Satsuki stood quietly at the front of the strategy room, facing the massive whiteboard.
She held a black marker, wrist slightly raised. The tip rasped against the surface with a faint rustling sound.
She finished writing and turned, her eyes sweeping the executives seated along both sides of the long table.
Winning over this room of battle-hardened elites required more than raw authority.
She'd always believed that ruling by power alone was unhealthy and unsustainable. Even though her prestige was strong enough to force this plan through, she preferred to bring everyone to the same page willingly.
So she needed a rigorous economic sandbox simulation — something solid enough to overturn their entrenched financial instincts.
"Managing Director Endo."
Satsuki's voice was clear. Her gaze locked on the chief financial officer at the head of the right side.
"Suppose the Ministry of Finance gets its wish and manages to give this runaway economic train a smooth landing. According to traditional macroeconomic theory, what would the Ministry of Finance and the Bank of Japan do next when asset prices collapse after the bubble bursts?"
Endo's brow furrowed. He thought for a moment.
"Miss Satsuki."
"Even if the bubble bursts completely and asset prices crash, the government won't just stand by and watch the economy grind to a halt."
He adjusted the gold-rimmed glasses on his nose, his speech picking up speed.
"The Bank of Japan will almost certainly cut the Official Discount Rate — the benchmark interest rate. In extreme cases, they might even push rates down to zero."
"Once the cost of capital becomes cheap enough, market liquidity will surge again. Real businesses can use near-zero-interest loans to restart investment and expansion. Consumer confidence would gradually recover under loose monetary policy."
He laid both hands flat on the table and met Satsuki's eyes.
"Objectively speaking, the economy would suffer for two to three years at most before returning to a recovery track. So I believe there's no need to risk destabilizing the nation's financial lifeblood just to artificially trigger a destructive Hard Landing."
The other executives around the table nodded, clearly agreeing with Endo.
Satsuki listened in silence. She didn't refute Endo's classic Keynesian argument directly. Instead, she turned back to the whiteboard and raised her wrist again.
The black marker wrote a new line across the center:
"Managing Director Endo, your deduction is rigorous," Satsuki said, setting the marker down and facing them again. "But all your conclusions rest on one classic microeconomic assumption — that a company's core motive is always 'Profit Maximization'."
"In a normal economic cycle, that theory does hold up."
"When interest rates fall, companies borrow to chase higher profits."
"But will reality really follow the textbook?"
She took half a step forward.
"Now, let's run an extreme sandbox simulation."
"Imagine a real estate company that leveraged 10 billion yen in land assets during the bubble to secure a 7 billion yen mortgage from a bank. Its net assets are 3 billion yen. When the 'land myth' collapses and valuations plunge 70%…"
"At that point, the asset side evaporates to just 3 billion yen in land. But the principal and interest owed to the bank on the liability side don't drop by a single yen."
Satsuki's gaze bored into Endo's.
"In that extreme state, what would the balance sheets of every Japanese company look like?"
Endo's breath caught. He ran the numbers in his head.
Assets down 70%, debt unchanged.
"Assets shrink drastically, debt stays fixed… Every firm would fall into complete Insolvency."
His voice dropped.
"By the financial system's strict definition, that's Technical Bankruptcy."
He pulled his hands from the table and folded them.
"If the entire industry hits Technical Bankruptcy, survival replaces growth. The core motive of every firm will shift. They'll abandon 'Profit Maximization'."
He met Satsuki's eyes.
"Every manager's first instinct will become 'Debt Minimization'." This deduction is based on the "Balance Sheet Recession" theory formally proposed by economist Richard Koo; readers who're curious can look it up.
Satsuki nodded. "Exactly."
"Even if the Bank of Japan cuts rates to zero — even if capital is basically free — these insolvent companies won't borrow a single yen for expansion."
"The only thing they'll do is take every scrap of cash flow from operations and pour it into bank repayments, desperately trying to patch their tattered balance sheets."
She tapped the whiteboard lightly with the marker cap.
"For an individual firm, repaying debt is 'Perfect Rationality' — pure self-preservation."
"But when tens of millions of firms across the country stop borrowing and simultaneously channel all profits into debt repayment, total demand in the macroeconomy collapses instantly."
"This is what economics calls the 'Fallacy of Composition'."
She looked around the table.
"The moment companies collectively refuse outside loans, the Bank of Japan's monetary policy fails completely. Traditional Keynesian tools become scrap metal. The entire Japanese economy drops straight into a bottomless 'Liquidity Trap'."
The air in the strategy room seemed to thin.
"Satsuki."
Saionji Shuichi, seated at the head of the left side, cut in.
"I'm not versed in economic theory, so I won't judge your deduction. But those bureaucrats in Kasumigaseki will never allow large-scale bankruptcies and liquidations to actually happen."
His brow furrowed.
"The Ministry of Finance bureaucrats, the LDP politicians, plus the construction industry that lives off government budgets… those three have been bound together for decades. They're an unbreakable Iron Triangle of interests."
"Mass corporate bankruptcies would tear apart Japan's lifetime employment contract. A wave of unemployment would shake the ruling party's foundation."
"Just to maintain surface-level social stability and their voter base, the Ministry of Finance would never dare to do a hard reset on rotten companies. The political cost is too high."
Satsuki nodded. "Father is right. Constrained by social stability and voter pressure, the Ministry of Finance will never liquidate all the debt-ridden giants."
"Then think about this, everyone. If the Ministry of Finance won't let these bad-debt-laden giants fail, how exactly will the bureaucrats handle the holes in the books?"
Eguchi Tokuhiro, seated beside Shuichi, leaned forward.
"If that's the case…"
His breathing grew heavier. After years of dealing with the Ministry of Construction and its bureaucrats, he knew their unwritten rules.
"The Ministry of Finance will likely fall back on Japan's old 'Convoy System'. They'll use administrative guidance to force healthy city banks to absorb small banks on the brink of collapse."
Eguchi's rough finger traced a heavy line across the table.
"To make those mergers work, the bureaucrats will loosen the standards for classifying bad debt, letting banks use accounting tricks to bury astronomical losses off the books…"
Endo, still in his leather chair, picked up the thread.
"Then, to cover up non-performing assets, banks will be forced to keep extending bridge loans to real estate developers and construction firms that went insolvent long ago — keeping them alive by rolling new debt into old."
He stared at the whiteboard, his tone steady.
"They're trying to buy time, hoping land prices will magically rebound. But that rebound will never come."
Satsuki listened quietly to both men. She lifted the marker and drew a black arrow on the right side of the board, showing the flow of funds.
At the end of the arrow was a dead loop.
"Exactly."
"To preserve political optics and social stability, the Ministry of Finance forces banks to keep transfusing blood into companies the market should have killed off."
"These firms on life support can't produce or innovate. Their only function is to burn precious credit just to pay interest on old debt."
"This group of companies drains the nation's blood without creating any value. They'll run rampant across Japan's economic landscape. Economics has a name for them—"
The marker squeaked as she wrote four words on the board:
[Zombie Companies].