Lake Toya: The billion-dollar Tower of Bubble

There could be no clearer example of the mismatch between the perceived need for relaxation and communion with the natural order, and the policies adopted in practice, than this 1987 [Resort] Law. Relaxation, along with freshness, greenness, and “my life”, was incidental to what happened. The expansionary thrust of Japanese capitalism shifted into a higher gear. The Resort Archipelago formula devised by PM Yasuhiro Nakasone created a huge new market and fed fierce expansionary pressures…In the Green Japan Plan Phase Two, published in 1988, resorts were described for the first time as “a new basic industry for Japan”. When Nakasone spoke of his ideal for Japan of “peace, freedom, and verdant greenery”, it should be understood that what he meant was…a land of chemicalized golf courses, expensive marinas, toll expressways that penetrated the deepest mountains, and resorts that multiplied the ideology and aesthetics of Disneyland, where culture meant consumption.

Gavan McCormack, The Emptiness of Japanese Affluence (1996)

Rte 393 ascends steeply out of Otaru in a succession of hairpins, eventually delivering drivers across the 700m Kenashi pass and into the village of Akaigawa (1899 population 1,716, 1935 population 3,592, 1955 population 3,045, 1980 population 1,485, estimated 2009 population 1,235, projected 2035 population 918), which covers an area larger than Otaru but is currently fourth smallest by population of Hokkaido’s municipalities. Reportedly its only concession to the retail experience is a single convenience store, and the village attracted a brief moment of notoriety in the media in 1999 when the Obuchi administration lavished some $7bn on “Regional Promotion Coupons” (chiiki shinkoken) as being one of the few places in the archipelago where it was next to impossible to use them. Rte 393 turns south before it reached the center of the village and the only place that attracted my attention on the forested mountain passes was the Mountain Village Revitalization Support Center.

The center was and remains something of a mystery. Why was it deserted and locked in the middle of a Tuesday morning? Why was so fancy an edifice constructed for the twelve hundred villagers? Perhaps, I speculated, that in Japan’s Construction State, it was the very act of construction that served as the act of revitalization, and that the center would be repeatedly torn down and rebuilt, torn down and rebuilt, to provide endless off-season work to Akaigawa’s pumpkin, corn, and watermelon farmers.

More mountain passes and tunnels led me back to the edge of Kutchan, and it was in a stretch of a couple of hundred of meters between the hamlets of Yamato and Fuwa, that I took a handful of snaps that I think convey well the way human life is ebbing away from the badlands of Hokkaido: the ageing smallholder hanging on, the ancient patched-up barn, the long forsaken homestead returning to the elements, the more recently abandoned and boarded-up farm.

From Kutchan, the route took me around the other, eastern side of Mount Yotei in forbidding weather through the arable farm towns of Kyogoku and Kimobetsu (1980 population 4,085, estimated 2009 population 2,520, projected 2035 population 1,335) and the village of Rusutsu (1980 population 2,075, estimated 2009 population 2,037, projected 2035 population 1,606), where ski resorts and sky sports seem to be keeping the economy ticking over, and finally into the lakeside town of Toyako (1980 population 14,401, estimated 2009 population 10,484, projected 2035 population 7,199), my first real destination of the day and the July 2008 venue for the 34th G8 summit of world leaders.

Rte 238 runs along the edge of tableland that descends steeply to the northwest side of the caldera lake of Toyako and affords spectacular views of it, views that attracted the development in the 1970s (I would guess) of a string of complexes with restaurants, gift-shops, and observation decks. Time and the frail tourist economy have not been kind to them.

I was particularly enamored with the exuberance and sheer datedness of this place. It’s for sale, and if structurally sound it would make a wonderful boutique hotel or an extravagant private residence.

Just a little further along was the Sairo observation deck, a characteristically Hokkaido piece of architecture, gamely hanging in there although without a great deal of appeal inside under the strip-lit glare.

On the opposite side of the road, I was struck by the contrast between the venerable iron plough and the almost Midwestern neatness of the farm behind. The prosperity or otherwise of Hokkaido’s farming districts varies hugely from crop to crop and village to village, and clearly many larger farms, especially the big dairy ones, have accrued survivor benefits from having outlasted their neighbors and are not faring too badly.

