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Mid-sized insurer Yamato Life goes bust, affecting 1,000 employees

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As I stated on these pages on 17 September - in response to some rosy comments by Japanese officials and foreign investors - my friend at New City Residence would be out of a job by year's end.

Well, sorry to say, Christmas comes early this year as New City, along with Yamato Life, filed for bankruptcy in the past 24 hours. It's the first REIT in Japan to go into Chapter 11 ... but will absolutely not be the last. The sector is in terrible shape right now. (I simply can't believe that New City has racked up debts of $ 1 BILLION plus.)

Now begins a coming rash of corporate busts in Japan. We can but hope that the government here will put sensible, prudent economic policies into place. Otherwise, this nation is easily in for another ten year recession.

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Sorry, that's 1 Billion Yen, not $.

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It's not over yet.

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Most Japanese banking and other institutions have averted the serious damage of their U.S. and European counterparts from the U.S. financial crisis. For now, that is.

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Nothing surprising knowing the health of Japanese Economy, but now some comapnies have plus point for declaring bankruptcy by blaming everything on U.S.- "origin" of financial crisis.

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anyone who invested in those stinky loans deserves everything they get. Good to see the greedy get smashed. Good times ahead for those who start investing now. Rock bottom prices all thanks to the greedy.

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Let the bowing begin.

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"Nothing surprising knowing the health of Japanese Economy, but now some comapnies have plus point for declaring bankruptcy by blaming everything on U.S.- "origin" of financial crisis."

Japan has no one to blame but themselves. All the data indicated that exports from Japan were doing fine, it was domestic spending that has been hurting the economy for a good 5-6 years now. Japan could have done itself a huge favor by importing many more goods from the US, thus addressing two issues, domestic spending and keeping American factories running with lots of job orders. Japan didn't do that ! And neither did much of the world ! So as Americans started losing jobs, or they moved overseas, the rest of the world payed no attention. Well we got yer attention now ! My suggestion, buy American ! Get them back to work... and just watch as they start buying "your" products again ! You want to blame someone, I blame all those countries that took American jobs, protected their own markets, and shamelessly bad mouthed the American worker and citizen over their life style choices. Japanese companies going bust ? So what ! You were warned ! Open your markets to US goods and reap the benefits. But nooo, Japan chose to bad mouth its most important trading partner and close its markets to US goods. This wave of economic devastation is not over ! Japan is looking down the barrel of a cannon right now ! Exports are in serious danger of going flat. Add the lack of domestic spending, increase in fuel prices... I see a deadly winter ahead ! Time to get out !

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brilliant post barfly08.

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another bow bow. whatever. everything but actually taking responsibility

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these execs still walked away with a handsome sev package.

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rom3... agreed and happy here too.

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Barfly's comments, while tinged with irrational nationalism, are right on. The G7, in early 2001 agreed to a weaker Yen, so that Japan could export herself out of recession while implementing domestic economic reforms. The weaker Yen was achieved by near zero interest rates and flooding the market with Yen loans. Added to this was the rise of China - indirect exportation of Japanese goods via China and Korea - which gave the illusion that all was hunky dory with the Japanese economy.

However, while Koizumi talked a good talk, there was very little structural reform, instead there was employment reform which actually diminished domestic consumption by impoverishing the Japanese domestic consummer at the expense of Japanese companies.

The reality of the world economy is that too many countries are dependent on export orientated economies and for Japan to still be practicing it when it is the second biggest economy in the world is an international economic crime.

Both Japan and the European Union should have been engines for consumption, instead of leaving it to the USA and while the European Union has largely taken this role, the Japanese have just continued with the parasitic model that served them well, when they were a developing economy

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Romulus: I agree that the greedy corporate pigs should get smashed, but unfortunately they simply get massive golden umbrellas while those 170,000 individual contract holders get screwed 100%, with no money back for what they've paid into for possibly years, and the government protecting the company from having their assets liquidated. In other words, the wrong people being smashed while the wrong people are being protected. I guarantee all the companies that go belly up over this crisis will see as large severance packages to their leaders as those in the US, if not larger, and no one will do a thing about it but say, "shou ga nai, ne!"

These guys probably bowed for the media and then agreed to meet up at a Matsuzaka Beef joint with some geisha to divvy up the billion yen leaders' packages.

