Princes of Yen - Summary and Analysis by Zobia Waseem
Princes of Yen is a documentary, based on the bestselling book of the same name by renowned
economist Richard Werner, on how Japan’s economy had an almost phoenix like revival, as it rose
from the ashes to become one of the world’s top economies. The documentary explores various as-
pects of Japan’s political economy and historical background, starting from the world war and post
war era to the 1997 Asian Contagion crisis to its current status. Having discussed how explanations
from long established schools of thought in economics, such as classical vs neoclassical theories,
fail to provide a plausible justification for Japan’s economic journey throughout the years, this doc-
umentary tries an alternative view and takes a more holistic approach, adding into account the
macro-sociopolitical and historical frameworks through which the economy and the people of Japan
were operating during those particular time periods.
Most of the banks during the war and immediate post war era only possessed war bonds and loans
in their reserves. Bankruptcy was imminent. After the American occupation that supposedly intro-
duced democracy in Japan, the mobilised war time economy, also known as the Japanese economic
miracle, was born and this resulted in an economic bubble. Rapid growth, resulting in higher stan-
dards of living, job creation, even wealth distribution etc was observed. Japanese companies gained
footholds in foreign markets and Japanese products gained popularity in the West. Japanese tech-
niques of productivity and lean quality control such as Kaizen, became popular in the US. Produc-
tion of goods shifted from weapons and military arsenal to consumer goods and services. Japan
ended up being the second largest economic power of the world during the 1960’s, lagging behind
the US only. However, this era of prosperity only lasted from the post war era to up till the end of
the Cold War. This period of opulence is thus known as the ‘Baburu Keiki’ or the age of Bubble.
During the Baburu Keiki era, former central bank governors, who were actually part of an elite class
of bureaucrats called Zaibatsu, started to present various proposals to bring about a total transforma-
tion of the Japanese economic system. The goal was to raise living standards and promote fairness
of income but this was just a guise under which the real target was to abolish the war time welfare
economy and enforce a free market economic model, similar to that in the US. The Ministry of Fi-
nance began to formulate a scheme that propagated ease of lending and the enforcement of this was
done through the Bank of Japan. This lead to a credit boom and loans were offered even when there
was no demand for them. As the creation of money increased significantly, some capital began to
seep outside through investment in foreign domains. Capital outflow was on the high as hard and
cold cash was sent outside under the veil of increasing trade surplus value. Moreover, loans which
are not used for the production of goods and services, called non-GDP loans, outnumbered GDP
loans and this was, in hindsight, a warning sign about the incoming banking crisis that was hovering
over Japan.
Enter the inevitable crash, aptly named the ‘Ushinawareta Jūnen’ aka the Lost Decade. As the bub-
ble burst, stock prices dropped on an all time low almost overnight. People lost their jobs, major
companies went bankrupt, alongside rates of suicide and crime increasing significantly. Tensions
between the Ministry of Finance and the Bank of Japan heightened as the Ministry of Finance called
for immediate economic recovery through short term policies, such as quantitate tightening on
loans. However, the Bank of Japan prioritised long term structural reform over fixing current defla-
tion and recession. Thus, the Bank of Japan did not engage in schemes proposed by the Ministry of
Finance that would reduce debt in the banking sector, such as buying assets at face value, creating
mini bubbles in one industrial corner of the market to boost reserves into other banks, request tax-
payers to take the brunt, increasing circulation of money etc. The philosophy behind this was that
there can be no true economic recovery without absolute change on a macrostructural level, so there
must be short term pain for long term gain.
Princes of Yen is a documentary, based on the bestselling book of the same name by renowned
economist Richard Werner, on how Japan’s economy had an almost phoenix like revival, as it rose
from the ashes to become one of the world’s top economies. The documentary explores various as-
pects of Japan’s political economy and historical background, starting from the world war and post
war era to the 1997 Asian Contagion crisis to its current status. Having discussed how explanations
from long established schools of thought in economics, such as classical vs neoclassical theories,
fail to provide a plausible justification for Japan’s economic journey throughout the years, this doc-
umentary tries an alternative view and takes a more holistic approach, adding into account the
macro-sociopolitical and historical frameworks through which the economy and the people of Japan
were operating during those particular time periods.
Most of the banks during the war and immediate post war era only possessed war bonds and loans
in their reserves. Bankruptcy was imminent. After the American occupation that supposedly intro-
duced democracy in Japan, the mobilised war time economy, also known as the Japanese economic
miracle, was born and this resulted in an economic bubble. Rapid growth, resulting in higher stan-
dards of living, job creation, even wealth distribution etc was observed. Japanese companies gained
footholds in foreign markets and Japanese products gained popularity in the West. Japanese tech-
niques of productivity and lean quality control such as Kaizen, became popular in the US. Produc-
tion of goods shifted from weapons and military arsenal to consumer goods and services. Japan
ended up being the second largest economic power of the world during the 1960’s, lagging behind
the US only. However, this era of prosperity only lasted from the post war era to up till the end of
the Cold War. This period of opulence is thus known as the ‘Baburu Keiki’ or the age of Bubble.
During the Baburu Keiki era, former central bank governors, who were actually part of an elite class
of bureaucrats called Zaibatsu, started to present various proposals to bring about a total transforma-
tion of the Japanese economic system. The goal was to raise living standards and promote fairness
of income but this was just a guise under which the real target was to abolish the war time welfare
economy and enforce a free market economic model, similar to that in the US. The Ministry of Fi-
nance began to formulate a scheme that propagated ease of lending and the enforcement of this was
done through the Bank of Japan. This lead to a credit boom and loans were offered even when there
was no demand for them. As the creation of money increased significantly, some capital began to
seep outside through investment in foreign domains. Capital outflow was on the high as hard and
cold cash was sent outside under the veil of increasing trade surplus value. Moreover, loans which
are not used for the production of goods and services, called non-GDP loans, outnumbered GDP
loans and this was, in hindsight, a warning sign about the incoming banking crisis that was hovering
over Japan.
Enter the inevitable crash, aptly named the ‘Ushinawareta Jūnen’ aka the Lost Decade. As the bub-
ble burst, stock prices dropped on an all time low almost overnight. People lost their jobs, major
companies went bankrupt, alongside rates of suicide and crime increasing significantly. Tensions
between the Ministry of Finance and the Bank of Japan heightened as the Ministry of Finance called
for immediate economic recovery through short term policies, such as quantitate tightening on
loans. However, the Bank of Japan prioritised long term structural reform over fixing current defla-
tion and recession. Thus, the Bank of Japan did not engage in schemes proposed by the Ministry of
Finance that would reduce debt in the banking sector, such as buying assets at face value, creating
mini bubbles in one industrial corner of the market to boost reserves into other banks, request tax-
payers to take the brunt, increasing circulation of money etc. The philosophy behind this was that
there can be no true economic recovery without absolute change on a macrostructural level, so there
must be short term pain for long term gain.