I threaded my way down to the side of the lake and into the hot springs resort of Toyako Onsen, which straddles the towns of Toyako and Sobetsu (1980 population 4,292, estimated 2009 population 3,008, projected 2035 population 2,043). The resort consists of a dozen or hotels, mostly abutting the lake, some of considerable size, and almost all with the malodorous pall of the Bubble hanging over them.

The second photo is of the 127-room Toya Park Hotel Tensho, completed in 1992, whose cavernous and ebulliently high ceilinged dining room was all but deserted (well, it was Tuesday) as I took a lunchtime stroll along the waterfront. It was readily apparent that something was gravely amiss. The only tourists were pensioners and there was only the merest smattering of them. One of the lakeside hotels had already called it quits.

The sun emerged for the briefest of moments and I allowed myself to be distracted by wonderful light that resulted as the pregnant rain clouds hung menacingly low over the lake.

It’s not widely known outside a coterie of ornithologists, but the council of owl elders has decreed that when the avian revolution comes, the pedalo swans that blight every lake in Japan will be given the bills of the most terrifying of the pterosaurs and the machine guns of Mad Max and assigned a sacred mission—to hunt down and terminate with extreme prejudice everyone who has ever been foolish enough to rent one out.

The inland side of the lakeshore road was home to a couple of grimier hotels, one sporting a banner offering rooms at the exceptionally low price of Y3,990 ($42.50), and the rubble of the flotsam and jetsam of craft and gift shops, noodle restaurants, and karaoke parlors that had once lived off the crumbs of trade that the larger hotels threw their way but starved and died as the pickings grew ever slenderer. The wrong side of the street was in tatters.

I was just too late for the 2pm lunch cutoff at the Toya Park Hotel, so my entire contribution to the Toyako Onsen economy was the purchase of an onigiri rice ball and a bottle of iced tea from a convenience store, where I had to ask for directions to the Windsor Hotel Toya Resort & Spa, the hilltop hotel where the G8 summit was actually held.

As I retraced my steps to get to the 3km-long private driveway that leads to the hotel, the weather closed in again and the fog came down, reducing visibility to mere yards, which was a shame because the view on a good day must be phenomenal.

The Windsor Hotel has a checkered history, to say the least: if it were a G8 head of state, from among the presidents, prime ministers, and solitary chancellor who attended the summit, it would perhaps be reformed boozer George W. Bush, although the hotel’s addiction was not to liquor but money, vast armfuls and suitcases and Olympic swimming pools of the stuff, snorting up a cool Y65bn ($700mn or so at the current exchange rate) in construction expenses alone, with the total cost estimated to be around the $1bn mark. Do you need to be told that it was a Bubble-era vanity project? I thought not. The firm with the fantasy was an obscure Sapporo real estate developer, Kabuto Decom, which had started out in life in 1971 as a road paver, of all things, and was determined to ride the resort boom of the late 1980s. One deep irony of the hosting of the G8 summit by the Windsor Hotel was that the hotel’s very existence might be said to have originated in a similar sort of gathering, the infamous one between the finance ministers of Japan, the US, the UK, France, and West Germany at the Plaza Hotel in New York a quarter of a century before, where agreement was reached in the Plaza Accord on concerted foreign currency market intervention to depreciate the dollar with the aim of boosting US exports, resulting in a brief economic downturn in Japan and monetary loosening that lit the fires of the asset bubble. One shallower irony is that the G8 summit and all its hot air about global warming took place in a hotel that is a temple to environmental desecration.

The hotel finally opened, as the Hotel Apex Toya, the deliciously named developer Apex having been a subsidiary of Kabuto Decom, in June 1993, born into an inhospitable post-Bubble world around the time that suspicions were first being raised about the lending practices of Kabuto Decom’s main source of funds, Hokkaido Takushoku Bank.

