"Inside of the Japanese head, these brains like our brains can do good things or bad things all depending on the kind of ideas that are put inside."
— US Occupation Film Narrator (On re-educating post-war Japan) [00:03](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=205s)
"If it were not for window guidance, we would compete until harakiri."
— Japanese Banker (On the necessity of the Central Bank’s illegal credit controls) []()
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"It is the crisis that convinces citizens and interest groups of the need for change... well you need a crisis. The best way to create it is to have a bubble."
— Richard Werner (Explaining the logic behind the Bank of Japan’s actions) [00:23](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=1382s)
"During the bubble we wanted a certain amount of loan increases but the bank of Japan wanted us to use more."
— City Banker (Revealing the forced nature of the credit expansion) [00:23](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=1418s)
"We could have created a recovery but then nothing would have changed. Japan's economic structure would not have changed."
— Bank of Japan Official to Richard Werner (Admitting the recession was prolonged on purpose) [00:50](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=3052s)
"To create a public consensus for the need for structural reform by purposefully creating a recession and then needlessly prolonging it must constitute an abuse of power."
— Narrator (Closing argument on the ethics of Central Banking) [01:30](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=5423s)
2. Executive Summary
This documentary challenges the mainstream narrative of Japan's "Lost Decade" and the Asian Financial Crisis, arguing that these economic disasters were not accidents of market failure, but engineered events. The central thesis is that the Bank of Japan (BOJ) systematically used "Window Guidance" (secret credit quotas) to first create a massive asset bubble and then deliberately crashed the economy to induce a long recession. The ultimate goal was to break the political power of the Ministry of Finance (MOF) and force the restructuring of Japan’s economy from a "war economy" model to a US-style deregulated, shareholder-capitalist system.
"Window Guidance" Controls Economies: Interest rates are secondary. The primary driver of an economy is the quantity of credit created by banks. The BOJ controlled this directly through secret quotas known as "Window Guidance."
Crises Can Be Manufactured: The documentary argues that the Japanese asset bubble (1986–1989) was not a market mania but a forced expansion mandated by the BOJ to set the stage for a systemic crash.
Recession as a Tool for Reform: A crisis is often the only political tool strong enough to break entrenched vested interests (like the Ministry of Finance). The "Lost Decade" was prolonged deliberately to force Japan to deregulate.
The "War Economy" System: Post-war Japan operated as a "war economy" during peacetime—total mobilization of resources, cartels, and no competition for profit, but for market share. This system was the target of the destruction.
The Princes of the Yen: A specific clique of Central Bankers (Mieno, Fukui) orchestrated these events to gain independence for the BOJ and align Japan with Western financial systems.
Central Bank Independence is Dangerous: The film argues that "independence" removes accountability, allowing unelected officials to pursue political agendas (like structural reform) that damage the population without consequence.
The film begins with the US occupation of Japan. Rather than dismantling the wartime bureaucracy, the US utilized it to rebuild Japan as a bulwark against communism. The Ministry of Finance (MOF) appeared to be in charge, but the Bank of Japan (BOJ) held the real lever of power: the ability to create money. The system was a "total war" economy applied to peace; competition was for market share, not profit, and bankruptcy was rare due to government support. This system created rapid growth and high equality but was antithetical to US-style free-market capitalism.
Synthesis: The roots of the 1990s conflict lay in the 1940s decision to keep wartime bureaucrats in power.
The documentary exposes "Window Guidance," a mechanism where the BOJ dictated exactly how much every bank could lend and to which sectors. This was illegal and unofficial but strictly obeyed.
Mechanism:BOJ officials met with bank heads quarterly to set loan quotas.
Impact: This allowed the BOJ to micromanage the economy, bypassing the government’s fiscal policy. While the MOF controlled the budget, the BOJ controlled the volume of money in circulation.
The Goal: In the 80s, pressure mounted (internally and from the US) to open Japan’s markets. The BOJ decided the "War Economy" system had to go, but the MOF refused to dismantle it voluntarily.
To destroy the old system, the "Princes of the Yen" (the BOJ elite) needed a crisis.
The Action: In the late 80s, despite a strong economy, the BOJ aggressively increased Window Guidance loan quotas.
The Result: Banks were forced to lend more than there was demand for. They turned to speculators, real estate, and the stock market ("Zaitech (or Financial Engineering)").
