Photo/IllutrationReporters gather in front of Lehman Brothers’ Japanese subsidiary in Tokyo’s Roppongi district on Sept. 16, 2008, following its collapse. (Asahi Shimbun file photo)

  • Photo/Illustraion
  • Photo/Illustraion
  • Photo/Illustraion

A financial adviser at a leading Japanese brokerage recalls the device he carried that sounded an alarm whenever stock prices declined. In those days, in September 2008, the alarm was constantly going off.

The global financial crisis from the collapse of U.S. investment bank Lehman Brothers was in full swing, and he could do nothing but watch his customers--and himself--lose money.

But after years of groveling to win back his clients’ trust, the adviser now has high hopes.

“Economic recovery and investment in growth sectors have been leading the market,” he said. “Japanese companies’ improved ability to make profits will result in a prolonged period of high stock prices.”

But not everyone agrees.

The financial sector has indeed made drastic structural changes since the so-called Lehman Shock. However, the same cannot be said for manufacturing and other traditional businesses that received generous government support to survive the crisis.

Although the Nikkei 225 index has reached one of the highest levels since the end of the late-1980s asset-inflated economy, some experts maintain a cautious stance toward concluding that Japanese corporations have really regained the “ability to make profits” by themselves.


The financial adviser for personal investors was working at his brokerage’s branch in Tokyo when stock prices started to plummet 10 years ago.

“Following the collapse of Lehman Brothers, companies’ business results were at the worst levels, and I could do nothing,” he said. “The value of my clients’ assets kept dropping.”

At the time, he provided advice for customers who borrowed funds from stockbrokers and bought a large amount of shares on credit to generate huge profits.

With stock prices rapidly sliding, some of his clients struggled to raise money for the deposits paid to securities companies for margin trading.

The crisis, in fact, forced them to pay extra deposits.

The adviser phoned his customers for additional deposits. Some of them could not be reached, so he waited for them at their workplaces and homes.

One elderly customer suffered enormous losses after putting his retirement allowance into an investment trust.

The brokerage employee worked under a one-year financial adviser contract, and his wages were determined by his business results. The financial crisis caused his salary to drop dramatically, and he was forced to leave his apartment.

He spent the next five years engaged in the tough task of “rebuilding trust with customers.”

He also made investment proposals and again succeeded in persuading more people to invest in risky but rewarding shares.

After Prime Minister Shinzo Abe’s second administration was inaugurated in late 2012, stressing the importance of its “Abenomics” stimulus program, Bank of Japan Governor Haruhiko Kuroda began implementing drastic monetary easing in April 2013.

Shares rose in value. The adviser’s salary level recovered, and he could afford to buy a new apartment.


The 2008 financial crisis started in the United States but also caused deep damage to the Japanese economy.

Takafumi Sato, president of Japan Exchange Group Inc.’s Japan Exchange Regulation, who was commissioner of the Financial Services Agency at the time of the crisis, said the government took aggressive measures to evade financial meltdowns, but they couldn’t prevent the share prices from falling.

He said the financial industry made various efforts to prepare itself for new problems from a policy standpoint after experiencing an earlier crisis in the late 1990s.

“We were already aware of the existence of issues derived from subprime mortgages in the United States and resales of securitized loans in summer 2007, the year before the Lehman Brothers’ collapse,” Sato said. “We were also examining how many collateralized debt obligations--a highly risky financial product--Japan’s financial institutions own and what damage they could cause.”

Sato said those efforts resulted in “improved risk management systems of financial institutions” before the onset of the global financial crisis in autumn 2008.

“However the stock prices dropped drastically,” he said.

The Nikkei 225 index topped 12,000 in early September 2008, but fell to 7,054 in March 2009, its lowest level since the end of the 1980s economic boom.

Japan’s stock prices dropped more significantly than overseas markets. With sales from corporate customers shrinking, the five major securities companies reported net losses for the April-December period in 2008.