Kabuto Decom’s modus operandi appears to have been this: it would make group companies buy up land in a notorious Bubble land-sharking practice known as “jiage”, then get the group companies to place orders with it for resort construction. Once it had finished the construction, it would buy up the resort and then sell it on again to the subsidiaries. It would then book a double dose of profit in a kind of internalized Ponzi scheme, once on the margin on construction and a second time on the sale to the subsidiary. Say for example the land cost $50mn and the construction of the resort cost $100mn; Kabuto Decom would then buy the resort for $200mn and sell it back to the subsidiary for $300mn, the “profit” being $50mn on purchase of the resort attributable to the subsidiary and $100mn on the sale of the resort to the subsidiary attributable to the parent, a $150mn “profit” on $150mn of expenditure. Consolidated accounting, which would have snuffed out this sort of chicanery, was in its embryonic stages in the Japan of the time, and it was not until the late 1990s that its application became mandatory. I had a brief chat with my bank analyst colleague, who graces the top of the rankings for his sector year after year, about the mechanics of the collusion, and it was his opinion that the group companies were quite probably near-fictitious entities in the name of the wife or other relatives of the president of Kabuto Decom, a shadowy figure called Shigeru Sato, whose photo I have tried for hours to track down but to no avail.

It took two to dance this crooked tango, of course, and Kabuto Decom had a more than willing partner in Hokkaido Takushoku Bank, colloquially known as Takugin. Takugin was established as a state-run development bank in 1900 to alleviate the problems of Hokkaido’s existing network of banks, which were small in scale and usurious in their lending practices. After the Second World War, the state lessened its grip and Takugin became an ordinary private-sector bank, one with such deep ties to the community that Hokkaido families, the majority of whom held accounts at the bank, came to refer to it as “Takugin san” – Mr. Takugin – and an account with or a loan from Takugin was seen as a barometer of the creditworthiness and stature of a business. By far the largest bank in the prefecture, there was a tacit understanding, of the sort that proliferated under the “convoy system” of the old and indulgently paternalist Ministry of Finance, that in any joint financing of an enterprise, Takugin would supply 40% of the credit, with the rest split between Hokkaido’s three other banks, Hokkaido Bank (30%), North Pacific Bank (20%), and Sapporo Bank (10%).

Enter the Bubble. The Bubble inflated first in the metropolises and was slow to ripple out to remote Hokkaido, and it was not until 1988 that Takugin began to seriously engage in the deliriously speculative real estate lending that defined the Bubble. Being late to the party was a recipe for disaster; while the earlier to arrive guests had been drinking in moderation from the punchbowl in 1986 and 1987, Takugin had to hammer back the tequila slammers to catch up. These slammers were particularly toxic; as the latecomer, Takugin was forced to take subordinated positions on collateral in real estate in the structure of existing, already extravagant, loans of 120%-130% on astronomically overvalued land.

Two small Takugin teams of fewer than a dozen people each, one in Tokyo and one in Sapporo, were responsible for much of the insanity. Feeling the chill winds of the collapse of the Bubble, with the Nikkei tumbling and land prices teetering, the Tokyo team quickly froze lending and was disbanded in 1991, but the Hokkaido team sailed blithely on.

For the briefest of moments, it seemed as though Hokkaido and the world lay at the feet of Kabuto Decom; its shares, which were first listed in March 1989 at Y2,300, spiraled higher and higher, to reach Y41,400 in October 1990, fully 10 months after the Nikkei had peaked, on the very last trading day of the 1980s. Sales, however dubiously they were measured, ballooned to Y100.9bn in 1991 from just Y15.4bn in 1989. In September 1989, Kabuto Decom snapped up a country club and ski resort in Hokkaido; by April 1990 it had started construction of a shopping center in Las Vegas.

Two other firms were particularly lavish bingers on Takugin’s largesse: Miki, a jeweler and retailer of women’s and children’s apparel, which at its peak had 1,400 outlets across Japan and was the nation’s largest retail jeweler; and Sophia, which like Kabuto Decom was a real estate developer, though one with even more bizarre roots. Sophia had been founded by a born-into-poverty hairdresser from Kutchan, Yoichi Nakamura, who started a salon with sauna attached (I cannot even begin to imagine how that worked) in Sapporo in 1972 and built a small chain of them around Hokkaido and beyond. Takugin lavished him with at least a couple of billion dollars to build two resort hotels in Sapporo.

