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The Samurai Strategy


  ”A financial thriller right out of the headlines.” Adam Smith


  A high-finance, high-tech thriller that correctly predicted the 1987 stock market crash. It was the first fictional treatment of a major international concern of the Eighties. Set in locales as diverse as Wall Street and the offices of Japan's powerful Trade Ministry, THE SAMURAI STRATEGY describes a scenario of murder, worldwide currency manipulation, a revival of Japan's smoldering nationalism, and is set against a background of a new high-tech computer milieu. Matthew Walton, a freelance corporate 'takeover' lawyer is hired by a mysterious Japanese industrialist to purchase a New York office building and begin a massive 'hedging' in the financial markets. Two weeks later, off an island in the Inland Sea, divers working for the industrialist's organization, recover the original Imperial Sword, given to Japan's first Emperor by the Sun Goddess, Japan's 'Excalibur', and lost in a sea battle in 1185. He forms an '800-Year Fund' and billions of yen flow to his fingertips. He then dumps all the Treasuries Japan had acquired and devastates the American economy.

  As the story rushes to its stunning conclusion, Matt Walton goes to Japan and determines that the 'Imperial Sword' is, in fact an unusual antique he once owned himself.

  Tags: Wall Street, Japanese Stock Market, Treasury Bonds, Stock Market, Imperial Sword, Emperor of Japan, Japanese History, Supercomputer, MITI



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  The Samurai Strategy

  Thomas Hoover

  Copyright © 1988 by Thomas Hoover


  Reissued by arrangement with Random House. First Bantam-Doubleday-Dell Publishing Group, Inc. edition 1988.

  Print ISBN 0-533—27186-5

  The following story is entirely imaginary . . . I hope.


  New York, New York. Friday, early September, dusk. Heading uptown on Madison. Sheets of icy rain washed the pavement, heralding the onslaught of autumn and the miser­able winter to come. The city was poised for its cruelest months, that twilight of the spirit when strangers arm-wrestle for taxis, nobody has time to hold a door, and you cherish every fleeting human kindness.

  Bring on the blizzards, the holiday madness. This winter I was planning something long overdue. To treat my daughter Amy, the Madame Curie of her ninth grade, to a real vacation. Just us. We'd leave at Thanksgiving and stay gone through the Christmas break. She got to live with me three months a year, and December was by God going to be one of the months. School? She'd already skipped a year; maybe she was a little too fast-track for thirteen.

  Since Joanna, my ex, had already lined up her own holiday excursion (Amy the spy claimed it was with some divorced Tishman VP), she hadn't bothered inventing the usual road­blocks. Clear sailing. We'd open the house down in St. Croix and spend a month getting reacquainted. Work on the tan and some postgraduate snorkeling, a strategic move while I still enjoyed a small sliver of her attention, before a certain "totally terrific" skateboard virtuoso finally got around to noticing her. Only a couple of jobs needed finishing, but they'd be wrapped up with weeks to spare.

  That night, in truth, had its moments of nostalgia. The destination was Sotheby's auction house, a place where Matthew Walton was greeted by name at the cashier's window. Home away from home for obsessive collectors. I leaned back against the vinyl seat of the Checker, letting the rhythm of the streetlight halos glimmer past, and reflected on all those happy nights I'd made the trek with Joanna. She'd had no real interest in my collecting hobby, Japanese samurai swords and armor, but she was always a decent sport about it. Besides, she had her own passions. While I was agonizing over long blades and short blades, she'd sneak off and browse for something French and nineteenth century and expensive. Fact is, I'd usually plan ahead and have something of my own on the block just to pay for that little sketch, or print, she suddenly had to have. Out of habit I'd even shipped up a couple of mistakes for the auction this evening (a hand axe and a lacquered-metal face guard).

  Though tonight's sale had only a few odd items in my specialty, the slim offerings actually suited the occasion. It left the evening open, time for the real agenda—getting things rolling with a new client who'd inexplicably handed me a job as simple as it was strange.

  The man, name of Matsuo Noda, had rung all the way from Japan Friday before last, introduced himself in generalities, then declared he had a pressing legal matter requiring both speed and confidentiality. Inquiries had led him to me. Would I have time to help him locate an office building to buy? He claimed he was head of a Kyoto consulting outfit that called itself Nippon, Inc., and he was looking for something in midtown, seventy-million range.