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barfly good job! It all ways amazes me at how much you hear in the news or forums like this at how the US policy is faulty but no one every has really put it in concise clear terms as you have.

By the way can someone answer me this, if the company has 269.5 billion yen in debts, but has assets of 283.1 billion, why are they going bust? Are these assets not able to be sold or am I missing something here? In Japan is it the buyer who looses his insurance policy if the company goes up, or can they take their equivalent policy to another company. I would think that the insurers out there would start a massive outreach to the affected policy holders to switch to them.

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When will Uncle Sam drop the other foot by defaulting on all of those foreign owned T-Bills?

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I suppose those who start investing today on the back of these "rock bottom" prices will be motivated only by altruism right and not greed? Interesting that you went on to compliment barflys post that recommended selling...as brilliant..which is it buy or sell? Anybody who is getting pleasure from the current meltdown is a bona fide idiot..who unable to connect the dots thinks this is happening to a world system in a parallel universe..it is all connected together..you too are losing out by it,just in ways that have not been noticed by you yet.

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Buy American you say?

I can't think of anything in particular from America that I would want to buy. Not saying Am. products are not ok, just I can get about everything I want of a good quality made locally. I don't think Ford, GE, IBM etc etc are going to sway me.

And yes I agree with many that the world has been too reliant on the US to buy all their stuff. The sooner the US global omnipresence wanes a little, perhaps a more balanced global economy can start to develop.

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TokyoVP,

Not going to happen. If it did, the global economy really would collapse. In fact there would be nothing left!

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The US need a Marshall Plan mk 2, paid by Western European and Asian countries.

Personally I wouldn't mind as it would only be repaying what the US did for other countries after WW 2 and I think it would finally release us all from any moral obligation that we still owe to a once great country, which is now no more.

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Browny1 you buy American products all the time, you have a computer and run an OS? You read books in english? allot of products are made in the US people just dont remember that..

DogDog, what makes a country great are the people not the Goverment nor the financial market. As the US market goes down so do all the others, so what America loses in financial greatness so do the others... Sad but true

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Nippon5 - you're right. It's inevitable if you're a consumer that you'll buy Am. made sometime. And yes I purchase books, cd's, etc from the US. But I can't recall anything of value (above $100) that's Am. made.

But I'd hazard a stab. and say that the majority of my Am. brand goods are made everywhere but US. Levis - Malaysia, K2 skis - China, Nike trainers - Indonesia, Quicksilver surf wear - Mexico etc etc.

The best 100% Am. purchase I've made recently was a book from a Vermont publisher titled "The End of America" by Naomi Wolf.

And I kid you not, I just checked on the details and it was god damn printed in Canada. Jeez.

But back to the topic. The Yamato bust is certainly not going to be a "relatively unusual case in Japan" as stated in the article. The depth of companies intertwinings will be revealed surely and surely over the days, weeks & months. Unfortunately.

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Comapanies have been fixing the books ever since the stock market demanded profits every quarter... Its a sad cycle and has ran its course until they do the same thing again...

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barfly, forgot to mention, great write up. I would love to have it translated, print 20 million and dropped out of a plane over Tokyo.

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Sat watching the BOJ release 4.2 trillion yen into the whirl wind of fear to no effect. Capitalism as we 'knew' it is gasping for breath. Simply 'buying American' is not going to even go close to solving what is essentially a USA caused catastrophe. What you are watching is a result of greed, unadulterated greed on the part of an economic model that America for decades has said, ‘Watch and Learn’, well, no, because all it is lighting up the darkness with is ‘Crash and Burn’. Buy American? To what end and more importantly… how? There’s no money, don’t you get that fundamental of this crisis?

...and it is the poor in America and elsewhere that will be the true victims, and it will be ugly. The crooks who spurred this financial melt-down will take billions in personal wealth with them to their tax havens. US corporations have long since stopped being American. They will happily transfer from New York to Dubai or Mumbai, or Shanghai. The exodus is already under way. And because American insfrastructure is now among the weakest in the OECD, foreign investors will cease operating plants in the US as soon as it is clear that the US market is drying up.

