June 24, Monday.
Over the past few days, Tokyo's financial circles were blown wide open.
The matter originated from the weekend news on June 22.
Several major national newspapers published reports almost simultaneously about Nomura Securities and Nikko Securities engaging in "loss compensation" for major clients—during the two years when the bubble was at its peak, the two brokerages secretly bore the investment losses for certain large corporate clients using proprietary funds and adjusting trading conditions.
The amount involved for Nomura was about 16 billion yen, while Nikko was close to 19 billion.
Such matters themselves were not really much of a secret in the securities industry.
In order to compete for major clients who could bring in billions or tens of billions of yen in trading volume a year, the corporate sales departments of major brokerages secretly making up for a portion of the losses for losing clients had long been a "commercial practice" that everyone knew about, but few were willing to put on the table.
As long as the accounts remained hidden behind the sales departments, it was just a matter between a few securities companies and major clients.
But once the amounts were written down one by one and printed in nationally distributed newspapers, the nature of the matter changed completely.
The money lost by ordinary investors could only be borne by themselves.
Large companies lost billions, yet someone helped them plug the hole.
What was even more troublesome was who had taken the money and who had not, why some people were able to get compensation, while other corporations that likewise contributed large amounts of commission fees to the brokerages had never received such treatment, quickly becoming a question that the entire financial circle was inquiring about from one another.
However, what truly caused the situation to spin out of control was not these loss compensations.
Almost at the same time, another old debt that originally had no direct relation to corporate compensation was also dug up from beneath the accounting books of the securities company.
Susumu Ishii.
This name might seem somewhat unfamiliar to ordinary corporate employees, but very few people in Tokyo's financial circles were truly hearing it for the first time.
Susumu Ishii had once sat in the topmost position of the Inagawa-kai.
He was the second-generation chairman of the Inagawa-kai, having stepped down from the chairmanship only last year.
Unlike the yakuza figures operating soaplands, gambling, and protection fees in the impression of ordinary people, Ishii had long extended his hands into the legal economic system over these years.
Real estate, corporate investment, stocks.
Even the financing windows of large financial institutions.
During those years when the bubble was at its craziest, he was one of the most typical figures of the so-called "economic yakuza."
Suits, companies, bank accounts, securities positions.
Just looking at the documents placed on the counters of financial institutions, sometimes it was even hard to tell what kind of people ultimately stood behind these funds.
And the most eye-catching thing in Ishii's hands was the stock of Tokyu Corporation.
A few years ago, he had purchased a large amount of Tokyu Electric Railway shares.
Whether he was purely preparing to make a bundle taking advantage of the bubble's rise, or wanted to reach his hands into the interior of Tokyu by taking advantage of large-scale shareholdings, no one had been able to clearly explain until now.
But one thing was already clear.
The money supporting him to buy these stocks did not all come from himself.
The securities-affiliated financial companies under Nomura and Nikko had both provided huge amounts of financing to Ishii's side.
Combined on both sides, it amounted to hundreds of billions of yen.
A large amount of these funds ultimately became linked with Tokyu stocks once again.
Ishii used money from financial institutions to buy stocks, and the stocks in his hands in turn became important assets for continuing to obtain credit.
As stock prices rose, the financing he could obtain became more and more, and the money he could mobilize within the legal financial system also increased accordingly.
When the bubble was still rising, this set-up even looked rather brilliant.
But now it was completely different.
Tokyu stocks were no longer just ordinary listed company stocks.
At the same time, they were Ishii's assets, collateral in the hands of financial institutions, and an entry point for investigating how those hundreds of billions of yen flowed from the securities financial system to the former chairman of the Inagawa-kai.
Thus, two matters that were originally unrelated collided like this.
On one side, major securities companies secretly covered securities investment losses for people in order to retain important corporate clients.
On the other side, that same major securities system had opened up financing channels on the scale of hundreds of billions of yen to a person whose identity could not possibly be truly unknown to any high-level figures in the financial circles.
