End of the Century - Japan Sinks!
End of the Century - Japan Sinks! That was the headline of the July 1st internet edition from Bloomberg, Wall Street's premier economic media group. It wasn't just text either—the article came with a crude illustration of Mount Fuji collapsing in a heap. The key point was that this piece came from the leading economic media outlet on Wall Street. The blunt image of Fuji crumbling explained exactly what had happened: Japan's economy had collapsed in the same spectacular fashion.
"And not just one pillar, but two."
"Two? So foreign exchange and the stock market?" Tiffany caught Yoo Jae-won's smug tone perfectly.
"Spot on." She was right. Japan had seen both major pillars of its national economy—the foreign exchange market and the stock market—collapse simultaneously. While Korea had fallen due to a lack of foreign currency, Japan had essentially self-destructed when long-standing illegal practices, long hidden under the guise of "custom," were suddenly exposed. The unfortunate part was that the destructive force wasn't quite as severe as Korea's had been. National credit had taken a major hit, triggering an outflow of foreign capital. Yet the scale wasn't large enough to bankrupt the country outright. Instead, speculative funds like George Soros's, which had deliberately positioned themselves in advance, amplified the exodus into something that looked far more catastrophic, destabilizing the markets. These players were far more aggressive and persistent than Yoo Jae-won, which ironically allowed him to enjoy a rare relaxed Friday evening with Tiffany at their San Francisco home.
While Yoo Jae-won had been fully committed to the Japan operation, Tiffany had been equally busy. Handling the twenty-third oil well, preparing to establish a new research institute for geological data analysis, and tying up loose ends from the successful Texas geological data project had kept her running nonstop for a month.
"So how much did you pull out of those two collapsed mines?" Tiffany likened the erupting Mount Fuji to a mine. The metaphor stuck with Yoo Jae-won even though he'd never thought of it that way before. Japan had indeed been a massive mine with enormous sums of money buried inside. The problem was that extracting it required flipping the entire country that had been sitting atop the mine and pretending everything was fine. Yoo Jae-won had managed to turn Japan upside down, leaving a deep scar on the economic superpower it had proudly claimed to be.
"Hmm, I wonder. How much was it?" Yet Yoo Jae-won could only give a vague answer to Tiffany's question. It wasn't that he was trying to hide sensitive information from her. They had already signed both an engagement contract and a marriage contract, so there was no need to keep something like this secret.
"Don't tell me..." Tiffany's voice rose at his evasive reply. "Don't tell me you haven't even tallied it up yet? Why not?"
That was Tiffany—always quick to read his style. "Yeah, not yet."
Tiffany nodded at his answer, though her expression showed the matter wasn't fully settled in her mind. Most people would have been glued to a calculator the moment a windfall hit, obsessively counting their profits. Tiffany had spent much of the past month in Texas precisely to finalize the accounting on the twenty-third well. Even Frederick Taylor II's estimate of twelve million barrels in recoverable reserves had been rough and preliminary. Tiffany had also taken Yoo Jae-won's casual suggestion about horizontal drilling seriously and spent time in Texas studying extraction techniques. So while it would have been normal for Yoo Jae-won to sit down and calculate his Japan profits now that the operation was winding down, he hadn't even turned on his computer since yesterday.
"Clinton's the one who took the wind out of my sails."
"Clinton? Our playboy president?" Yoo Jae-won nodded at Tiffany's question.
A few days earlier, the yen had reached 92 to the dollar and the Nikkei had broken below 13,000. That was the peak of Yoo Jae-won's Japan campaign. The yen's value had soared while the Nikkei shattered its previous lows. Though harder to quantify, confidence in Japanese products had also hit rock bottom. The quality manipulation scandal wasn't limited to steel—it extended across food products and home appliances, as subsequent revelations showed. Even Japan's historical distortions were being reexamined because of this incident. Yoo Jae-won's operation against Japan had been a resounding success.
He had been preparing one final blow to completely bring Japan to its knees—buying more yen while selling stocks cheaply in the equity market, even at a loss. Short-selling was naturally part of the plan. Just as he was timing the kill shot, a phone call came through. It was President Clinton.
"Hello?"
Hey, young man! Isn't this enough already?
Clinton had called directly on Yoo Jae-won's Tiffany phone and made it clear he wanted the operation stopped. Stopping meant halting the Japan campaign, of course. The stated reason was simple: Japan's economic collapse wasn't helping American national interests or peace in East Asia. Listening to the explanation, Yoo Jae-won immediately understood—and his irritation flared. The talk of East Asian peace and U.S. interests was just cover. The timing made it obvious that Japan had lobbied Clinton to make this call.
Japan's current prime minister was Keizo Obuchi. Among postwar Japanese leaders, he ranked fairly high; people even called him "the gentleman Obuchi." His mild temperament and distinctive tenacity had helped him navigate multiple crises without making enemies. But the recent economic crisis had driven his approval ratings into the ground. Scandals that erupted in the financial sector revealed political protection, and delayed responses had caused losses to spiral out of control. Public disappointment over the astronomical losses in Japan's public pension fund—and the cover-up that followed, including payment errors of tens or hundreds of yen to recipients—had been devastating. Still, Japan was Japan. Whatever card they had played with Clinton had worked; the president was now calling Yoo Jae-won at their behest.
"Surely you don't think I'm the only one investing in Japan, Mr. President?"