“We took measures to ease market fluctuations, such as partially restricting short sales and making it possible to use theoretical values instead of market prices as accounting standards,” Sato said.

“The crisis froze financial systems all over the world, causing serious damage to the real economy, such as the suspension of plant operations and increased unemployment.”

Sato also noted Japan’s financial authorities did all they could do then.

“Special inspections were conducted to check operations of banks that were reluctant to lend money for irrational reasons,” he said.

The decreased stock prices hit individual investors hard, forcing many to withdraw their funds from the market.

The downward trend dealt “a double blow” to small and midsize local stockbrokers, which had already been struggling to compete against spreading online securities services.

Akakiya, Jujiya and other local securities corporations withdrew from stock trading to focus on real estate and investment advisory businesses.

The number of member companies of the Japan Securities Dealers Association dropped from 322 in December 2008 to 266 by July 2018.

Other stockbrokers continued their operations but faced hardships.

“Securities firms started seeking new pillars to produce profits following the financial crisis,” said Takuya Aizawa, president of Aizawa Securities Co. “The securities business changed dramatically.”

According to Aizawa, many corporations strengthened their investment trust operations, which ensure stable commission incomes, while profits from stock sales are easily affected by market conditions.

After the 2008 crisis, Aizawa Securities put priority on sales of stocks of Vietnam, Indonesia and other Asian nations because their prices were expected to rise in tandem with economic growth.

Aizawa Securities anticipated individual investors would show interest in stocks of emerging nations whose share prices had recovered relatively early.

The brokerage is also currently working to promote services to offer support for elderly customers in inheritance processes.

“We need to enhance solution services related to inheritance and business succession to make our company stand out from others,” Aizawa said.


The Nikkei 225 index has more than tripled from the post-bubble low recorded in March 2009 and exceeded 24,200 in early October, the highest level in 26 years and 11 months.

In the United States, the Dow Jones industrial average hit a record high of more than 26,800 in early October.

Although stock markets around the globe have recently slumped, they appear to have recovered from the 2008 crisis.

But the situations facing Japan and other nations are different.

In January 2008, before the financial crisis hit, the Japanese companies with the highest aggregate market values were Toyota Motor Corp., Mitsubishi UFJ Financial Group Inc. and Nippon Telegraph and Telephone Corp. They held the same positions in the ranking in January 2018.

On the other hand, Apple Inc., Alphabet Inc. (Google) and Microsoft Corp., all of which are U.S.-based information technology firms, were the top three on the global market value list in 2018.

Ten years ago, the top three businesses were PetroChina Co., and U.S.-based Exxon Mobil Corp. and General Electric Co.

Yasushi Hoshi, a senior official of Daiwa Institute of Research Ltd., said old companies that have not been replaced are a stumbling block for Japan’s economy.

“The metabolism of Japanese businesses has not worked smoothly, inhibiting the growth of the stock market,” Hoshi said.

The recent rise in stock prices was largely buoyed by drastic monetary easing, the “first arrow” of the Abenomics growth strategy. The BOJ invested big sums in the market, weakening the yen and raising share prices, and purchased a large amount of exchange-traded funds.

The government’s economic stimulus policies also provided assistance for manufacturing and other traditional types of business.

“Japan’s manufacturing industry could survive the crisis because of the government’s measures to promote eco-friendly products and other policies,” said Yukio Noguchi, an adviser at the Waseda University Institute for Business and Finance.

Sato said the 2008 crisis was not caused by securitized products alone.

“Behind the crisis were various factors, including excessive dependence on short-term market investments, wide-range risk transference and U.S. financial institutions’ short-term-profit-oriented salary systems,” he said. “Quickness is important in risk handling, but excessive protection could create a problem for the future.

“What is important for regulatory authorities is making efforts to figure out the essence of possible risks in the business.”

Ten years after the financial crisis, U.S. economic expansion slows with stock prices sometimes declining significantly across the world. Concerns remain that the current high share prices could suddenly plunge due to uncertain factors.