Japan's Bankers Are Pulling In Their Necks

They're not much bigger than shoe boxes, but the tiny studio apartments Shoji Kanazawa once peddled were the biggest thing going in Japan's overheated real estate market of the 1980s. Kanazawa's company, Maruko Inc., moved 31,000 of them, and the more it sold, the more its bankers wanted to lend. Mitsubishi Trust & Banking Corp., Kanazawa's lead bank, funneled $418 million into Maruko. Others kicked in $1.8 billion more, allowing Kanazawa to branch out into Tokyo office towers, Hawaiian property, and even fine art.

Then, in 1989, Bank of Japan Governor Yasushi Mieno clamped down on easy money to curb inflationary speculation in real estate and stocks. As interest rates soared from 4.9% to 8.9%, condo sales and Kanazawa's fortunes nose-dived. Kanazawa pleaded with his lenders for more cash, but none would accede. By last summer, Maruko was bankrupt. Says Masayuki Sagawa, a Mitsubishi senior manager: "The situation was much worse than we expected."