Transcription
In 2025, more than 10,000 companies in Japan went bankrupt, and out of those, 300 completely disappeared. This is the highest number of bankruptcies in the past 12 years. The reason these companies went bankrupt wasn't just because they ran out of money, but the bigger problem was that they ran out of people. You can support the information in the clip "Japan's Crisis of Running Out of People" from the channel Sai Money Monster by scanning this QR code. Or, you can support the channel S Money Monster very easily by just liking, sharing, commenting to chat with us, or what we want you to do the most is to subscribe. After subscribing, you don't need to click again. If you haven't subscribed yet, just click once. This way, we can see each other in future videos. Thank you.
Japan's economy, if you follow the news or this channel, you'll know that Japan's economy has been in a state of crisis for quite some time. Household expenses in Japan have been rising, peaking significantly in the past 3 years. As for Japan's national debt, there's no need to even mention it. Currently, Japan's public debt is valued at 1,300 trillion yen, which is about 240% of its GDP. The yen's value today has weakened considerably, nearing a point where it could collapse. This makes Japan seem like it's willing to give up its position as the world's creditor, no longer maintaining its yield curve control to keep the yield or interest rates of its 10-year bonds stable by buying its own debt. Japan says, "I probably shouldn't do that anymore. I should probably raise interest rates." Japan raising interest rates, I must say, shocked the world and the global financial community. And as I've mentioned many times in many videos, Japan raising interest rates, and potentially multiple times, could be the genesis of the largest financial crisis in world history. And the reason Japan is doing so poorly, struggling to hold on, is because Japan is not just facing an economic crisis, but Japan is also facing a demographic collapse. It can be said that even if Japan's economy were good, or if Japan still had a lot of money, it might not be able to solve the problems that are currently occurring. This is because Japan has entered a Super Aging Society. More than one-fifth of Japan's population is over 70 years old. Many factories and companies have to close down, not just because the economy is bad and they're out of money, but because they lack labor. Schools in Japan are closing down about 450 schools per year because there are no new children to come and study. The question is, how did Japan, the world's third-largest economy, reach this point of collapse? Because in the 1980s, Japan grew tremendously. GDP per capita, or the average income per person in Japan, grew from around $500 per person in the 1960s to $25,000 per person per year in the 1980s. And Japan, a small island nation, about 26 times smaller than the entire landmass of the United States, once boomed immensely. Japanese real estate boomed immensely. The price of land in Japan, a country 26 times smaller than America, was once 4 times higher than the entire land price of America. It can be said that Japan grew so rapidly that its GDP surpassed America's at that time. The United States had a GDP of about $7.66 trillion, and Japan was second, not far behind, with $5.55 trillion. Japan was the country with the highest standard of living in Asia. Japan also established itself as a superpower, the world's manufacturing powerhouse. In all aspects, Japan's economy seemed poised to overtake the United States, the world's number one economy. Underline the phrase "Japan seemed poised to overtake America."
At this point, if you know some history, you'll know that it started with Japan bombing Pearl Harbor. America was very angry. After bombing Hiroshima and Nagasaki, Japan was completely devastated. And America was the one who helped rebuild Japan's economy. But later, America itself quietly brought down Japan's economy. This whole mess is the beginning of Japan's current crisis. Let's go back to August 15, 1945. Japan announced its unconditional surrender after being hit by nuclear bombs from the United States, which devastated Hiroshima and Nagasaki. Along with 67 other major cities in Japan that were bombed, millions of people starved, and the economy collapsed. Japan was destroyed. Everything was burned and demolished. Japan's condition at that time was like a scene from the end of the world. And the suffering was indiscriminate. Whether it was children, women, or the elderly, if they didn't die immediately from the explosions, they were slowly dying from radiation poisoning, burning their internal organs. And yes, those bombs, that situation, came from the United States. Did America feel at ease after doing that and seeing the situation? Honestly, no. America at that time wasn't just celebrating the war with great joy. There was concern. Seeing Japan's condition, some might think, "Oh, America seems like a good person." Well, not entirely. Because what America was concerned about after World War II, after seeing Japan's condition, wasn't really how devastated Japan was. What America was more concerned about was whether Japan would become communist. Because at that time, even though Japan was completely destroyed by the war, if the Soviet Union had gotten Japan, America saw it as the Soviet Union gaining a powerful ally. You might ask, "But Japan was already devastated by the war, how could it be powerful?" Even though Japan had declared surrender, it still had 6.5 million soldiers. At that time, was it possible that Japan might be swayed by the Soviet Union to become communist? Yes, it was possible. Because after World War II, in 1949, the whole world entered the Cold War era between the United States and the Soviet Union. This was a time of proxy wars. The Soviet Union supported Mao Zedong to take over China, leading to the Chinese Civil War. And they supported North Korea to invade South Korea. And the country that was in the battlefield zone was Japan. Did Japan itself worry about the Soviet Union? Yes, it worried about the Soviet Union. And Japan probably thought, "Oh, the Soviet Union and America, what should we do? America, perhaps." There might have been this reason. At that time, America was also concerned that if the Soviet Union made good offers to Japan, and if they were appealing, Japan might become communist. And another thing America was worried about, and didn't want Japan to go to that side, was Japan's strategic location. Japan's geography was too good for the Soviet Union to have. Because at that time, the Soviet Union had already gained China and North Korea. If they also got Japan, looking at the map, it would mean gaining control of the entire Pacific Ocean. You see, the Pacific Ocean could allow the Soviet Union to sail and directly attack America, attacking California and invading America. Therefore, at that time, America had no choice. America's only option was to gain control of Japan. But fortunately, at that time, America's intention to control Japan wasn't to further oppress Japan, because it was already so devastated. And they didn't want to make America look like a villain in the world any more than it already did. But America's idea at that time was to make Japan a showcase. "Look at Japan, everyone. If Japan chooses the Soviet Union, rest assured Japan will starve and die. But if Japan chooses the United States, then look, Japan will prosper."