The former made people begin to doubt whether the securities market was fair at all.
What the latter prompted people to question, however, was another much uglier problem—
What kind of people did these securities companies treat as "important clients"?
Continuing the investigation downwards, how many banks, trusts, securities financial companies, and large enterprises had done business with his companies while knowing full well who Susumu Ishii was?
If it were only Nomura or Nikko running into trouble themselves, replacing a few people and accepting punishments from the Ministry of Finance, there would still be a way to salvage things.
But once the investigation continued to spread outward from the securities companies along financing, collateral, accounts, and corporate relationships, what it ultimately bumped into might not just be the securities industry anymore.
By today, Nomura Securities President Yoshihisa Tabuchi and Nikko Securities President Takuya Iwasaki had successively submitted their resignations.
Once this matter came out, the nature changed once again.
A piece of trouble that was originally only circulated within the industry officially became something that the entire financial world could not avoid.
Azabu-Juban, The Club.
Just past 7:00 PM, the piano in the lobby was still playing as usual.
A guest who had arrived not long ago handed his coat to a waiter, stood at the bar for a while, and ultimately did not order alcohol, instead taking only a glass of club soda and heading upstairs.
The dining tables on the other side had already begun serving the main course.
The silver food covers were gently lifted, and the aroma of roast beef quickly wafted out.
Looking only at the first floor, there was not much difference here from usual.
What was truly lively today was the second floor.
The coat rack outside Chōshōken could no longer hang any more coats, and the later ones could only be temporarily collected by waiters into a small room nearby.
Some had hurried directly from Marunouchi, with briefcases still placed beside their feet; others had obviously already attended a round of banquets, with their ties loosened a little, just holding whiskey and leaning back in the sofas.
Banks, trusts, insurance, trading companies, manufacturing companies.
There were also a few familiar faces who had just come over from Nagatacho this afternoon.
People who were usually hard to see simultaneously in the same company conference room appeared here one after another tonight.
Yet no one felt it strange.
Over the past few years, whenever something big enough to affect the entire financial world truly happened in Japan, these members who had been saved by Saionji would all consciously come here.
How should the bank's money be arranged?
Just listen to Saionji and you will be right.
Whether the company's business should be contracted, who the orders in hand should be left to, and which companies that were barely holding on should be seized the opportunity to take over?
Just listen to Saionji and you will be right.
Which direction should effort be exerted toward in political circles, which people could still be protected, and which people were best kept away from as soon as possible?
Just listen to Saionji for everything and you will be right.
Anyway, over all these years, this core group of members who had "shared trials and tribulations" had already formed a consensus, which was "listening to Saionji on major events can never go wrong."
Could Lady Satsuki possibly harm you?
Therefore, when major events truly occurred, everyone did not even need anyone to notify them specially.
Whatever they knew, they brought it over.
Whatever could be mobilized in their hands was also explained clearly along the way.
Anyway, as long as everyone took out their things and put them on the table, Saionji would arrange everything.
"Take this copy away first."
Sitting in a position close to the main seat, Shuichi pulled an evening newspaper from the table, folded it, and placed it to the side.
"The newspaper says 'may be involved'. Managing Director Tanimoto brought just now represents confirmed loan relationships."
He reached out again and tapped two other documents.
"Do not discuss these two together."
The man sitting on the left was just about to reply when Shuichi already raised his eyes to look over.
"Also, as for the police side."
"What is confirmed right now is that they have re-pulled Ishii's corporate materials from the past few years. As for what they are preparing to open a case to investigate, no one knows at present."
The man nodded and put the cigarette he had just picked up back onto the edge of the ashtray.
"Understood."
Only then did Shuichi lean back against the back of his chair again.
The discussion on the table had lasted for more than an hour.
He had handled scenes of this kind far too many times over the years.
The Club had originally just been a place for people to drink and exchange news.
Later, Black Monday came, and someone withdrew high-risk positions in advance; when Japanese real estate was at its craziest, someone else, having listened to Saionji's warning, kept the money that was originally prepared to continue buying land.
