A Maverick Sidesteps Stodgy Banks

Takashi Yoneda has a vision of how he wants his life to turn out that can only be described as Far East Hampton: No working dinners on Fridays, a country house for the weekends, and no breakfast meetings on Monday mornings. Of course, he plans on doing well financially. He says he already is.

Saying things plainly is part of Mr. Yoneda's shake-things-up style. Fortyish, built like a slightly undersized linebacker, he speaks easy-going, idiomatic English, has an American business partner, and is married to an Air France flight attendant.

This aggressively global entrepreneur represents two aspects of the evolving Japanese economy. One is that the work force has ceased to be a group of faceless men interested in lifelong jobs at a big corporation and willing to work beyond reason for the privilege.

What Yoneda wants, aside from satisfying work, is a lifestyle, something that is a foreign concept to most Japanese breadwinners.

The other evolution is in Yoneda's mtier: finance. One can argue about the pace of change in Japan's economy or the sincerity of the government's reforms. But this much is certain: The banking system that funded Japan Inc. for most of the past half century is doomed. If the system were to crash heavily, the impact would badly hurt Wall Street. The best hope is that it will crash lightly, the effects of its breakdown cushioned by politicians willing to make tough decisions.

Yoneda, in his own small way, is trying to create a soft landing. He sees a new system in which companies are not reliant on banks for capital and where people can do more than keep their savings in banks or add them to the pool administered by Japan's postal service.

From his style of speech to his career path, Yoneda is a maverick in Japan, but even the government is now pleading for more people to show initiative and innovation. The Economic Planning Agency, in July's annual report, said "the government should strive for structural reform which will reward risk-taking economic activities fairly." Many Japanese are fond of noting that entrepreneurs created Sony, Honda, and other icons of Japan's economic success.

Yoneda spent the beginning of his career at the large, prestigious Industrial Bank of Japan (IBJ). "I come from one of the most eminent financial institutions, where they take the cream of the crop from the universities, and I was told I was crazy to leave," he says. But in 1991 he quit anyway and says his old colleagues praise his foresight. "Oh, Takashi," he quotes his friends as saying, "you've made the right move."

A good system that hung on too long

The existing banking system was brilliant while it lasted, but it has now become a huge drain on the world's second-largest economy. After World War II, the bureaucrats in Japan's Ministry of Finance decided to keep control of the allocation of credit so they could guide the rebuilding of the country's industries. They made it very difficult for companies to raise funds in the stock market - where many players make control impossible - and made bank loans the only real source of capital.

For a while, this arrangement produced winners all around. The banks burgeoned, since depositors had few other options. The banks also profited, since they didn't have to pay a lot of interest. And in exchange, they obeyed when the ministry suggested offering cheap loans to certain companies, in accordance with the government's plan for industrial growth.

But government policy also helped produce the bubble economy of the late 1980s, whose collapse left banks saddled with real estate and other assets that had plunged in value. Japanese financial institutions may hold as much as $1 trillion in unrecoverable loans, a situation the government is trying to extricate the country from without generating panic or large numbers of bankruptcies.

Yoneda joined IBJ in 1981 after graduating from Waseda University, a name-brand private college in Tokyo. The bank sent him to Tufts University's Fletcher School of Law and Diplomacy in Medford, Mass., for a graduate degree.

According to his friend Motoyasu Yukawa, a manager at IBJ, Yoneda was considered a rising star, but some of his efforts were frustrated. In the late 1980s he worked hard on a plan to have IBJ introduce a retail charge card, a bold step for a staid institution. But a rival bank objected, threatening to cancel a business partnership. In the cozy world of Japanese banking, going it alone has not been an option.

Mr. Yukawa says that Yoneda frequently talked about getting out. "He wanted to be a real coordinator, to be really doing international business. Many people asked, 'Why, what is your complaint?' " Yukawa recalls. "No one understood him." Yoneda was the first to depart the bank from the batch of recruits who joined in 1981; only Yoneda has started his own firm.

That company, Global Link Associates, has its small offices in a district populated by foreign bankers and businessmen - at lunchtime you might think you were in New York or Frankfurt. Yoneda and other investors have raised a small venture-capital fund, worth $6 million. He's also functioned as a private banker for wealthy individuals and is now trying to encourage investors and fund managers to put their money directly into companies rather than going through a stock market.

All three activities are standard in Europe and the United States, but rank as innovations in the time-warp world of Japanese finance.

In the meantime, Yoneda says he's paid off the loans he took to start the firm and is paying himself 20 million yen a year. That salary translates to $140,000, perhaps not top dollar in the world of finance, but Yukawa says it's more than Yoneda's peers at IBJ are making. They've just taken a pay cut, a reflection of the bank's sagging stock price, portfolio full of bad loans, and dim prospects - a set of circumstances that affects most Japanese banks.

Will any Japanese banks survive?

Today, with increased foreign competition due to deregulation, some analysts wonder just how many of Japan's big banks will last.

"In this new global financial game, can any Japanese financial institution survive?" asks Kenichi Ohmae, a widely published author and management expert. "The answer, as far as I know, and I've been one of the best consultants in this field, is zero. Because [the banks] are almost like overprotected children."

Yoneda has good things to say about the efficiency and creativity shown by Japan's big manufacturing companies, some of which are prospering despite years of stagnation and huge currency fluctuations. But as for the service and financial industries, he adds: "Can you say they're efficient? No way. Can you say they're creative? No way.

"Japan has to go through major reforms in these areas, and I hope I'll be a catalyst."