  Honestly I couldn't quite believe he was serious at first. Why this job (just a little legwork, really) for somebody he'd never even met? I could swing it, sure, but now that Japanese investors were snapping up U.S. property right and left, who needed some ex-Texan turned New York lawyer knocking around? There was no rational reason to engage a corporate attorney.

  "Out of curiosity, why aren't you working through one of the Tokyo firms here in New York, say, Hiro Real Estate or KG Land? Surely they could—"

  "Mr. Walton," he interrupted smoothly but firmly, "allow me to say I have my reasons. May I remind you I stressed confidentiality."

  "Merely asking." I took a deep breath. The connection was distorted, a high-pitched hum in the background, as though he wasn't using commercial phone lines. "If you want, I can look around and see what's on the market . . . and in the meantime how about sending along a prospectus, just for the file?"

  "Assuredly," he said, "and I do look forward to working with you." After a few more polite nothings, he abruptly closed out the call.

  Peculiar. That wasn't how the Japanese road show usually did business. From what I'd seen, Tokyo invests very cau­tiously and deliberately, sometimes "researching" a deal half to death. I momentarily wondered if it wasn't just one of the jokers from my old partnership pulling my leg.

  He was real enough. A brochure arrived by overnight air, bound in leather, with a flowery covering letter. Two problems: most of the thing was in his native tongue, and what I could read didn't tip his hand. From the looks of its public disclosures, Nippon, Inc. was merely some kind of money manager for Japanese investment banks; it had almost no assets of its own. All I could find listed were a few million dollars, lunch money for a Japanese outfit, mostly cash parked in some short-term Euroyen paper. That, and a head office in Kyoto, was the sum of it. What's more, Noda only worked with Japanese banks and firms. No foreign clients.

  So why did this man suddenly require space in New York? An entire building. I honestly couldn't figure it. On the other hand, with any luck the whole deal probably could be put together with a few phone calls.

  By way of introduction, let me say that I worked, technically, as a straightforward attorney-at-law. I say "techni­cally" because I was, in fact, a freelance defensive back in the corporate takeover game, which these days is anything but straight. You'd have to go back to the roaring twenties to find so many creative screw-jobs.

  Some people are drawn to power; guess I'm more attracted to the idea of occasionally whittling it down to size. So when some hotshot raider found a happy little company whose breakup value was worth more than the current stock price, then decided to mov
e in and grab it, loot the assets, and sell off the pieces—one of the players apt to end up downfield was Matt Walton. For reasons that go a long way back, I liked to break up the running patterns of the fast-buck artists. It's a game where you win some and lose some. The trick is to try and beat the odds, and I suppose I'd had my share of luck.

  Give you a quick example. Back in the spring, a midsize cosmetics outfit called me in as part of their reinforcements to fight an avaricious rape, better known as a hostile takeover, by one of their biggest competitors. After looking over the balance sheet and shares outstanding, I suggested they divest a couple of unpromising consumer divisions—namely a "male fragrance" line that made you smell like a kid leaving the barbershop, and a "feminine hygiene" product that could have been a patent infringement on Lysol—and use the proceeds to buy back their own common shares. We also threw together a "poison pill" that would have practically had them owning anybody who acquired more than twenty percent of their stock. Our move scared hell out of the circling vultures and reinforced my reputation on the Street (unduly harsh, I thought) as a give-no-quarter son of a bitch.

  Another fact worth mentioning is that I worked without benefit of a real office; after selling off my piece of the law partnership, I operated out of my place downtown, with a telephone and a couple of computers. A kindly gray-haired dynamo by the name of Emma Epstein, who had a rent-controlled apartment down the block, dropped by afternoons and handled correspondence, filing, matrimonial advice, and the occasional pot of medicinal chicken soup. The only other member of my staff was a shaggy sheepdog named Benjamin, who served as security chief, periodically sweeping the back garden for the neighbor's cat. That was it.

  Oh, yes, one other item. Crucial, as it turned out. I'd always been a collector of something—once it was antique spurs, for chrissake—but about ten years earlier I'd started to get interested in things Japanese and ended up going a little overboard about old swords and such. Joanna's unscheduled departure managed to burn out a lot of my circuits, and what had been merely an obsession grew into something a little crazy. For a year or so I became, in my own mind at least, a sort of American ronin, a wandering samurai.

