“Boss, as you know, I remain opposed to this Japan venture. The aggressive expansion and construction by the subsidiaries, the family office we’re newly establishing, even the think tank… [Enjoy] under your name and the investment company have yet to produce clear profits or reach stable footing, haven’t they? In this situation, hastily extending our reach into Japan is clearly overreaching. But even aside from that risk, there is a bigger problem. I spent all night debating it with the chief analysts, but the premise is utterly incomprehensible… I am not doubting your intuition, Boss, but as the head of [Devenger Asset Management], this is something I must point out.”
A heavy weight entered Gilberto’s voice. Henry adjusted his grip on the receiver, a faint smile on his lips.
“Tell me, Gilberto. What is it that’s troubling our elite analysts so much?”
“The risk of foreign exchange losses. Japan is currently seeing prices soar due to the second oil shock, and the yen’s value is plummeting without finding a floor. On top of that, Paul Volcker, who took office today as chairman of the U.S. Federal Reserve, is a hard-liner who will raise interest rates like a madman to rein in inflation. But what about the Bank of Japan? They’re hesitating even to raise rates beyond the mere five-percent range. Even now, the interest-rate gap has widened to more than double. At this rate, the current level of 220 yen to the dollar will collapse easily. According to our forecasts, by next year the yen will weaken to around 250, perhaps even into the 270-yen range.”
From beyond the receiver came the sound of Gilberto roughly flipping through documents.
“This is exactly why Japanese commercial banks are rushing in, offering lower rates than the Industrial Bank. In their eyes, Boss, you’re nothing more than a grateful ‘donor’ bringing dollars and converting them into yen. Let’s say you borrow 100 million dollars now and deploy 21.7 billion yen. If the exchange rate widens to 270 yen later, the money you’ll need to repay the principal will be only around 80 million dollars in dollar terms. From the bank’s perspective, it’s a structure where they sit still and eat more than twenty percent of the principal as foreign exchange gains. And instead of dipping into their precious dollar reserves, they get a chance to replenish them. What bank would possibly refuse this?”
Gilberto’s tone grew even more earnest.
“Boss, this is a textbook bait product where you try to save a few percent in interest, only to lose twenty or thirty percent of the principal to the exchange rate. Those Japanese banker bastards must be treating you like some naive young master from a wealthy American old-money family and popping champagne behind your back right now. We cannot let assets evaporate so meaninglessly.”
A certain phrase suddenly flashed through Henry’s mind, and he answered quietly.
“So you’re saying my plan is a ‘free lunch’ I’ve thrown to the Japanese?”
“Looking only at the current data, it’s insanity, Boss. Unless the companies you intend to acquire increase in value by at least two hundred percent within ten years, it is mathematically impossible to overcome these overwhelming foreign exchange losses and interest burdens. Betting on where the entertainment business will be ten years from now is gambling. Please reconsider. If you borrowed in dollars, then you should deploy the funds into dollar-denominated assets!”
As Henry listened to Gilberto’s loyal warning, he instead smiled with amusement. This was the limitation of modern analysts who could not even dream of the “forced exchange-rate adjustment” that would take place at New York’s Plaza Hotel in 1985. If anything, Henry was pleased that they had definitively predicted the coming yen depreciation. It was proof that his employees were that capable.
‘Your skill really is incredible. To predict so accurately that the exchange rate will hit 270 yen next year. Gilberto, you’re not wrong. But if even you think that way, do you really believe the U.S. government will just keep sitting by and watching?’
Ironically, the maxim that would later pierce through the tragic aftermath of Japan’s bubble bursting was the very one Gilberto had said.
‘There’s no such thing as a free lunch.’
“In the short term, your prediction may be right, Gilberto. But who can say how long a weak yen will continue? This is a kind of ‘give and take.’ A very tasty piece of bait I’m tossing to the Japanese side, you could say. If I offer at least this much, won’t acquisitions and operations in a foreign land beyond my family’s influence become smoother? On the contrary, the banks may even wag their tails first, offering to lend me more and suggesting I acquire companies like this or that. Haha, in any case, don’t worry too much. To begin with, it seems like the interest in that calculation is based on American bank rates, but the rates Japanese banks offer will be incomparably lower than those of American banks.”
