone that wanted the money, they have been on the ropes ever since the collapse of stock and land prices earlier this decade. But another wave of casualties is coming, this time in the non-financial parts of Japan’s ailing economy. The implications for output and jobs are serious, more so than many Japanese yet understand.

“The news gets worse by the day…. Japan’s economy is in a horrible state….

“Ryutaro Hashimoto, the Japanese prime minister…admitted that Japan faced its biggest economic crisis since 1945.” The article then points to the underlying problem: “a mountain of debt.”

“Many companies are in danger of going bust…. Another series of construction bankruptcies—bigger and scarier than last autumn’s—is looming, as stronger banks choose to pull the plug on firms with no prospect of recovery.

“Much of Japan’s manufacturing industry is struggling too…. Mitsubishi Motors, Nissan and Mazda are on their knees….

“But the biggest time-bomb hidden in Japanese accounts is the horrifying amount of unfunded pension obligations that have been piling up and now threaten to topple many firms. This is happening just as the graying of Japan’s population gathers pace. [This should be a warning to America as well, because that ‘time-bomb’ is also going to hit America’s Social Security system.]”

Japan’s economy is not a pretty picture. Many experts believe it is even worse than outsiders can see. The April 13 WSJ says that some U.S. officials’ “greatest fear is that Japan’s banking system is saddled with much bigger bad loans than official numbers show, and that a weak economy and markets will only exacerbate those woes…. U.S. officials don’t rule out more large bank failures and bank runs in Japan.”

Failing Japanese Efforts

It seems no matter what Prime Minister Hashimoto’s government does in this crisis, it fails. Can it be because the “invisible hand [the Creator God!] is giving Japan an almighty whack”?

The April 12 Financial Times reported on the likely impact of Japan’s sixth recent attempt to stimulate its economy in an article entitled “Tokyo Markets Begin to Suffer ‘Package Fatigue.’” The article states, “It was billed as Japan’s biggest ever economic package. Yesterday, though, the market yawned. As traders digested the government’s latest ¥16,000 billion ($125 billion) stimulus measures, the Nikkei 225 closed on Friday at 16,481—some 55 points down on the day.

“The reaction partly reflected ‘package fatigue.’ The measures announced late on Thursday, are the sixth high-profile announcement that the ruling Liberal Democratic Party (LDP) has made since late October [1997]. They are also one of a string of ‘stimulus’ measures introduced this decade.”

On April 27, BBC News wrote that “Share prices in Tokyo plunged and the yen took a hammering against the dollar as the markets gave the thumbs down to the Japanese Government’s [seventh] economic rescue package.

“On the stock market, growing pessimism about the deal sent equity [stock share] prices into a nose dive. The benchmark Nikkei 225 stock average plunged 361 points, or 2.26 percent, to close at 15,649…. Meanwhile, the dollar rose above 132 yen for the first time in four sessions.”

The next day, April 28, the Tokyo stock market dropped another 1.63 percent or 254 points to 15,395. All signs point to the imminent collapse of the Japanese economy. If the Nikkei stock index drops below 15,000, a series of bank and corporate bankruptcies may follow as the value in their balance sheets and financial statements simply evaporates into financial never-never-land.

In the cover story for the Far Eastern Economic Review of April 23, entitled “How the Experts See It,” a dire warning was put forth when it wrote, “Markets across Asia may have spent the first quarter of 1998 on the upswing, but our panel of fund managers warn: Don’t be fooled. Sustainable recovery won’t come until Asian exports flex their muscles, and the chances of that happening anytime soon look bleak. Meanwhile, the region is under siege on numerous fronts. At home it could take only the Japanese yen slumping to 145 to the dollar, the devaluation of the Chinese renminbi, or intense social unrest in Indonesia—all real possibilities—to lead to another meltdown. Overseas, the possibility of higher U.S. interest rates and, by one forecast, an American stock market crash, would be all that’s needed to send a tentatively mending Asia back to the operating table.”

Has round two of the Asian Financial Meltdown arrived? Every indication is that it has. Business Week of May 11 states, “Ten months after the crisis started, it seems that Asia is entering a second stage of turbulence.”

The Japanese Threat

In the Vancouver Sun on March 27, an article appeared entitled “Asian Nations Dumping U.S. Treasury Securities.” It stated that “All the Asian countries combined, including Taiwan, Malaysia and Singapore, sold a net $17.73 billion of Treasury securities [bonds, etc.] in the final three months of 1997, nearly six times the net $3.05 billion worth they sold during the third quarter.”

The April 14 Wall Street Journal reported that U.S. Treasuries “came under pressure as speculation about Japanese selling of Treasuries and worries that the Federal Reserve could raise interest rates swept the market….

“The magnitude of the T-bill sale [by Japan]—estimated to be about $12 billion—meant that the Fed couldn’t handle this customer-related transaction in its usual way: parcel the order out among a few primary dealers [meaning secretly sell Japan’s U.S. bonds to avoid a panic].” In one day, Japan sold almost as much as all of the Asian countries together sold during the last three months of 1997. Japan must raise cash and it must raise it quickly, even if it means pulling the rug out from under the United States, financially speaking. This is exactly what God means by Israel’s “lovers” abandoning her (Jer. 30:14; Lam. 1:2, 9; Ezek. 23:9, 22). America is very quickly alienating itself from the rest of the world because of its arrogance, and disasters such as the Asian financial crisis are hastening that alienation.

The April 14 Financial Times asks, “Can Japan escape from a deflationary spiral? Despite the more detailed plans for income tax cuts and public spending announced by Prime Minister Ryutaro Hashimoto…the risk that the world’s second-largest economy will suffer a precipitous decline remains disturbingly high.

“Rising unemployment, a seemingly endless banking crisis and a debt hangover from the bubble economy of the 1980s have all combined to cause Japanese consumers to go on strike. Collapsing business confidence has produced an equally worrying investment strike. Hence recent data showing falling domestic demand, shrinking industrial output, rising inventories and a sharp fall in imports.

“A credit crunch, stemming from the banks’ problems, is now affecting the big companies as well as small. And the Nikkei 225 index, whose level is vitally important for the solvency of Japanese banks, ended the March 31 financial year 8 percent down on its level the year before….

“This underlines the global implications of Japan’s plight. Without a Japanese recovery, the rest of Asia’s problems will be harder to solve. With a Japanese deflation, the risk of a protectionist backlash grows. Japan can and should expect continuing international pressure for more radical action. This is dangerous territory indeed.”

Or as Andrew Alexander wrote in the April 3, 1998, Daily Mail, “These are, to put it mildly, uncertain times—even though the London and Wall Street markets do not seem to think so…. What is special now is that we have the Asian problem being compounded by Japan’s particular problems, plus sky-high stock market valuations in the West, plus the potentially unsettling effects of [European] Economic and Monetary Union [EMU]…. The ingredients for real trouble are in place.”