fictionpage Chapter 227 Capital Manipulation
Chapter 227 Capital Manipulation
(Still two chapters~)
Late February 1990.
Nikkei Average: 30,120 points
Eight o'clock in the morning.
Chiyoda Ward, Tokyo.
The glass curtain wall of the Fuji Bank headquarters building gleamed with a grayish-white reflection in the gloomy winter morning light.
Inside the credit department's office area, the air was filled with the faint smell of burnt printer toner. Dozens of fax machines were lined up in two rows, their green indicator lights flashing uniformly.
Managing Director Tanimoto sat upright in his separate glass office.
He put down his coffee cup and reached for an execution report that had just been delivered to him on the table.
"Executive Director." The credit section chief stood in front of his desk, bowing slightly. "The loan extension applications from all 372 construction and real estate-related companies in the Kanto region have been processed."
Tanimoto pushed up his gold-rimmed glasses and glanced at the names on the report.
Daiwa Development, Kansai Heavy Industries affiliates, Keihin Realty...
"Have you checked the wording?"
Tanimoto's voice was steady.
"It's been checked." The credit section chief immediately reported to his superior, "They all used the highest-level business apology. The reason given was uniformly 'cooperating with the head office's annual financial risk control and compliance review.'"
"We rejected all bridge loans and requests for payment extensions. Notices demanding the final payment by a specified period have been sent to the desks of all the other company presidents."
Tanimoto nodded slightly.
He took off his glasses, pulled a clean white handkerchief from his suit pocket, and carefully wiped the lenses.
"Go check with the foreign exchange department." He put his glasses back on, his tone relaxed. "Have the foreign exchange department process those large positions we recovered yesterday immediately. Convert them all into U.S. short-term Treasury bills."
At the same time.
Greater East Asia Business Headquarters, Financial Accounting Center.
President Kuroda stood before the enormous floor-to-ceiling window, overlooking the bustling street below. Behind him, the indicator lights on over a dozen telephones on his desk were flashing wildly. The pleas for help from downstream suppliers were nearly overwhelming the switchboard.
"Tell them that we are very sorry. Daedong Asia Corporation is undergoing internal accounting standardization."
Kuroda turned around and gave instructions to the finance minister, who was covered in sweat.
"Stop supplying any accounts at risk of default. Don't leave the recovered cash flow on domestic balance sheets; immediately contact our offshore channels in Europe. I want this money converted into holding certificates in the North American bond market by 3 PM today."
The finance minister swallowed hard, his hand holding the document trembling slightly.
"President, several key downstream contractors just called, saying that if their payments are cut off today, their factories will have to shut down tomorrow. And what about the workers' wages...?"
"That's a problem for their president to worry about." Kuroda walked to the table and picked up a cup of warm sencha. "Daitoa Trading also needs to survive. Go and carry it out."
On this seemingly uneventful morning, hundreds of billions of yen in cash flow were silently and quietly withdrawn from the bottom of the market by these suited giants using the most appropriate and polite business language.
Huge sums of money are flowing into safe-haven assets overseas through foreign exchange channels.
……
Nihonbashi Kabutocho.
Tokyo Stock Exchange.
The huge trading hall was bustling with noise.
The mechanical flip-board above the lobby made a dull "click" sound. The black plastic flip-board with white lettering rolled.
Nikkei 225 Index: 35,025 points
[Decline: 125 points]
Matsumoto stood in front of the trading table, loosening his tie. His forehead was covered in sweat, but an excited smile played on his lips.
"Daiwa Construction! Buy 10,000 shares!"
He yelled at the liaison officer outside the venue, his fingers flying across the terminal.
The other traders around him also looked relaxed.
"The market has dropped by more than 100 points again today."
A trader took a sip of water and looked at the steadily declining index above.
"It's just a normal technical correction." Matsumoto stared at the screen without turning his head. "This has been the trend for the past two months. A drop of one or two hundred points every day is just enough to shake out those weak-willed retail investors. Once the shakeout is over, a retaliatory rebound and a breakthrough of 40,000 points could happen at any time!"
In a corner of the hall, a major investor excitedly waved his passbook.
"Buy the dip! Put all the cash in your account into the market! This is the last chance to get on board!"
In the eyes of these retail investors and ordinary institutions, the market's continuous decline is no different from any previous correction. They remain immersed in the illusion of perpetual growth, excitedly shouting to buy the dip, and pouring the last of their cash into this bottomless black hole.
However, the real abyss lies hidden in the depths of the betting market, beyond their reach.
With the collective withdrawal of funds by giants like Fuji Bank and Daitoa Corporation, the previously abundant buying support evaporated overnight. The market index, as if stepping off a cliff, continued its downward spiral with extremely low trading volume, offering no resistance whatsoever.
……
Xiaguan.
Ministry of Finance, Banking Bureau Monitoring Center.
The director sat behind his large desk, reviewing yesterday's exchange rate fluctuation report.
"Chief."
A monitor removed his listening earpiece and turned around. He pushed up his glasses, looking somewhat surprised, his tone carrying a hint of suppressed tension and confusion.
"The real-time data for the interbank lending market... has become abnormal."
He pointed to the steep upward red curve on the screen and swallowed hard.