Further down the line, there was the bursting of the bubble, corporate relief, banks recalling loans, and most recently, Seibu and Hakusuikai.
Every time a storm passed, someone always disappeared.
But there were always people who stayed.
Most of those who could still sit here securely today had seen with their own eyes several times just how much Saionji's so-called "thinking one step ahead" was worth.
So when Shuichi told them not to rush, they were truly willing to sit and wait.
A director from a trust bank finished flipping through the pages in his hands, took off his glasses, and wiped them.
"Then let us start with what has already been confirmed."
"This afternoon, we re-examined the large corporate credit lines over the past three years. Among them, one company entered our list starting the year before last through ordinary corporate financing."
He pushed the documents slightly toward the center of the table.
"Although they changed shareholders once later on, we did some digging and can now confirm that they actually have deep ties with Ishii."
President Kuroda glanced at the first page.
"How much money?"
"There are 4.7 billion yen remaining now."
President Kuroda feigned surprise and said with a smile,
"Oh? Is such a paltry sum worth you making a special trip over here?"
"Hehehe, it is indeed not much money."
The director responded with a laugh, not minding his tone in the least.
"So if it were just 4.7 billion, I would not have brought this matter here today at all."
He flipped to the next page of the document in front of him.
"The trouble is the timing. As luck would have it, this credit line is due for renewal tomorrow."
"Under normal circumstances, as long as there is no issue with the collateral, the branch would probably just extend it for them."
"But this afternoon, risk management re-inspected the collateral."
He paused.
"A lot of Tokyu Electric Railway shares are pledged in it."
The smile on Kuroda's face faded slightly.
"How much?"
"Based on today's closing price, it covers about 1.6 times the credit line."
Managing Director Tanimoto, sitting on the other side, finally set down his cup.
"What does risk management say?"
"Refuse it."
The answer came quickly.
"Since four o'clock this afternoon, I have already received three calls. The Credit Audit Department, Legal, and the branch handling this transaction are, for once, in complete agreement."
Someone let out a laugh.
"If you still dare to renew at a time like this, the newspapers will be writing about you tomorrow."
The director chuckled as well.
"That is why I did not say we definitely have to renew."
He reached out and opened the second document.
"The issue is that if we do not extend it tomorrow, they will need to make up the difference in cash or provide additional collateral."
"What if they cannot produce it?"
"According to the contract, we can demand the liquidation of a portion of the existing collateral."
The room grew a bit quieter.
The so-called existing collateral was mainly that batch of Tokyu Electric Railway shares.
President Kuroda rubbed his chin.
"If it is just your single line right now, 4.7 billion itself really will not cause much of a stir. Even if a portion of Tokyu shares is liquidated in the end, it will not blow things out of proportion."
"If you look only at us, of course that is the case."
The director nodded along with his words, but his gaze shifted diagonally across the table.
"I brought this matter here tonight specifically because when we audited the accounts this afternoon, I noticed that we probably are not the only ones keeping an eye on Ishii and re-evaluating his credit."
Having said that, he looked over at Tanimoto.
"Fuji is digging through old accounts today as well, are not they?"
Tanimoto, who had not chimed in until now, finally picked up the thin document beside the table.
"We did an emergency re-screening this afternoon. We do not have anything directly registered under Ishii's name."
He flipped open the first page.
"However, two companies have deep ties with him, and we have had credit dealings with them over the past few years. One of them currently holds a significant amount of Tokyu Electric Railway stock as collateral as well."
Only then did the expression on Kuroda's face turn somewhat serious.
Several people nearby also shifted their gazes to the document in Tanimoto's hands.
The trust bank director raised his hand.
"That is precisely the problem."
"If we collect first tomorrow, Tokyu will face additional sell orders. When Fuji sees the price drop, they will recalculate the collateral. Other institutions using Tokyu as collateral will recalculate as well."
Saying this, he tapped his finger lightly on the table.