So the empire will die, it will be a slow change, because the merging world cannot afford and will not permit a rapid one. America's main problem is that although it is defeated all the time, it refuses to accept that reality. In the American psyche, winning, at any expense, even the brains of children splattered against the wall, is all that matters. Meantime, Americans will continue strutting and threatening to kick butt, waving their flags. USA! USA! USA! (Fade)

...and to call out Japan is wrong, wrong, wrong, you need to read what they did in order to save their and your tails in the wind in 2002, what they did with their toxic debts the US needs to do and ASAP. Japan, far from being a 'laughable excuse' is The Model.

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this is a life insurance company -and Japan has many old people- = this is a very bad situation.

Many company's equity is tied/leveraged to stocks = expect more of these failures to continue.

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...and to call out Japan is wrong, wrong, wrong, you need to read what they did in order to save their and your tails in the wind in 2002, what they did with their toxic debts the US needs to do and ASAP. Japan, far from being a 'laughable excuse' is The Model.

Most economists argue that Japan is not the model to follow and the bad financial debts of 2000 were the bad financial debts of 1994 and the negative equity of 1990.

What makes 2002 an important date was that the G7 agreed that Japan could export herself out of the mess she had gotten into by having a weak Yen. How America is able to export herself out of this mess, as Barfly correctly sees as a solution is beyond me, unless suddeny Mars has a consummer market that we haven't heard about.

Japan as an economic animal on the world economy, is parasitic, when its true role as the second biggest economy in the world, should be as a consummer of other peoples products while developing its own information, technological and service markets. Through these, rather than manufacturing, which it can only compete in by distorting the working conditions of the domestic workers, it would create the wealth that allowed a genuine middle class with genuine middle class conditions to develop in Japan and stimulate the domestic consumption that Japan so sorely needs - a one room house only needs one TV, a 3 bedroom house would probably have 3 if not 4 TVs!

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Pure gubuk. It's not Japan's seven hills burning. Japan doesn't want a polarised society where the richest CEOs on average earn 400 times more than their 'employees' --here it's 12 times-- the Japanes don't want your model because their's works for them. Parasitic? Laughable. Simply completely wrong. If any economic model is that its the American as it carves, eats, consumes and pollutes its way --and ours-- to oblivion. It was Japan that took the pain for it's toxic debt, not the G7. The Japanese banks purged their bad debts before they went out of business. No money from the G7.

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Just to remind you: Banks were losing money in loans to people who could not repay them and whose collateral, the value of their property, was less than the value of those loans. Japanese banks have the largest savings on the planet, the Japanese save money not just gorge on the natural resources of everything on sale. The threat of one of these collapsing had the world economy VERY nervous. Given their wealth and global influence, it was often said that if one of the big Japanese banks went under, it would trigger a financial crisis that would spread around the world. BUT that didn't happen because The Japanese authorities did what it took.

They slashed interest rates to zero. They pumped money into the financial system, just as America has.

But in the end, they took the expensive and painful decision to use tax payers' money to help the banks write off the bad loans.

The price was enormous. At least $100bn dollars went on the programme. The Bank of Japan lent money to institutions at special rates and also bought some of their shares.

The money came with an important proviso; the Bank of Japan wanted full disclosure of how serious the problem was and a promise from the banks not to let it happen again. When the figures were made public, they caused shock. In many cases, this hit the banks' share prices and caused anxiety to both customers and investors. Yet by 2006, most were back in profit and credibility was restored. The Bank of Japan even managed to make a profit from the whole affair, through selling the shares it bought at the time for more than it paid for them. Read and learn. It worked. The proof is in this pudding.

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The Japanese banks purged their bad debts before they went out of business. No money from the G7.

Japan purged its banking debt by making them public debt which helped to contribute to Japan having a public debt burden which is almost 170 per cent of its GDP and already the highest in the industrialised world. The amount is equivalent to about Y7.24 million for every Japanese.

Way to go..........

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The Bank of Japan even managed to make a profit from the whole affair, through selling the shares it bought at the time for more than it paid for them. Read and learn. It worked. The proof is in this pudding. At least they still have zeros on their debt clock. Waaaaaaaaaaaay to go. (Get it?)

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this thread and postings is a good one... keep it going guys.

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Time to get out !

And go where, exactly?