  You see, the Japanese warriors had a code that said you ought to live every moment in full awareness of your own mortality. When you adopt this existential outlook, so they claimed, all regrets, emotions, complaints, can be seen as an indulgence. You're ready to meet life head-on, to risk every­thing at a moment's notice. That's the only way you ever discover who you really are, and it's supposed to make you marvelously detached.

  Almost enough to make you forget how your raven-haired, brilliant, sexy mate packed it in one New Year's Eve twenty months past . . . when you called late from the office, again . . . after declaring that that was the goddam last straw and apparently the only thing you could find worthy of undivided attention came printed on goddam computer paper and she was goddam sick of it—which she demonstrated the next day by slamming the door on her way out.

  Add to which, she used my momentary disorientation to get custody of Amy. So while I was battling corporate Goliaths, I let her walk off with the only thing I would have given my life for. The more time went by, the more I wanted to kick myself. Alex Katz (of Walton, Halliday, and Katz—now minus the Walton) read the custody agreement the day after I signed it, sighed, glared over his smudgy half-lenses, and announced that this kind of unconditional surrender should only be signed on the decks of battleships. What did he have, a law partner or a fucking schlemiel?

  He was right, for all the wrong reasons. Not long after, I cashed in my piece of the firm and went independent. Win or lose, it's best to sort things out on your own. I was then forty-three, six one, and weighed in at an even one eighty. There were a few lines on the face and several more on the psyche, but the sandy hair was mostly intact, and I could still swim a couple of miles if absolutely essential. Maybe there was still time for a new start. Part of that therapy was going to be our trip.

  Perhaps I should also add that I'd had a brief "rebound" fling, for what it was worth. The lady was Donna Austen, a name you'll recognize as belonging to that irrepressibly cheerful "Personalities!" host on what Channel Eight likes to term its Evening News. She'd called about a segment on the subject of the cosmetics company takeover, then very much in the local press, and I'd said fine. She ended up downtown, and soon thereafter we became an item. She was the closest I'd had to a girlfriend, and at that it was mostly an on-again, off-again thing—which terminated in an event reminiscent of the Hindenburg’s last flight. In the aftermath I went back to chatting with Amy every day on the phone, putting together stock buyback packages, and collecting Japanese swords.

  Anyway, while the cab waited for a light, worn-out wipers squeaking, I fumbled around in my coat pocket and extracted the meishi, the business card, one side in English, the other Japanese, that had been included with Noda's letter. He'd personalized it with a handwritten note on the side with English print. Now, I'd kept track of the new Japanese investment heavies in town—Nomura, Daiwa, Nikko, Sumitomo—since you never know when a corporation might need some fast liquidity. They were starting to play hardball, and these days (with all that cheap money back home) they would underbid a nine-figure financing deal before Drexel Burnham could spell "junk bond." But Nippon, Inc.? Never heard of the outfit.

  Well, I thought, you'll know the story soon enough. The driver had just hung a right on Fifty-seventh and was headed east toward York Avenue. I'd called that afternoon to lower the reserve on one of my lots and had been told that because of some union squabble the preview would continue till just before the sale, now scheduled to kick off at eight-thirty. It wasn't quite seven yet, so we would have at least an hour to run through my list of prospective buildings.

  As the cab pulled up next to the chaste glass awning, I took a deep breath, shoved a ten through the Plexiglas panel between the seats, and stepped out. While the battered Checker (lamented remnant of a vanishing species) squealed into the dark, I unbuttoned my overcoat and headed up the steps. A few grim-faced patrons milled here and there in the lobby, but nobody looked familiar. There was even a new girl at the desk by the stairs, ash blond and tasteful smoked pearls, pure Bryn Mawr art history. A class act, Sotheby's.

  It appeared that most of the Japanese crowd was already upstairs, undoubtedly meditating on their bids with the meticulous precision of the Orient. I was headed up the wide, granite steps myself when I decided to check out the downstairs one last time.

  Hold on, could be there's a possibility. Waiting over by the coat check, thumbing the catalog, was a distinguished-looking guy, retirement age, wearing a light, charcoal suit. Italian. Unlike the usual Japanese businessmen, he clearly didn't assume he had to dress like an undertaker and keep a low profile. No, probably just some Mitsubishi board member thinking to diversify his portfolio with a few objets d'art.