The story that will be told next will resolve the confusion for many people: Japan, which was devastated by the war, and the United States dropped the bombs, why isn't Japan angry? Why do so many Japanese people still admire Americans and the United States so much? Because after Japan lost World War II, and America said it would control Japan by making it prosper, America took it very seriously. America created an economic miracle and provided an excellent quality of life for Japan. America created a miracle by casting three spells that were very effective. First, it injected billions of US dollars into Japan's economy. That money allowed major companies, like Toyota, to survive bankruptcy. Toyota later became a company that greatly supported and enriched Japan. Second, America not only provided money but also knowledge. It gave Japan knowledge in high-tech industries, such as steel manufacturing or producing world-class electronics. And third, after providing money and production capabilities, it provided sales channels and markets. America opened its arms and said, "All products from Japan can be brought to sell in the United States." And it was a success. These three spells from America were remarkably effective. In less than 20 years, from a country devastated by war, it grew and its economy surpassed Germany, England, and France, becoming the world's third-largest economy. However, while Japan's growth was good, it was good for America at first. But later, it grew too much, perhaps only good for Japan. Because in the 1980s, Japanese cars captured 23% of the US market share. At that time, American car manufacturers like Chrysler were on the verge of bankruptcy and had to seek government aid of $1.5 billion. Americans started to wonder. And going back a bit to the 1970s, America controlled 60% of the global semiconductor market. But by 1989, Japan had surpassed the United States. America gave Japan the knowledge for electronics production, right? Japan was skilled and did it well. In 1989, Japan controlled 51% of the global semiconductor market, while America was left with only 35% market share. America was surprised. And then, in the 1980s, the economy was highly competitive. At that time, 6 out of the top 10 largest companies in the world were Japanese companies, more than American companies. And at that time, while Japan was flourishing, the US economy was not as prosperous. Japan's economy was good, but America at that time had to lay off employees to keep companies afloat. So, Americans started to wonder, "Is this right?" And three times. Yes, at that time, what Americans saw was that Toyota, a Japanese car company, was crushing Ford and General Motors, American car companies. At that time, Americans were quite angry about what was happening. To the point where someone live-streamed on television, using a large hammer to smash a Toyota Corona car. It was a campaign that said anyone who came and smashed a Japanese car would get $1. This means that during that period, the country that recovered from the devastation of war, with America's help, but recovered with America's assistance, and was about to surpass America, America did not like it. And so, in 1985, the United States agreed with Japan, saying, "How about this? Japan, please sign the Plaza Accord." And Japan had to sign. This is the point that paralyzed Japan's economy. What was the Plaza Accord? It was complicated, but to put it simply, the Plaza Accord was an agreement that made the Japanese yen appreciate more against the US dollar. America had a spell to make Japan's economy flourish, and they also had a spell to destroy it. It happened instantly, much faster than it was built. Look at this graph. In 1985, $1 US dollar could be exchanged for 260 yen. But in 1987, in less than 2 years, $1 US dollar could be exchanged for 130 yen. This means the yen strengthened by 100%. This would mean that, for example, a Toyota car sold in the United States, which used to cost $10,000 US dollars, would now have to be sold for $20,000 US dollars to make the same profit in yen. This means that Japan, sitting idly, without doing anything, saw its products become twice as expensive in the US market. This was a loss of cost advantage. This loss of cost advantage, along with the export supply chain of Japan, collapsed. And from this event, Japan decided to escape by saying, "Okay, let's move production bases out of Japan to Southeast Asian countries." One of the countries where Japan set up operations was Thailand. This is why Thailand is one of the countries with many Japanese car production bases. Another thing Japan did to compete in that economic battle was to lower interest rates. At that time, Japan's interest rate was 5%. Japan said, "Let's cut interest rates in half, to just 2.5%." This was in the hope that investors and entrepreneurs would borrow money to do business. Did this stimulus work to encourage people to borrow money? Yes, it worked. People borrowed money, and businessmen borrowed a lot. However, it worked in an unintended way. The banks intended for people to borrow money for business, but people didn't go into business. They used it for speculation. The money borrowed, being easily obtained, was invested in stocks, land, and