"Within just one hour of trading, the 'unsecured overnight interbank lending rate' skyrocketed. I've had the technical department check the underlying interfaces three times, and the equipment is functioning normally."
The director put down the briefing he was holding, stood up, and walked to the huge electronic display screen.
He frowned, staring at the unconventional curve.
Logically speaking, it is impossible for liquid funds in the market to disappear out of thin air.
"Several medium-sized local banks are facing a severe shortage of interbank lending funds." The monitor's fingers flew across the keyboard, pulling up another set of details. "They are frantically raising interest rates in the interbank market to absorb overnight funds. The domestic short-term liquidity pool... seems to have evaporated into thin air."
What's happening with the foreign exchange reserve monitoring system?
The bureau chief asked in a deep voice.
"Yellow light warning." The monitor quickly switched the screen, a fine layer of sweat appearing on his forehead. "A huge amount of domestic funds are flowing out of Japan legally and legitimately. Every transfer comes with complete declaration procedures, and the categories are uniformly marked as: allocation to the North American bond market and overseas safe-haven assets."
The bureau chief felt a cold sweat break out on his back.
In this situation, there's basically only one possibility.
That is—there is a large amount of capital orchestrating this behind the scenes.
The expected "smooth soft landing" trajectory was unexpectedly disrupted by a deep, bottomless crevice in the ice.
He turned and walked back to his desk, grabbing the red internal hotline receiver.
"Receive instructions from Fuji Bank, Daitoa Corporation, and Mitsubishi." The director quickly issued the order to his secretary, speaking at a pace half a beat faster than usual. "Prepare to issue administrative guidance. Require major city banks and trading companies with ample cash to immediately ease credit and inject liquidity into the interbank market."
After a brief silence.
"Managing Director Tanimoto," the director said, suppressing his anxiety and trying to make his voice sound calm and authoritative, "this morning, the unsecured overnight interbank lending rate... saw an irrational surge. The Ministry of Finance is now issuing administrative guidance to your bank."
"We hope that Fuji Bank can consider the overall financial situation and play an exemplary role as a core city bank. It should immediately release funds into the interbank market to alleviate this abnormal liquidity shortage."
On the other end of the phone came the gentle and extremely polite voice of Fuji Bank Managing Director Tanimoto.
"Your Excellency, our department is very willing to cooperate with the Ministry of Finance's guidance."
There was no discernible emotion in Tanimoto's voice.
"However... I'm very sorry. In view of the Bank of Japan's recent interest rate hikes and global market volatility, in order to protect depositors' assets, our bank yesterday allocated all idle liquid funds on its balance sheet to safe overseas assets in accordance with international hedging practices. Currently, our holdings are all short-term U.S. Treasury bonds."
Tanimoto paused, his tone remaining humble.
"There is indeed no extra yen available for allocation in the domestic accounts. I hope the Director can understand."
The director's hand gripping the receiver tightened involuntarily.
These damned capitalists actually took advantage of the national crisis to do such a thing.
But when he opened his mouth, he found that he couldn't refute it at all.
The balance sheet presented by the other party was flawless. Even if he had the greatest audacity, he would never dare to issue an executive order forcing these giants to sell their holdings of US Treasury bonds to bail out the Japanese market. That would immediately trigger a transnational financial dispute between Japan and the United States.
"……I see."
The bureau chief clenched his teeth and squeezed out those words.
The receiver fell back to its base with a dull thud.
The Ministry of Finance's much-vaunted administrative guidelines have become nothing more than a worthless piece of paper in the face of these multinational conglomerates that have invested in US Treasury bonds.
But the bureau chief did not allow himself to remain stagnant. As a bureaucrat who controlled the nation's financial lifeline, his ingrained crisis response mechanism prompted him to immediately begin searching for alternative plans.
"Take over to the Bank of Japan's business bureau!" The director straightened up and quickly issued instructions to his secretary, speaking rapidly. "Instruct them to immediately initiate emergency open market operations to inject short-term liquidity into the interbank lending market! Furthermore, immediately draft an urgent briefing for the Prime Minister's Office, requesting the use of the Ministry of Finance's special reserves to intervene in the market!"
The secretary hurriedly grabbed another red dedicated phone and started dialing.
The director braced his hands on the edge of his desk again. He stared intently at the overnight interbank lending rate curve on the screen, which was still climbing steeply, cold sweat trickling down his face.
He knew very well that these conventional monetary tools were like a drop in the ocean compared to this coordinated and deliberate drain on funds amounting to hundreds of billions of yen.
Behind this is a massive and terrifying force of capital precisely strangling the market. If the hidden mastermind doesn't loosen the noose, even if the Prime Minister of Nagata Town personally intervenes, he cannot conjure up the cash flow to fill this abyss.
The instructions he is issuing now are merely the instinctive struggle of a bureaucrat.
Even a little bit helps.
"Director," the secretary said, her voice strained as she covered the microphone, "the Bank of Japan's branch office replied that a large-scale capital injection requires the signature of President Mieno, and the funds cannot be allocated until this afternoon at the earliest..."
The bureau chief closed his eyes, his chest heaving violently.
"Keep pushing."