My childhood and Japanese economic boom in the late 1980s
Raised in a small town in Hokkaido, the northern island of Japan, I have lovely childhood memories of playing in nature, enjoying music, singing, and creating crafts, although my family was not doing well financially. Because my father frequently changed jobs and was often unemployed, our family was almost constantly facing financial challenges with four small children. However, thanks to my mother’s talent of enjoying life even during a hardship, my siblings and I were able to have an overall happy childhood.
I remember that the late 1980s was the only period in which my family enjoyed some affluence. My father finally got a stable job at a large real estate company based in Hokkaido, so my family could afford to travel to mainland Japan to see our extended family, buy nice toys, and dine in fine local restaurants. Our family even bought a new house. It was in a short while, however, that I learned Japan had been experiencing an unprecedented asset price bubble, in which stock and asset prices were over-inflated and the economy was overheating.
My family’s hardship as Japan experienced the burst of Bubble Economy and financial crisis
My family’s good time did not last long, because the country’s asset price bubble and economic boom, the so-called “Bubble Economy”, collapsed in late 1991. My father left his job and founded his own real estate company in 1992 with the hope that housing prices would recover soon, never imagining that severe recession and financial crisis were ahead.
After the burst of the Bubble Economy, Japan suffered from deep economic recession and financial crisis. The prolonged period of economic stagnation during the 1990s is called the Lost Decade, in which the country experienced the shrinking of economic activities, the falling of real wages, and large scale unemployment particularly among the youth, resulting from the failure in economic policies and the malfunctioning financial system among other factors.
The collapse of Bubble Economy adversely affected my family; in fact, my parents went through divorce, financial distress, and bankruptcy. My father’s company did not go well at all, as the business model was based on continuously growing asset prices had already gone when he launched his new business. Soon, my family started to accumulate a significant amount of debt from my father’s business loan. The mortgage payment from our housing loan also squeezed our household, because my parents bought the house when interest rates were quite high. The Bank of Japan had raised policy rates deliberately to cease the overheating economy, which resulted in higher interest rates including mortgage rates. The financial suffering devastated my parents’ already worsened relationship, and they divorced. After the Hokkaido Takushoku Bank, the largest bank in Hokkaido, went bankrupt in 1997, a severe economic recession came to Hokkaido, which further hit local businesses. My father’s company finally went bankrupt.
My response to Japan’s financial crisis
Back then, I was a young college student, and I was infuriated. I had already left my hometown to study natural science at a university in mainland Japan to pursue my dream to become a scientist. It seemed to me that social and economic injustice dominated the Japanese society in the late 1990s. What was wrong with the country’s economy, while Japan was the second biggest economy in the world? What is economy at all? Why had “elite” institutions such as Ministry of Finance and Bank of Japan apparently failed to manage the crisis? Why was every economic and financial “expert” contradicting each other when they were debating about what the country’s economic policies should be? As a science major, I couldn’t find right answers to those questions.
As a vigorous youth, I came up with an idea: Helping the country fix its economy and financial system by studying economics and working at the Ministry of Finance, which was in charge of major macroeconomic policies – fiscal policy and the financial system. I wanted to participate in making economic policy decisions to bring better lives and jobs to people like my parents who were struggling to make ends meet in the middle of the recession.
Everyone around me – including my close friends and teachers – said that I’d have no chance to pass the exam and enter the Ministry of Finance, because the ministry was known to accept only elite students with law majors. In addition, I had no background of economics and law, which were the indispensable subjects that promising candidates should be familiar with. But I wanted to challenge and take a risk, no matter how reckless it might seem. So when I graduated from college without a job and started studying for the exam.
To get a job offer from the Ministry of Finance, I had to pass a very tough and competitive exam and a series of interviews. After failing in my first attempt, I was admitted to the Graduate School of Economics at Hitotsubashi University to further study economics. At the same time, I took a part time job at a publishing company to earn money to live in Tokyo and to continue my studies. It was one of the toughest periods I had in my life. I remember that I had only one sweater – a red sweater – during that whole winter because I couldn’t afford to buy extra clothes. The memories of hardship during those days still inspires me.
During that time, I had plenty of time to read and study, and found economics very enlightening; indeed, knowledge in basic economics could really help socially and economically vulnerable people, particularly those with financial hardship. For example, economic theory on business cycles tells us that economic boom (or asset price bubbles) and burst cycles repeat, and that if the scale of an economic boom is huge, following economic stagnation is quite severe once markets crash. When my father founded his own real estate company, Japan’s Bubble Economy had already started to collapse. However, he – like many other Japanese people back then – wrongly expected that asset prices would go up again and that the economy would recover soon, without basic knowledge of economics. Here is another example why economics could help people: when the central bank keeps interest rates high and the economic outlook is gloomy, you have to be very careful about borrowing a significant amount of money including applying for a housing loan. It’s very risky to get a mortgage loan with a wishful thinking that the economy will get better soon. When my family bought a house by receiving a housing loan, interest rates were very high because the Bank of Japan, the Japanese central bank, had made controversial decisions to keep the policy rates high despite the fact that the country was heading to the aftermath of the collapse of the Bubble Economy.
Professional career as a Japanese policymaker and as an IMF advisor/economist in the 2000s and 2010s
I successfully passed the exam in my second attempt and got a job offer from the Ministry of Finance in 2000. In the next year, I started my career at the International Financial Bureau at the ministry. One of the important missions for me and my team was to build a stronger and more resilient economic and financial system following the 1997 Asian Crisis, which had hit hard a number of countries in East Asia and Southeast Asia. Those Asian countries had enjoyed fast economic growth in the early 1990s, while their economic and financial system was still vulnerable to sudden shocks, which resulted in a large scale financial crisis in 1997. I was also engaged in building a strong financial system and macroeconomy of Japan. As a young policy maker, I worked hard towards the implementation of right economic policies through discussion with my colleagues and various stakeholders.
While working for Ministry of Finance, I earned a scholarship to study economics at a graduate program of Georgetown University in the USA, which helped me to be further equipped with the latest economic theory.
I also got an opportunity to work at the International Monetary Fund (IMF) as an economist, as well as an advisor to IMF Executive Director. Shortly after I started my career at IMF, the world economy was beginning to suffer from the economic stagnation and financial crisis triggered by Lehman Shock in 2008. As a member of the IMF Executive Board, I helped countries recover from recession and worked on building more resilient financial systems. As an IMF economist, I traveled to many countries to help them carry out more effective economic and financial policies.
What I learned from my professional experiences
Working on economic policy gave me profound insight on economic theory and practices. Through my work as an economist and a policy maker, I learned a lot about how to implement right economic policies and how hard it is to carry out right policies. I also learned that a failure in economic policy could bring huge negative impacts on people’s well-being and lives and even on the next generation. Indeed, I saw many countries without right policy approaches suffering from economic stagnation resulting in high unemployment, indebtedness, low productivity, etc. Furthermore, the next generation – our children – may have to pay the cost of policy failure, if their country expands its government spending carelessly by borrowing money and accumulating public debt.
Marriage and childbirth
I met my husband, who is an Egyptian American and we married in 2012. I delivered my son in January 2014, but never imagined that giving birth to my child would drastically change my life.
In the next article (My Life Story - Part 2), I will talk about the challenges I faced as a parent and how I made a breakthrough.