real estate. They weren't buying real estate for business, but for speculation. What followed was... drumroll please... anyone who can guess, comment below. Okay, I'll reveal it. The consequence was a bubble. After the Bank of Japan lowered interest rates, Japan's economy experienced a bubble. The Nikkei index surged threefold, from 6,000 points to 38,915 points in 1989. If you invested in the Nikkei during that period, you would have received returns of 300-500%. It was very profitable. This caused the market value of companies in Japan, both large and small, to increase. But this growth wasn't because they sold more products, had more products, or expanded their businesses. The stock prices increased due to speculation. And what did those companies do after their market value increased? They used their company shares as collateral to borrow more money for further speculation. The bubble thus became enormous. And yes, at that time, the land bubble and real estate bubble followed. This is why, as mentioned at the beginning, the land in Japan, that small island, 26 times smaller than America, had land prices that were 4 times higher than the entire United States during that era. Until one day, the Bank of Japan realized, "What have I done? This has caused severe inflation in Japan, and we must solve this problem immediately." What the Bank of Japan decided was, from an interest rate of 2.5%, they said, "We must fight inflation." So, the Bank of Japan increased interest rates from 2.5% to 6%. My goodness, when interest rates rise, everyone's debt doubles overnight. And yes, the bubble that had inflated burst violently. The Nikkei plummeted. And the story I'm about to tell will explain why we hear news about Japan having so many zombie companies, and why they go bankrupt. Why are there so many zombie companies in Japan? The story is like this: When the Bank of Japan decided to increase interest rates, the debt burden, meaning the interest on each company's debt, more than doubled overnight. And of course, when the debt increases so much, there must be people who are shocked and think, "Where will I get the money to pay?" They can't pay their debts. And when they can't pay their debts, bankruptcy should follow, right? But at that time, the Japanese government saw that they couldn't let these companies go bankrupt. Why? They didn't know the exact reason, but one reason was that the banks wouldn't be able to collect interest. So, what did the Japanese government do? "Oh dear, if the banks can't collect interest if all these companies go bankrupt, let's do this. Whatever debt you have, let's say your company has a debt of 10 million. Okay, you have a debt of 10 million, right? The bank will lend this company an additional 2 million and tell this company, 'Don't go bankrupt. Just exist. You don't have to work. Just exist to pay the interest, okay?'" So, the company agreed, "Okay, we'll get an additional 2 million loan, but we can't do business anymore. But we'll stay to pay the interest continuously." These are companies that exist only to pay interest, not to do business. That's why they are zombie companies. And there were a lot of them. In the 2000s, a survey of all companies in Japan estimated that 30% of all companies in Japan in the 2000s were zombie companies, existing only to pay off debt. And another mistake that private companies made, not just the government or the central bank, but another mistake that private companies made when the economy collapsed, was not hiring new graduates. It sounds like it's not a big deal, right? It's just not hiring new graduates. It's a big deal because major companies in Japan didn't hire new graduates for over 10 years. This means that new graduates born in that era, who are now around 50 years old, have had almost no one get good jobs or good salaries. The culture in Japan, I must explain, is that they study very hard to get into a "keiretsu" (a group of companies) to be hired by a large company and stay there until retirement. But this didn't happen for 10 years. This meant that over a million children from that generation had no good jobs, couldn't buy houses, and had to live with their parents until they were old. And without money and jobs, they didn't get married and didn't have children. This led to a massive demographic collapse in Japan during that era, which they called the "Lost Generation." And this led to a stagnation, resulting in Japan having too many elderly people and no new births. Demographers have warned that if Japan's birth rate falls below 800,000 people per year, Japan's economy cannot continue. But today, Japan's birth rate is below 600,000 people per year. This means, how will Japan's economy continue? This teaches us that we should not rely on anyone. No country helps another for free. Second, in an economic system, it must be allowed to run its course. If a company cannot survive and must go bankrupt, it should be allowed to go bankrupt for the long-term health of the economy. Third, all actions taken today determine the future. Mistakes, especially at the national level, if made today, will have devastating consequences for generations to come. And by then, even if we realize it, it will be too late to fix anything.