Princes of the Yen: How Japan's Central Bankers Engineered their Country's Boom and Bust
Can central banks create booms and busts by manipulating the money supply? Do they do this in order to create a public consensus for economic, political and social change?
Professor Richard Werner, a monetary and development economist at the University of Southampton, says they can and they are. This is what the Bank of Japan did in the 1980s and '90s, and it's what the European Central Bank is doing at this very moment.
Werner spent much of the '90s and early 2000s in Japan, where he was a visiting researcher at the Bank of Japan and the Ministry of Finance, in addition to lecturing at Sophia University in Tokyo. In 2001, he published Princes of the Yen: Japan’s Central Bankers and the Transformation of the Economy, which quite unexpectedly jumped to the number 1 bestseller spot, outselling even Harry Potter. The book caused a significant stir as whistleblowers came forward and corroborated the evidence.
The documentary “Princes of the Yen” begins at the end of the Second World War. Japan was a country in ruins, many of its major cities having been literally razed to the ground. Yet in a mere two decades Japan recovered to become one of the world’s major economies. How was this possible?
At the heart of this transformation lay a little known mechanism called window guidance. It was in effect a mechanism carried forward from the wartime economic system, whereby the Japanese central bank would dictate the number and value of loans that banks issued, and which industrial sectors these loans should be allocated to.
During the war, this mechanism was used to support the Japanese war effort. After the war, it was used to rebuild Japan. The problem was that the system was too efficient, and Japanese firms began to gobble up western industries.