Technically it wasn't investment but an assault, but Yoo Jae-won couldn't say that to Clinton. The word "invest" felt especially awkward in that moment. Still, for the sake of his company and Korea, he could thicken his skin as much as needed.
Of course not! I already called Chairman Soros and your future father-in-law, Chairman Pink of Blackstone. Oh, and Elliott too. You're the last one. And the keystone, at that.
As expected of the American president—he knew everything. He was clearly aware of the major players in the Japan operation. George Soros was obvious, and Blackstone, his father-in-law's firm, was involved as well. While Blackstone was primarily a mutual fund, it also offered high-risk, high-return products, some of which had exposure to Japan. Though overshadowed by Frederick Taylor II, his father-in-law was no ordinary man. The bold and decisive leadership that had built Blackstone into the world's largest mutual fund was on full display.
"I'm the keystone? If I stop, everyone else will too?"
That's right! They all move based on what you do. Or am I wrong?
"Of course you're wrong." It was absurd. Blackstone might follow his lead, but Soros and the other hedge funds each operated according to their own strategies. They shared nothing. They simply moved with their own expertise to maximize profits based on the situation at hand.
Anyway, how about we stop here?
At Clinton's repeated suggestion, Yoo Jae-won fell into deep thought. After considering it carefully, he spoke.
"As you know, the capital we're moving right now is fully leveraged. Every tick the exchange rate or Nikkei moves creates or destroys profits in the hundreds of millions. If we see this through, we could easily double what we've already made. And the bigger the profits, the bigger the tax bill. You still want us to stop?"
ID Investment's tax calculations were complicated. Sometimes the bulk went to Korea, sometimes to the U.S. Large Korean tax payments happened when Yoo Jae-won distributed personal dividends from profits, triggering high income tax. Large U.S. tax payments occurred when the company acquired American firms or paid out employee bonuses. Either way, the more money Yoo Jae-won made, the more tax revenue went to either Korea or the U.S.
I know what a great contribution a friend like you makes to the national interest. I'm always grateful. But understand this: in exchange for this request, we've extracted even greater concessions from Japan. I can guarantee this will be good for you and for Korea as well.
Yoo Jae-won understood immediately. Japan had clearly offered Clinton something tempting enough to make him act. Strangely, though, he didn't get a bad feeling about it. His intuition told him the claim that this would benefit Korea wasn't empty talk.
"Hmm. This really is a once-in-a-lifetime opportunity, though."
He hedged slightly rather than agreeing outright.
Haha, that's weak talk. For a genius like you, opportunities will always be there. And I'll work hard to help you too, since I owe you one. I've done some studying on the bad blood between Korea and Japan because of this.
"Understood." At Clinton's firm assurance, Yoo Jae-won nodded. The man might be facing impeachment hearings over the Lewinsky scandal, but he was still the President of the United States. Besides, the upcoming Korea-U.S. summit and armistice talks with North Korea were right around the corner. What would be decided there couldn't be bought with money. Whatever the U.S. had extracted from Japan wouldn't be ordinary either.
After a few more minutes of small talk, Yoo Jae-won ended the call. He immediately dialed Vincent Greenhill, who was still in Japan.
"Yeah?"
The phone rang but went unanswered. That was unusual. Vincent Greenhill never missed Yoo Jae-won's calls. No matter how late, he always picked up before the third ring. This time it went straight to voicemail.
Ding!
Just then, Yoo Jae-won's ID Talk chimed. It was an executive from Shin-Nihon Investment Bank.
Mr. Chairman! The Ministry of Finance's Securities Supervision Bureau is raiding our office on suspicion of stock manipulation. President Vincent is handling it!
The message was serious. The Securities Supervision Bureau was Japan's equivalent of Korea's Financial Supervisory Service. It had the authority to investigate suspicious trades and, if it found evidence, refer cases directly to prosecutors.
"I was wondering why the Cabinet Intelligence and Research Office had been quiet even after moving. But this timing is too convenient."
President Clinton's call and the arrival of the securities inspection team had aligned perfectly. It gave him the same feeling as North Korea's simultaneous military and diplomatic pressure tactics.
Ring ring.
A few minutes later, Yoo Jae-won's phone rang again. The caller was Vincent Greenhill.
I'm fine. They showed up late and only got to play cleanup. Of course, we haven't done anything illegal, so there's nothing for them to find.
Vincent's voice sounded no different from usual.
Ah, I see. That's a shame. But overeating always leads to indigestion. It's good to stop when you're still a little hungry.
After relaying Clinton's message that they should stop here, Vincent offered his own sage advice.
"Is that so?"
After all, you could end up missing the last train if you waited too long. Hedge fund operations were unpredictable, so leaving early wasn't a bad idea. The only regret was having to stop when the situation was good enough to shout "three in a row."
"What? You really just forgot?"
After hearing the full explanation, Tiffany's mouth fell open.
"I was focused on the work I'd been putting off. The Korea-U.S. summit is coming up, and we have product launches for the touch phone, DAP, and Next Music soon. Besides, checking late won't make the money we've already made disappear."
"That's true, but how can you not be curious? I can't even imagine it!"
"Well, should we check now?"
At Tiffany's words, Yoo Jae-won sat down at his computer, launched ID Talk, and opened the IDW file labeled "Shin-Nihon Investment Bank Q2 Special Returns Report" from his personal document vault. A dazzling array of numbers filled his monitor.