In present-day Japan, companies watched the banks’ moods, and the banks in turn watched the government’s moods, forming a thoroughly vertical structure. As written in the think tank intelligence team’s analysis report, Japanese companies’ dependence on their main banks was far higher than Henry had expected. It was a neighborhood where kneeling before a bank president and begging for a loan extension was commonplace. Unless one was a fairly major conglomerate, escaping the banks’ grasp was nearly impossible, and the banks’ power was correspondingly immense.
That was why major companies, one and all, were already involved in the banking business. In any case, receiving a bank’s help in a place like that? That was extremely attractive.
Henry desperately needed such a powerful local partner for his entry into Japan, and because of that, he could consider giving them a bit more. On top of that, from Henry’s perspective, this was bait bordering on a scam. Bait structured so that they thought they were gaining, but in the end Henry would be the one to profit. And as a bonus, he could gain the convenience of entering the market with a Japanese bank as a partner? Henry would gratefully accept their goodwill while shouting inwardly that this was sweet as hell.
Henry’s original intention had been exceedingly simple. ‘I want to sweep up Japanese IP, but I don’t have the money? Then let’s take out a loan. The Plaza Accord will happen anyway, so dollar-denominated loans are a huge win!’ It was a judgment made at a one-dimensional level through that line of thought. But now that he had actually set up the board, it was like buying a computer (Japanese companies) and getting not only a monitor (foreign exchange gains from the Plaza Accord), but even an expensive keyboard and mouse (the banks’ protection) thrown in as freebies.
Even so, Gilberto’s worried nagging continued over the receiver for quite some time. Henry once again firmly asserted his stubbornness, broke through Gilberto’s logical resistance, and instead badgered him to thoroughly prepare for the business trip to Japan.
‘Is it because I still haven’t shown them a solid track record, like a huge win from silver investment or a smash-hit game console launch? They have far too little faith in me… Elites, honestly. They just refuse to believe anything outside their own calculators.’
.
.
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Time passed quickly, and on August 10, Henry boarded first class on a Pan Am flight bound for Narita. Originally, he had intended to travel with the [Enjoy] team, but the [Saph] factory was in Osaka, while Henry’s main business was concentrated in Tokyo, so he separated from the group.
He had briefly considered taking the private jet he had inherited from the family.
‘Of the two private jets the family had, one was wrecked in an accident. And the one I rode to California can’t fly nonstop across the Pacific.’
Even if the Gulfstream II was called the Rolls-Royce of private jets and flaunted its prestige, its inherent limits were clear. The cabin space was only slightly wider than the first-class section of a Boeing 747, and above all, he would have to endure that thunderous engine noise, land in Anchorage, Alaska as a stopover, and sit through the tedious two hours it took to refuel. If that was the case, an airline’s direct flight was more comfortable and took less time.
‘It’ll still be a few years before the Boeing 767 is put into service, and even if I buy a new private jet next year, it’ll only be a 727 at best. That one can’t cross the Pacific in one go either, so I’d still have to step on Alaskan soil, right? And buying a 747? Even the current 747-200 still needs a stopover. Like a novel protagonist, I could reduce the interior space and enlarge the fuel tanks, but while I could tolerate burning through 100 million dollars, spending that money on a plane that will soon become outdated?’
Knowing the future meant having to suffer, in units of tens of millions of dollars, the same pain he had felt in his previous life when buying the latest smartphone in December. Like having watched a NewTube video titled “Next flagship is insane, recommend holding out,” the specs of the soon-to-be-released new model flickered before his eyes, making it impossible to press the purchase button on the current model.
That was the reality of the private jet market Henry was now facing.