The hotels that Kabuto Decom and Sophia built were probably intrinsically unprofitable, and this was compounded by the one thing that Kabuto Decom, Sophia, and the bankers parachuted in to help from Takugin had in common: none of them knew the first thing about the hotel business. When Hotel Apex Toya finally opened, many of its customers were the families of Takugin branch employees, no doubt not entirely of their own free will, and even then the occupancy rate was less than half of the target.

Kabuto Decom had incurred two principal forms of liability with Takugin, the original loans to buy the land and the debt guarantees on the borrowing of its subsidiaries to finance the construction, which conventionally it would have provided but which were again borrowed. The momentum of the spinning plates that were Kabuto Decom’s Byzantine financing arrangements were beginning to fail, but the bank could not bring itself to pull the plug, as it knew that at least some of its loans had passed through dummy companies and that a Kabuto Decom bankruptcy would expose the shenanigans in which it had been complicit, so it rushed around desperately trying to keep all the plates in motion, funnelling tens of billions of yen through dummy companies to Kabuto Decom so it could repay loans to its nonbank subsidiaries, while at the same time plotting to have its dummy companies buy up Kabuto Decom’s real estate holdings in preparation for its bankruptcy soon afterward.

The bank managed to seize control of some of the few profitable parts of the empire but its strategy backfired when to, cap it all, it had the Kabuto Decom President arrested by the Sapporo District Public Prosecutors Office on charges of promissory note forgery, the objective being the unconditional surrender and departure of the Kabuto Decom management team in exchange for dropping the case. The management team, backed into a fearsome corner, duly folded, but when the bank tried to withdraw the forgery allegations, the public prosecutors turned on it and threatened charges of aggravated breach of trust.

By early 1994, the story had seeped out to the media and Takugin was being dubbed an “abunai ginko”, a bank on the brink. Still, the unfolding of events has a slow motion feel to it in the wake of the financial crisis of 2008: it took the Ministry of Finance until the end of 1994 to (secretly, in the best ministerial tradition) require the bank to submit its earnings reports to the ministry for approval, the announcement of the first loss in the bank’s history did not come until May 1995, and Moody’s did not downgrade it to the lowest bank rating, E (” very modest intrinsic financial strength, with a higher likelihood of periodic outside support”) until the summer of 1995. A run on the bank had begun discreetly in 1994, with corporate customers closing accounts, but somehow it staggered on through 1996, until a comment early in 1997 on a TV program (“to judge from the share price, Takugin’s effectively bankrupt”) sparked a minor run the next day among retail depositors. By March 1997, Takugin had an official non-performing loan ratio of 13.4%, versus 1%-2% for a healthy bank in normal times, and in all likelihood, thanks to lax borrower categorization, a real ratio of triple that.

The Ministry of Finance, whose mantra of the time was not that “some banks are too big to fail but that “all banks are too big to fail”, tried to effect a merger between Takugin and Hokkaido Bank, the prefecture’s second largest bank, which was nursing its own crippling hangover from the after-effects of the Bubble. It came very close to succeeding, too: the long-time rivals announced a “love marriage” on April 1, only for their love to turn to hate over the next six months, as Hokkaido Bank staff rebelled against merging with the bank’s perennial competitor and Takugin, unforgivably, railed against its smaller rival’s plans to cut it down to size.