"Then everyone will think it is best to sell before others do."
Tanimoto frowned.
"If it is just a matter of a few billion, it will not be that exaggerated."
"Of course."
The other man nodded.
"But who knows how much there actually is right now?"
No one responded.
From this afternoon until now, the materials continuously sent into The Club had already illustrated this point.
One company with 4.7 billion.
One with only ordinary settlement transactions.
Another as a peripheral enterprise.
Plus securities custody, financing guarantees, and land transactions.
None of them seemed like much on their own.
But no one knew which company would show up in the next document brought in from outside.
"If Tokyu's shares are truly liquidated en masse, the first ones to suffer will be the creditors themselves."
The president of Otsuka Heavy Industries spun the lighter in his hand.
"The stock falls, collateral becomes insufficient. Collateral becomes insufficient, they demand more payment. The other party cannot pay, so they have to keep selling."
"In the end, based on today's stock price, they might have recovered eighty percent of their money. But with several institutions selling simultaneously, Tokyu's stock price will be hammered down by themselves. By the time the collateral is fully liquidated, they might not even recover fifty percent."
Having finished, he glanced at the several bankers sitting across from him.
"You people in the financial industry love doing this sort of thing the most."
"That is just the law of the financial market, okay?"
Tanimoto retorted testily.
Only then did the political figure sitting near the door put down his teacup.
"If the banks are really planning to tighten credit, you had better think carefully about how the outside world will perceive it."
"Nomura and Nikko just took responsibility for the Ishii affair. If several major banks simultaneously stop renewing loans and re-examine financing tomorrow, journalists will definitely ask—why today of all days?"
Tanimoto frowned.
"But if we do nothing and continue disbursing money as usual, the situation will be even harder to explain."
"That is why everyone cannot just go off and do their own thing."
The political figure looked around at the people at the table.
"If we are going to act, we must set the direction first."
After those words were spoken, the topic shifted rapidly.
Just a moment ago, everyone was calculating loans and collateral, but now they began discussing line by line what each of them could do.
The trust bank director spoke up first.
"If the decision is to tighten, we can stop issuing new credit tomorrow. Expired ones will be handled according to contract, and all other loans will be re-examined, especially those backed by Tokyu stock, which will be singled out first."
Another financial figure chimed in.
"We can check securities accounts as well. Large transfers, new pledges, and accounts with sudden changes of beneficiaries can all have their audit levels raised immediately."
The person by the window flipped through a note that had just been brought in.
"On the insurance side, two affiliated companies made financing arrangements. If we need to investigate, we can review the insurance policies, collateral, and beneficiary relationships tomorrow morning."
President Kuroda leaned back in his sofa and spoke up as well.
"Great East Asia Corporation has not lent money directly to Ishii, but two of our subsidiaries are still doing business with his affiliated companies—one purchase, and one real estate partnership. If Saionji thinks it should be stopped, I can have my people re-examine them as soon as I get back."
The political side was actually much simpler.
"There is no need to worry about the Parliament. Right now, the Ministry of Finance already needs to explain the securities firm issues. As long as no one suppresses the matter for Ishii, there are plenty of people willing to keep pushing for answers."
Someone in the corner who had remained largely quiet joined in with a smile.
"The same goes for the newspapers. People are already investigating Ishii's funding sources over the past few years. As long as no one deliberately stops them, they will keep digging on their own."
No one asked anything further.
Everything was crystal clear.
Banks could tighten credit, trust and securities firms could monitor accounts, insurance companies could audit collateral, corporations could suspend business, the Parliament could demand answers, and the media could keep digging.
Normally, these people managed their own affairs and had no direct connection with one another.
But as long as The Club set a direction tonight, by tomorrow morning, they would all act simultaneously in their respective fields.
When that time came, Susumu Ishii could prepare to face a combined manhunt from power factions across most of Japan.
For a yakuza mob boss to receive such "special attention" from so many heavyweights was, in a sense, truly something to celebrate.