the discipline of the market.

My father died in April this year at the age of 90.


Back in the days when he was a young man, an ambitious go-getter with a bit of luck could still dream of making a quick fortune.

My father was an executive of a company that operated many gas stations throughout Tokyo.

The company was founded during Japan’s high-growth era. It bought land at prices that were steadily rising, and then the arrival of the private car boom also helped their business. So the earnings of the company kept growing fairly easily.

For example, even the value of land to be used for a gas station, which had been bought to help someone out and was criticized as being reckless then, had doubled and tripled instantly, then went on to increase even ten and twenty times. But in those days, no one noticed the pitfalls hidden there.

No matter how much the land prices soared, they did not contribute to earnings. First of all, the company could not sell these assets as they were being used. Even if they sold off some of the land, most of the profit was sure to be lost to taxes. So, after various expenses were deducted, very little money was left over.

When the nation’s high growth began to cool down and the economy entered a maturing stage, the earnings of companies soon reached their ceilings and then a phenomenon began in which expenses kept increasing while earnings kept decreasing. The steep rise in the price of oil directly impacted the situation, but companies managed to withstand it by cutting costs.

But, faced with the following quick rise in the value of the yen, they were not able to ride out the situation only by cutting costs. So they tried an asset management approach.

This resulted in increasing their debts. The drastic rise in asset values was not based on actual demand but caused by speculative investment. This then led to the emergence of the so-called “bubble economy.” When that bubble burst, the gap between the values of assets and debts became overwhelmingly large.

In a high-handed move, the government of Japan ordered the disposal of worthless assets in order to settle bad loans. As a result, unsecured debts and the flow of money created by those debts remained. Even today, Japan has not yet been able to escape the negative chain reaction created by such bad debts.


There is concern that this phenomenon could eventually spread all over the world.


Public finance is not based on the principle of periodic profit and loss. The problems mentioned above, however, are caused by an imbalance between earnings and expenses, which also holds true for public finance. They notably appear especially in countries that have taxation systems based on income taxes, including corporate taxes.

From a different viewpoint, cost-cutting means decreasing income and the jobs of people. When earnings decrease, the amount of corporate tax is compressed.

From a taxation point of view, loss-making businesses in Japan have been increasing continually since WWII and the ratio is now as high as 70%.


In the meantime, cheap products made possible by Japan’s economic growth flooded the markets of Europe and the US, putting pressure on the earnings of local companies and destroying the discipline of the markets. As a result, the US began supplementing its decreased earnings through asset management and has been doing this up to the present.


Although people tend to think of customs duties as a means of market protection, what matters is the discipline of the market. Customs duties don’t protect markets. To ensure fair competition, players should be able to compete on a level playing field.


It’s necessary to listen not only to opinions in financial circles but also to those in various industries, especially leaders in industries of goods called commodities.


What matters is the balance among assets, expenses, debts, and earnings.

What supports the economy is the balance between the negative part and positive part, and the balance between earnings and expenses.

When earnings are under pressure, some people easily turn to cost-cutting. Things are, however, not so simple.

Cost-cutting leads to decreasing the income and jobs of people. If such decreases in income and jobs are promoted after earnings have already fallen, an economic slowdown is inevitable. In addition, it will be immediately reflected in investment. The important point is to maintain earnings.

Promoting excessive competition during a time when companies must maintain earnings is a self-contradiction.


We should seek:[J1] 

Not low prices but fair prices.

Not efficiency but fair allotment.

Not mass production but adequate production enabling people to produce the necessary goods in the necessary volume.


Profit is not a goal but just an indicator.

Changes are required -- from competition to collaboration, from conflict to cooperation, and from quantity to quality.


What is important is to maintain earnings based on strict control of debts and the discipline of the market.

And, that is the duty of a country.

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