Investment lessons to be drawn from "Princes of the Yen"
Credit allocation - not interest rates - steers the real economy; crises are often engineered to centralize those credit levers. Everything else is theater.
I am referring to the book “Princes of the Yen“ by Richard Werner.
Credit allocation — not interest rates — steers the real economy; crises are often engineered to centralize those credit levers. Everything else is theater.
Credit Control Doctrines — “The Hidden Steering Wheel”
1) Credit is the steering wheel, not interest rates
Revealed behavior: BOJ’s window guidance (administrative quotas) expanded then choked bank credit to target sectors → engineered booms/busts on command.
Lesson: Control quantity + direction of credit → script the business cycle.
Rates = theater. Credit allocation = power.Modern rhyme: Macro-prudential quotas, sectoral risk weights, CCyB (Counter-cyclical Capital Buffer) toggles. CBDCs → per-sector, per-wallet credit control.
2) Manufacture crisis to force structural change
Revealed behavior: Boom-bust cycles justified post-bubble “reforms” — bank mergers, regulatory centralization, MOF (Ministry of Finance)/BOJ (Bank of Japan) power consolidation, foreign entry.
Lesson: Crisis → Reform is a policy tool, not an accident.
Modern rhyme: Cyber/liquidity shocks birth “temporary” standards (identity, provenance, real-time tax) that never sunset.
3) Pick winners via directed lending
Revealed behavior: Lending quotas privileged export champions & keiretsu; starved SMEs.
Lesson: Industrial policy runs on loan books, not white papers.
Modern rhyme: Green/strategic taxonomies, export-control carve-outs, guarantees channel credit to defense, energy transition, “trusted AI”.
4) Asset bubbles as policy tools
Revealed behavior: Property/equity bubbles let the state steer wealth + balance sheets; collapse transferred assets + obedience.
Lesson: Wealth effect = programmable. Inflate for compliance, deflate for discipline.
Modern rhyme: Housing via LTV/DTI caps & MBS ops; equities via buyback safe harbors & index rules.
5) Opacity is the instrument
Revealed behavior: Real levers (window guidance) hidden; public obsessed with rates & CPI.
Lesson: Keep the real control surface off-stage.
Modern rhyme: Risk-based supervision, internal models, stress tests → black boxes that sanctify pre-decided allocations.
6) “Independence” = insulation from voters
Revealed behavior: BOJ tightened vs. elected priorities, loosened after institutional gain.
Lesson: Independence = from the public, not from the state.
Modern rhyme: Mandate creep (climate, equity, cyber) expands technocratic remit; accountability decorative.
7) Import the pretext, own the implementation
Revealed behavior: Basel/BIS/IMF norms gave cover for domestic control moves.
Lesson: International standards = political insurance: “We must comply”.
Modern rhyme: C2PA (AI provenance), AML Travel Rule, ISO payments → harmonized control across allies.
8) Bank consolidation = obedience training
Revealed behavior: Post-crisis mergers → fewer, larger, more controllable nodes.
Lesson: Fewer counter-parties = cheaper enforcement.
Modern rhyme: Cloud concentration, custody oligopolies, card networks = choke points.
9) Scarcity of consent → buy compliance with liquidity
Revealed behavior: Liquidity taps opened to placate sectors; closed to punish.
Lesson: Liquidity = carrot, not just safety net.
Modern rhyme: Targeted backstops, bill-heavy issuance, and standing facilities reward ID-bound compliant rails.
10) Academic & media capture normalize the lever
Revealed behavior: Orthodoxy ignored credit creation; worshiped rates & savings.
Lesson: Shape elite priors → define what counts as “serious policy”.
Modern rhyme: Foundation grants, “responsible AI” fellowships, think-tank pipelines curate ignorance on credit and programmability.
11) Currency policy = jobs program
Revealed behavior: Yen tracked export politics, not “optimal” theory.
Lesson: FX = industrial policy by stealth.
Modern rhyme: Weaponized dollar, FX swap lines, sanctions, stablecoin corridors = capital flow levers for security goals.
12) “Reform” = centralize the knobs
Revealed behavior: Every crisis → more centralized discretion over banks & budgets.
Lesson: Never waste a downturn; ratchet guidance → rules → automation.
Modern rhyme: From supervisory letters → machine-enforced standards (real-time tax, ID-gated apps, revocable credentials).
13) Credit starvation as discipline
Revealed behavior: SMEs & dissenting regions rationed; champions refinanced.
Lesson: Withhold credit to punish; flood to reward.
Modern rhyme: Bank/app-store/cloud de-platforming = digital window guidance.
14) Political theater = misdirection
Revealed behavior: Parties rotated; credit steering constant.
Lesson: Personnel swaps manage consent; the lever never moves rooms.
Modern rhyme: Elections reshuffle faces while policy perimeters (ID, payments, provenance) harden.
15) End-state: the parameterized society
Revealed behavior: From informal guidance → legal code → invisible automation.
Lesson: Power = setting parameters, not debating outcomes.
Modern rhyme: CBDCs + digital ID + content provenance + court-grade AI → programmable defaults. Consent becomes optional.
The Playbook Cycle
Prime sector(s) with credit → Inflate collateral → Announce “excesses” → Tighten quotas → Bust → Consolidate & codify → Reopen credit to parameterized rails. Repeat.
If you were the Controllers
Steer bank credit (quotas/weights); graduate to programmable wallets (CBDC/stablecoins).
Stage manageable crises to pass standards you already drafted.
Bind identity and provenance to every person, payment, and artifact.
Concentrate choke-points (banks/clouds/app stores/payments/custody).
Deploy admissible AI so decisions survive court and export across jurisdictions.
Do that and you’ve replaced consent with defaults.
Risk checks (where this thesis can break)
Sustained legal push-back that binds data-fusion/provenance mandates (rare, but non-zero).
Vendor lock-in backlash at scale (public procurement revolts + credible open alternatives with provenance).
Fiscal/FX accidents that force genuine austerity (starves the credit machine temporarily).
Bottom line
Thesis: Control credit allocation → control cycles; crises centralize control; code makes it permanent.
Buy: policy-grade AI (PLTR), ID/compliance (MSFT), perimeter (PANW).
Timing: Buy during Problem (shock headlines, hearings, civil-liberties backlash), trim on Solution (regulatory “clarity”, index inclusions). Track harmonization verbs (when the same verbs appear across jurisdictions: attest, revoke, trace, split (tax), prove lineage, rollback).
Avoid: willpower vs default products.
Maxim: Incentives > ideals; control > fairness; stability > truth. Follow revealed preference.
That’s Werner’s book, stripped to its load-bearing beams and wired to today’s control stack.
None of this should be considered investment advice.