The death knell came, as so often it does, from an unexpected and trivial quarter; on November 3, 1997, second-tier securities firm Sanyo Shoken went under, causing a default on a Y1bn uncollateralized call loan by an obscure credit union, which led the already jittery call market to convulse, cutting off virtually the only source of funds left to pariah Takugin. On Friday, November 14, Takugin was unable to raise its daily requirement of Y40bn by noon, mustering only Y6.1bn. Over the weekend the Ministry of Finance and senior Takugin bankers frantically tried to find a solution, the first proposal being a merger with fourth ranked Sapporo Bank, which had historically had much cozier ties with Takugin than Hokkaido Bank had. Takugin executives pig-headedly spurned all such talk, however, as the then Sapporo Bank head, a former Takugin top brass, had wanted to take the bank toward consumer lending and away from corporate lending when he had been at Takugin, for which heresy he had been summarily excommunicated. There was only one bank left in Hokkaido with whom the ministry could force a merger, the North Pacific Bank, which had just one-fifth of the assets and one-tenth of the capital of Takugin. Frantic preparations were made by all parties and the Bank of Japan to prepare for a run on the bank come Monday.

On the morning of Monday, November 17, at a hastily called press conference, Takugin officials announced that the bank’s operations would, in a face-saving euphemism, be “transferred” to the North Pacific Bank and that it would be disbanded. Takugin thus became the very first “city bank” (one headquartered in a major city) in post-war Japan to go under, and to date it is still the only one. It was only the eighth bank to go under since the end of the war, the first ever having sought refuge in the arms of the authorities only in 1992, the second just two years previously, in 1996. In contrast, five US banks were shut down by the regulators yesterday, as of this September 5, 2009, writing, bringing the year’s tally of US bank closures to 89. Those sentences alone tell you pretty much all you need to know about the difference between the economies and the societies of the US and Japan.

As word of Takugin’s failure spread, newspapers rushed out special editions and the bank’s customers thronged branches in such numbers that the police had to be mobilized. In the three days after the collapse, panicked customers withdrew approximately $5bn in deposits and branches ran out of the forms needed to close accounts. The bank’s final accounting, for FY3/98, was prepared according to US generally accepted accounting principles, and revealed that of the total loan book of Y5.9trn, a staggering Y2.3trn (close to 40%) was non-performing. The bank was insolvent (i.e., in a position of negative net worth, with liabilities exceeding assets) to the tune of Y1.1trn.

It is difficult to understate the impact that the collapse of Hokkaido Takushoku Bank, together with that of Yamaichi Securities, one of the big four brokerage houses and Takugin’s lead underwriter, exactly a week later, had on the national psyche in Japan’s annus horribilis of 1997. The aftermath of the Bubble had been festering on the fringes of finance for a while but the problems appeared to be confined to semi-respectable specialists in mortgage lending known as “jusen” or to second-tier regional banks of little national significance. Although the stock market was in the doldrums and land prices were continuing to sag, it seemed possible to many ordinary people that, while there had indeed been a Bubble, its effects had been localized and the economy was getting back on its feet, if in fits and starts. The failures of Takugin and Yamaichi shattered these illusions. In the immaculately groomed socioeconomic order of post-war Japan, bank failures were simply inconceivable. The cancer of the Bubble had metastasized to the vital organs of business life.

How badly was Hokkaido really affected by the collapse of its largest bank? That’s a difficult question to which to assign a quantitative answer from this distance, temporal and spatial. The response of the media was predictably shallow—a big bank failure must be a calamity. The Washington Post reported from Hokkaido in June 1998:

Japanese legislator Shizuo Sato is well aware that foreign leaders, economists and investors are pleading for Japan to bolster its ailing financial system by closing or merging its sick banks.

But Sato recently received a message just as compelling from a panicked hospital manager: The hospital is in financial trouble because it hasn’t been able to find a lender since the failure in November of Hokkaido Takushoku Bank, the biggest Japanese bank ever to go bust. And the hospital manager is just one of many borrowers who have complained to Sato, a 56-year-old member of the ruling Liberal Democratic Party, as he has traveled across the island of Hokkaido recently.

“Everywhere I go, every meeting, I hear owners of companies, and wives of businessmen, and parents of those who work for companies who were hurt” when Hokkaido Takushoku Bank collapsed, Sato said.

Business Week was near to hysteria in May 1998, in an article titled “The crisis hits home in Hokkaido”:

For a look at how badly the Japanese crisis can affect the lives of ordinary citizens, just head for Sapporo, the capital of Hokkaido, Japan’s northernmost island. The failure of Hokkaido Takushoku Bank, the dominant local bank, has dealt a devastating blow to the island’s already fragile economy. And its citizens now worry that public works projects in their prefecture may soon dry up, as the central government in Tokyo runs out of funds.