He rode the Gulfstream II because he had inherited it, but buying a new one was a different matter. Even looking only at the business jet market, the Gulfstream III would come out in 1980, and if he could just hold out five years, the Gulfstream IV, which would become a legendary private jet used well into the future, would arrive. But the real headache was the final boss, the 747.
Going all-in on a fully loaded 747-200 right now would be no different from buying an old flagship smartphone the day before the new flagship model shipped the next morning. The 747-300 that would come out in 1982 was a stopgap model that would sell a measly eighty units before disappearing, and Henry knew that even those had specs that varied wildly between early and late models, requiring luck of the draw.
And the most important genuine article was the 747-400, which would reveal itself in 1988.
The legendary model that every airline in the world would point to with a thumbs-up and say, “This is the one!” The model [Boeing] would milk for a full twenty years to come! Though, because they milked it too much, they would later get dunked on by [Airbus], but limiting it to the near future, the best was naturally Boeing’s 747-400. But even then, if he waited for it to enter commercial service and then be converted into a private jet, there was a high chance he wouldn’t receive it until the 1990s. Recalling its 1989 commercial launch date, Henry felt bitterness in his mouth.
‘[Airbus], can’t you at least put something out a little sooner? Wait a second. I’m rich now, aren’t I? Why do I keep weighing cost-effectiveness like a commoner?’
At the thought that suddenly crossed his mind, Henry let out a hollow laugh. Even if a new flagship came out tomorrow, wasn’t his current financial power enough to let him buy today’s best model without hesitation?
‘A limited run of eighty units that requires luck of the draw? Even better. I can just buy the current top-spec 747, then keep upgrading every time a new model comes out. The ones I used can be turned over for company business or trust assets.’
And so, with the final resolution that later… much later… when he had the money, he would buy them all, Henry rose from his seat to look around the airplane.
In 1979, [Pan Am Airlines] would later meet the fate of bankruptcy, but for now it was the emperor of the world’s skies. The Boeing 747-SP “Clipper” Henry had boarded was an oddly shaped model created for direct flights to Asia, with a shorter fuselage than a typical 747-200, but its first-class section boasted overwhelming grandeur. Henry was now sitting at the highest point of that massive iron bird, in the upper-deck lounge just behind the cockpit.
At the time, the second floor of Pan Am’s 747-SP was operated not as seating, but as a luxurious dining room and lounge for a chosen few. Of the fifteen people accompanying him for this Japan acquisition, including M&A specialists and the security team, only Jay and Jeston, who were in charge of close protection at Henry’s insistence, were seated in first class; the rest of the personnel were dispersed throughout business class. The interesting thing was that perhaps because it was a weekday, the only passengers in this spacious first-class section were the three members of Henry’s party. If Henry had not insisted on keeping his bodyguards beside him, he would have ended up chartering this enormous space all to himself.
Wanting to sample in advance the structure of a future private jet, Henry had come up to the second-floor lounge. Outside the window stretched the endless Pacific, glittering like glass beads, and before him sat beluga caviar on the finest bone china and chilled Dom Pérignon.
“Welcome to the Clipper Jet Set*, Mr. Henry.”
At the alluring voice, he lifted his head to see Diana, a flight attendant neatly dressed in Pan Am’s distinctive sky-blue uniform, smiling at him. In the 1970s, Pan Am flight attendants were members of an elite profession coveted even by aspiring Hollywood actresses, and every one of her gestures overflowed with the pride and ease befitting that status.
She bent her knees slightly and filled Henry’s glass with champagne. In the process, her slender fingers lightly brushed the back of Henry’s hand. It lingered too subtly to be coincidence, and it was clearly intentional sex appeal.
“Thirteen hours from New York to Narita… Aren’t you terribly bored? On this big, lonely airplane, your party is the only one in first class.”
[Jet Set = used both to refer to ultra-wealthy socialites who travel the world as if it were their own backyard by private jet or first class, and to mean that you have now become a member of a special class with the whole world beneath your feet]