investor in the world to assume there's a Japanese pullout underway.
But why the grandstand play? Sure, he'd made a pile, but he didn't seem like a guy who had to sweat his mortgage payments. Nor did this kind of market manipulation require a building in midtown Manhattan and a computer setup to rival NORAD headquarters. Something more had to be coming. And the only thing I could think of was that Noda's something had a lot to do with my profession.
This was not a welcome piece of prognostication to loose upon the world. Since the financial markets already had plenty of problems on their plate, there wasn't all that much interest in speculating about the next course. Consequently nobody made the slightest attempt to man the ramparts for what was ahead. Our financial battleship had been stopped dead in the water and its engines disabled, but nobody was even bothering to prime the guns. This couldn't be an all-out attack. Right?
Wrong. The stage was now set for Noda's real move. The following Saturday I was summoned to Dai Nippon's midtown fortress where I watched my crazy theory become reality. Before anybody in our shell-shocked financial centers had time to digest what had happened, Matsuo Noda—his Dai Nippon Eight-Hundred-Year funds underwritten through a syndicate of Japanese banks and insurance companies led by the Dai-Ichi Credit Corporation, Ltd. of Tokyo—hit the beach.
In the days to come I did manage to assemble a rough outline of how Noda pulled off his brilliant opening feint. It was elegant, and to savor it fully requires a quick peek at his reserves—Japan's bankbook.
Start with personal savings, the hundreds of billions being squirreled away by individual Japanese. Then add to those monies the assets of Japanese pension funds, private savings organizations with several hundred billion dollars to lend out. Next come insurance companies and corporations, similarly awash in loose cash. Taken together, the total amount of excess capital in Japan is now well over five trillion dollars.
If all those zeros befuddle you as much as they do me, try thinking of it like this: a trillion dollars is the size of the annual U.S. budget. So if the Japanese regulators opened the floodgates and let all that money roll, its citizens have the ready bucks to finance our government's entire budget—Lockheed, stockpiles, and pork barrel—for at least five years using just what's in their mattresses.
As it happens, all this Japanese cash has become an important, nay, indispensable, component of the American financial scene. We and the Japanese are like an old married couple: they're the wife who scrimps and saves, we're the husband who borrows and squanders. The middlemen who rifle her purse and ship the proceeds to us are, increasingly, Japanese investment firms.
At least half a dozen major Japanese securities dealers with offices in New York run big bond departments. The foremost of these is, of course, Nomura Securities International, the world's largest brokerage house (having aced out Merrill Lynch). With over two hundred billion dollars in customer accounts, Nomura is now a primary dealer in U.S. Treasury issues, meaning they can buy directly from the government and sell to their clients. And since Treasuries pay several interest points better in return than Japan's miserly savings accounts, their customers back home think they're getting a terrific deal. Little wonder Japanese investors finance a full third of America's budget overdrafts these days.
Another major player is Daiwa Securities America, which also underwrites federal paper on its own. Nor should we overlook Nikko Securities and Yamaichi Securities, both handling money in the tens of billions. These outfits and others are well past the beachhead stage of entry into the world capital markets. They're entrenched; they're big; and they know how to play hardball. Were they involved in Noda's assault? Nobody ever knew for sure. But you figure it out.