The squeeze already is bad. According to Teikoku Databank, a Tokyo-based credit research organization, 974 Hokkaido companies folded in the past fiscal year ending in March, up 25.7% from 1997. “Hokkaido’s current crisis is the severest one in its history,” says Yasuyuki Yanagisawa, manager of Teikoku Data Bank’s Sapporo branch. “And one sees no sign of a rebound.”

A more measured academic response suggests that the impact of Takugin’s disappearance was not that profound; as it was Hokkaido’s most prestigious bank, it had a lot of blue-chip clients that found it relatively straightforward to establish banking relationships with other banks, and the handover to the North Pacific Bank was handled seamlessly.

Taking the macro view, Cabinet Office statistics on prefectural economies indicate that Hokkaido’s real gross product contracted by 2.5% in FY3/98, the fifth worst prefectural performance, but it rebounded to register growth in FY3/99, when 21 prefectures out of Japan’s 47 contracted. Over the longer run, Hokkaido’s real gross product shrank by 2.5% in the decade between FY3/97 and FY3/07, the latest year for which data are available, and was the only prefecture to record a decline, although the disappearance of Takugin can only have played a modest role in this baleful record.

Kabuto Decom subsidiary Apex finally went belly up in March 1998; Hotel Apex Toya, which had been renamed the Windsor Hotel Toya, was left in the hands of the administrators and closed its doors. It was bought in 2000 by security services firm Secom forY6bn, less than a tenth of the total cost of construction, reopening after refurbishment in 2002. It’s a member of a loose consortium of several hundred of the Leading Hotels of the World, where it hobnobs in the company of the Hotel de Crillion in Paris, the Ritz in London, and the Hotel Cipriani in Venice. Without seeing the books, it’s hard to say in anything other than an impressionistic way whether it’s thriving or merely surviving, but the foggy day I was there the car park was packed and the foyer bustling if not abuzz. The hotel is reputed these days to draw heavily for its guests from the well-heeled nouveau riche of the Sinosphere but I heard mostly Japanese being spoken. Rates are roughly Y35,000-Y60,000 ($375-$645) for a room and Y60,000-Y100,000 ($645-$1,075) for a suite. Fancy indulging yourself with a night the 500m2 Grand Presidential Suite in peak season? That’s Y1,386,000 ($14,900) a night, please. Well, it is at least five times the size of a generously proportioned Tokyo apartment; on the other hand, stay there for three months and you could buy that generously proportioned Tokyo apartment outright.

So what is the hotel actually like? The final 50m or so of the driveway to the front entrance is covered, and this is the scene greeting those guests lucky enough to be stepping out of their limousines.

The atrium, which overlooks the spot where many of the G8 press conferences took place, is discreetly inoffensive in its restrained opulence.

Up on the second floor, I stumbled across a restaurant whose name struck me as very out of keeping with the environs.

To my knowledge, the UK was never subjected to the joys of the 1960s schlock TV serial “Gilligan’s Island”, but I’ve spent just enough of my adult life around North Americans to know that there was a desperate brand mismatch occurring here. Take a minute or two here to acquaint yourself with the intro if you’re not a familiar with the series and you’ll begin to understand why.

What on earth were they thinking? What did the US delegation to the G8 summit make of it? Did eternal frat boy George W. Bush have the sign pointed out by aides and break into gusty Texan guffaws? Sadly the annals of history will in all probability remain forever silent on this score.

Did the assembled leaders of the free (and in the case of Russia, not so free) world have any inkling of the tortured birth pangs and struggle for survival in infancy of the resort at which they were lodging, I wondered. My private bet would be that the only ones in the know would have been the Japanese delegation and that this particular full tub’s worth of dirty laundry stayed firmly off the washing line.

That was it, sadly, for me and the Windsor Hotel, although I hope to renew our acquaintance sometime.