Evidence: Quotes from bankers confirm they were "harassed" to lend more by the BOJ. This flooded the market with new money, driving asset prices to insanity (e.g., the Imperial Palace grounds being worth more than California).
Governor Mieno, previously in charge of the bubble's creation, became Governor in 1989 and immediately pricked it.
The Crash:Mieno raised interest rates and froze lending. Asset prices collapsed (down 80%).
The Trap: The BOJ then refused to lower rates or inject liquidity effectively for years. They argued "structural reform" was needed before growth could return.
The Truth:Richard Werner reveals the BOJ knew exactly how to fix it (buy bad debts, print money) but chose not to. They held the economy hostage to force the government to deregulate, privatize, and break the MOF’s power.
The strategy worked. The MOF was blamed for the bubble and corruption, leading to it being stripped of power. The BOJ was granted legal independence in 1998.
Asian Crisis Parallels: The film pivots to the 1997 Asian Financial Crisis. It argues the same playbook was used. Asian "Tiger" economies were pressured to liberalize capital flows ("hot money"). When the money fled, the IMF stepped in.
IMF Strategy: The IMF forced high interest rates and austerity (which worsened the crisis) and demanded the sale of distressed assets to foreign investors. This effectively transferred Asian assets to Western capital.
The documentary concludes by applying this lens to Europe. The ECB is shown to have fueled property bubbles in Ireland and Spain through reckless credit expansion, only to enforce austerity later.
The Verdict: Central Banks like the BOJ and ECB act as supranational political entities. They use their monopoly on money creation to bypass democracy, engineering social and political changes (like EU federalization or Japanese deregulation) that voters would never approve at the ballot box.
MacArthur’s Arrival [00:02](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=166s): The story of Douglas MacArthur rehearsing his exit from the plane multiple times to get the perfect "conqueror" photo op, symbolizing the orchestrated nature of the occupation and subsequent Japanese democracy.
The Imperial Palace vs. California [00:24](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=1485s): A vivid illustration of the bubble's absurdity. The land beneath the Emperor's palace in Tokyo was valued higher than all the real estate in the state of California combined.
The Street Peddler Bankers [00:31](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=1892s): During the bubble, banks were so desperate to meet BOJ lending quotas that they acted like "street peddlers," begging people to take loans. Bankers would show up at companies and virtually force money upon them, even if the company had no use for it.
The "Clean" Hedge Fund Bailout [01:20](https://www.youtube.com/watch?v=p5Ac7ap_MAY&t=4827s): The film contrasts the harsh treatment of Asian banks (forced to close) with the US Fed's treatment of Long-Term Capital Management (LTCM). When LTCM failed, the Fed organized a "cartel-like bailout" in New York to save it, highlighting the hypocrisy of "free market" advice given to Asia.
Institution:Ministry of Finance (MOF) - The powerful bureaucratic body that ran Japan's post-war economy until being dismantled by the BOJ's manufactured crisis.
9. Speakers & Credentials
Prof. Richard Werner: Narrative anchor and subject matter expert. Former researcher at the Bank of Japan, Chief Economist at Jardine Fleming Securities (Tokyo), and Professor at the University of Southampton.
Narrator: Provides the historical context and connective tissue between interviews.
Archive Footage: Includes comments from Paul Volcker, Jean-Claude Trichet (ECB President), and Japanese politicians.
10. Actionable Next Steps
Monitor "Credit Creation" vs. Interest Rates: Stop looking at interest rates as the primary indicator of economic direction. Look at the quantity of credit being created by banks (bank lending data).
Scrutinize Central Bank Independence: Question the narrative that Central Banks should be unaccountable to democratic bodies. Research local movements or legislation regarding Central Bank audits.
Analyze "Structural Reform" Rhetoric: When politicians or bankers call for "painful structural reforms" during a crisis, investigate who benefits from the deregulation and who buys the distressed assets.
Diversify Away from Bubble Assets: Recognize that asset bubbles (real estate, stocks) are often monetary phenomena engineered by credit expansion. In periods of high credit growth, be wary of "fundamental" justifications for high prices.
Read "Princes of the Yen": For a deeper technical understanding of how "Window Guidance" specifically functioned and how it applies to modern Quantitative Easing.
Jul 16, 2026
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Land Rise
245%
Rise in Japanese land prices between 1985 and 1989.