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LFRA: Commodities. Diamonds and Gold especially, if its capital you wish to hold on to. Gold has never lost its relative value in thousands of years. If it's mute to you --the 'wealth' gig-- try a small holding in Alaska, Siberia or other far reaches north or south.

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And the attack on the Japanese --for this Insurers failure-- is a fundamental mistake on your part because

Yamato’s financial profile took blows from losses from investments in subprime mortgages-related bonds and other securities whose prices have recently plunged amid the financial crisis

i.e. they took advice and got involved in this US mess. That's how they came to fail. Japanese banks have kept their exposure low, if not at nil, --Aozora and Shinsei aside-- their --the Japaneses's-- model is not laying on the canvas and will continue to remain standing provided the engine of Japanese growth - its booming export sector - continues to sell to the rest of the world.

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It posted be4 being finished...

...continue to remain standing provided the engine of Japanese growth - its booming export sector - continues to sell to the rest of the world. AND there in lies the rub.

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Barfly's comments, polluted by irrational nationalism, are ridiculous. When Americans start making products that the world wants, they will succeed. Unfortunately, like the Japanese in the late 80's, they assumed that economies could be sustained through financial chemistry. The only difference between the Japanese in the late 80's and the Americans now is that the Japanese never lost the plot with the manufacturing end of it. Take out the financial engineering component of the US economy and there is no one left in the pointy end. Everyone is flying cattle-class. Prepare to be slaughtered.

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Well we're in a worldwide meltdown as everyone should have guessed. Here's my prediction: the last time this happened in the States it led to people dumping money into realestate (undervalued at the time) and creating a bubble which then brought about this crisis 8 years later (bad mortgages, risky deals, people thought home values could go nowhere but up). Look for a repeat, as soon as credit markets can be freed up and the forclosures are auctioned off people will be buying back into housing which after a 25% deflation is once again undervalued. I'm glad what little I have is in realestate and not stocks. All hail the next bubble somewhere around 2011.

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And go where, exactly?

Away from globalization and more towards regionalization. China(as well as the rest of North East Asia) have enough resources to focus inward and build up their domestic markets, as is already happen (America recently has been the second most important, as China is Japan top importer). After Japanese companies with American financial instruments, sell them of or go bankrupt, like Yamoto Life, there will less investment from Japanese Companies in America. This will happen in many countries and the resulting outcome will be years of reorganization. Which will see America and some others lose a significant amount of thier equity, and the world push closer to a more even wealth distribution and some countries become lesser versions of themselves. As some of those nutty finance people say, you should never invest in a dog with fleas.

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Bad decisions on all areas in all markets. If another country would have been the first to recognize this and spoken up something similar to now would have happened. It just so happens that the US spoke up first. You think all other countries were not already seeing the signs of this well over a year ago???? Well, keep dreaming because they did. My guess is to avoid something as serious as the Depression, the US decided to limit the blow. Exports/imports and buying/selling is fundamental to countries supporting each other while making their economies grow thus a world market was creatde. People need to get a grip, not panic, allow the right people to handle this and be positive. Things will certainly worse before they get better but it sure beats a World Deprssion. Things like this can never be avoided; it is cyclical. Once we're out it will begin to get better. It's the nature of the market everyone takes risk while investing; some people will lose and at the same time others will benefit. Japan will be no different.

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All the blame for this current disaster sits squarely in the head of GW Bush and is incompetent band of idiots. America has been raped of its future and robbed blind by the current administration. The US is so unbelievably in debt now that the next administration will have a hard time raising money for food stamps, let alone a healthcare system.

Anyone who votes Republican is a fool. (a bit off topic, but related)

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the engine of Japanese growth - its booming export sector - continues to sell to the rest of the world

Export growth is slowing. It is hardly booming.

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Bento,

Yes. your lunch box is the perfect place to keep money.

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In the short term, the key to whether other Japanese financial institutions are affected in a way similar to Yamato will be the nature of the debt instruments in which those institutions invested. If a significant portion of the debt instruments in which they invested are backed by American real estate or were issued by companies that are overleveraged, then those financial institutions will have problems. If not, then financial institutions in Japan will be able to withstand the initial round of financial company failures. In the long term, the health of Japanese financial institutions will depend on whether the Japanese companies to which they have extended credit are able to weather the current financial storm.

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