Kabuto Decom president Shigeru Sato, who was only 44 when the Bubble burst in 1990, was somehow found not guilty of forgery by the Sapporo High Court in August 1999, and didn’t stick around long thereafter: an unsubstantiated but somehow entirely believable Internet site run (I assume) by a Sato victim alleges that soon after the verdict he fled to Hawaii with a new wife, having ferreted a couple of billion yen to the US over the years, and has been quietly building a property empire on the islands and the West Coast over the last decade.

Like Sato, Kabuto Decom proved to be a survivor; for reasons that are to me utterly unfathomable, the company lingers on as a shell. According to its FY3/08 securities filing, it had sales of Y12mn or so and net liabilities not yet dealt with of around Y422bn (approximately $4.5bn).

The former directors of Takugin were not so lucky. The Resolution and Collection Corporation, which inherited the bank’s liabilities, went after them with a vengeance; the five civil lawsuits brought against them ended up in front of Japan’s Supreme Court, and in January 2008, the court ordered the directors, including former Takugin boss Hiroshi Yamauchi (80), to pay Y5bn in compensation for the Kabuto Decom debacle; in total 13 Takugin executives face Y10.1bn in compensation claims. The criminal cases, in which certain directors face jail terms of up to two and a half years, despite their advanced age, are in the final stages of Supreme Court appeal. We are approaching the 12th anniversary of the demise of Takugin; justice delayed, Japanese style, is justice denied.

The biggest loser, though, was the Japanese taxpayer; combing through the footnotes of the FY3/09 annual report of the Deposit Insurance Corporation, one of the principal organizations charged with the wet-towel wiping up of the deposits of the Bubble, in conjunction with my friendly bank analyst, reveals that the cost to the Japanese state (i.e., taxpayer, eventually) of the demise of Takugin was approximately: Y1,763,100,000,000. The number doesn’t even fit on the screen of my pocket calculator. Let’s try again. Y1.76trn. Let’s now put that into dollars at today’s rate: $19.1bn. A manageable enough amount, then.

Like the anti-globalization Canutes and single-issue obsessives around the planet, the Japanese media have a touchingly naïve belief in the relevance of G8 summits, as if bringing the frightened pilots of the countries that count and a hodgepodge of assorted other luminaries together for a hobnob gabfest jamboree over three days at an estimated cost of Y60bn (over $600mn) is going to do either great good or great damage, and they whip themselves into a particular frenzy whenever the hoopla is held in Japan. The summit’s peroration was a communiqué of excruciating length and banality (“We are determined to continuously take appropriate actions, individually and collectively, to ensure stability and growth in our economies and globally”) and which was almost immediately overtaken by events: “Financial market conditions have improved somewhat in the past few months”…

Ahead of the summit, the usual boosters oozed confidence that the summit’s halo effect would produce untold benefits for the local economy, although it’s hard to conceive what kind of freaks—apart from me, of course—would choose their holiday destination based on past G8 summit venues. Tetsuo Kuboyama, president of the hotel management company Windsor Hotels International and something of a legendary hotelier, spurned the skeptics in a Japan Times interview, portraying the hoopla as “an opportunity for the entire region to gain experience in serving discriminating foreign guests”. The Japan Times in May 2007 reported that “the Hokkaido Economic Federation recently estimated that the G8 summit will generate economic effects worth 37.9 billion yen for the region in the five years following the event”.

Tourism around Lake Toya ground to a halt, however, in the face of a massive security operation in the weeks leading up to the summit, and when the books were closed on FY3/09, Toyako tourist numbers were actually down 10% versus the previous year, hit supposedly by the surge in gasoline prices and a 40% drop-off in foreign tourists due to the financial crisis and the strength of the yen. “We didn’t expect at all (that the figures) would drop below the level of the previous year,” one Toyako official said. “It’s beyond our imagination.”

I swung one last time through the slumbering streets of Toyako Onsen before pulling east then south away from the lake through the coastal city of Date (1980 population, 36,309, estimated 2009 population 37,044, projected 2035 population 28,745) and on to my second and final appointment of the day, the clapped-out steeltown of Muroran.

[with thanks to H.N. on the banks]