  Abruptly he glanced up, smiled, and headed my way. I realized I'd been recognized.

  "Mr. Walton, how good of you to come." After a quick bow he produced his card, a formality that totally ignored the fact he'd already sent me one. As convention required, I held it in my left hand and studied it anew while I accepted his hearty American handshake. "It's a pleasure to meet you. At last."

  At last?

  I let that puzzler pass and handed over a card of my own, which he held politely throughout our opening ritual, then pocketed.

  Noda had a mane of silver hair sculptured around a lean, tan face, and he looked to be somewhere between sixty and seventy. Though his dark eyes were caught in a web of wrinkles that bespoke his years, they had a sparkle of raw energy. He moved with an easy poise, and the initial impres­sion was that of a man eminently self-possessed. He had that sturdy, no-nonsense assurance usually reserved for airline pilots. If you had to entrust somebody with your wife, or your life savings, this man would be your pick.

  Well, my new client's a mover, I told myself. All the same, I accepted his hand with a vague twi
nge of misgiving. What was it? Maybe something about him was a little too precise, too calculated.

  "Mr. Walton, permit me to introduce my personal consul­tant." He laughed, a slight edge beneath the charm, and more wrinkles shot outward from the corners of his eyes. "I always seek her approval of major acquisitions, particularly those of the Heian period, her specialty." He turned with what seemed obvious pride and gestured toward the tall Japanese woman standing behind him. I'd been so busy sizing him up I'd completely failed to notice her. "I must confess she is, in fact, my . . . niece. I suppose that ages me." Another smile. "You may possibly be familiar with her professional name, so perhaps I should use that. May I introduce Akira Mori?"

  Who? I stared a second before the face clicked into place. And the name. They both belonged to a well-known commen­tator on Tokyo television. Only one slight problem: her "specialty" had nothing to do with art.

  "Hajimemashite. How do you do, Mr. Walton." She bowed formally and, I noticed, with all the warmth of an iceberg. No surprise—I knew her opinion of Americans. She did not bother meeting my eye.

  She looked just as I remembered her from the tube. A knockout. Her hair was pulled back into a chignon, framing that classic oval face, and her age was anybody's guess, given the ivory skin and granite chin. She was wearing a bulky something in black and deep ocher by one of the new Tokyo designers. For some reason I was drawn to her fingernails, long and bronze. The parts, a mixture of classic and avant-garde, did not seem of a piece, the kind of detail you didn't notice on the TV. But there was something more important than her looks.

  I'd been to Tokyo from time to time for various reasons, and I'd heard a lot of stories about this lady. Fact is, you didn't have to be Japanese to know that Akira Mori was easily Japan's most listened-to money analyst. You've probably seen her yourself in snippets of that weekly chat show she had on NHK, which used to get picked up by the networks here when they needed a quick thirty seconds on "Japan This Week" or such. Her ratings had little to do with the fact she's a looker. She was, talk had it, an unofficial source for official government monetary policy. Akira Mori always had a lead on exactly what was afoot, from the Bank of Japan to the Ministry of Finance, even before the prime minister broke the news.

  Miss "Mori," whoever the hell she was, had some very well placed friends. Tell you something else, she didn't go out of her way to find flattering things to say about how Uncle Sam handled his bankbook these days. Her appearance here made Noda's unorthodox office plans even more perplexing.

  "We both appreciate your taking time from your schedule to meet with us." He bowed again. "We've been looking forward to having you join us at the sale."

  While Akira Mori appeared to busy herself with a cata­log, Noda and I got things going with that standard formality preceding any serious Japanese professional contact: meaning­less chat. It's how they set up their ningen kankei, their relationship with the other guy, and it's also the way they fine-tune their honne, their gut feeling about a situation. Any greenhorn foreigner who skimps on these vital niceties runs the risk of torpedoing his whole deal.

  In response to my pro forma inquiries, Matsuo Noda declared he liked New York, had even lived here for a while once, honestly found it less hectic than Tokyo, usually stayed these days at the Japanese hotel down on Park but sometimes picked the Plaza when he needed to be closer to midtown. He adored La Grenouille and thought La Tulipe overpraised. When I pressed him, he declared his favorite Japanese place to dine was Nippon, over in the East Fifties (maybe he merely liked the name, but it was my pick as well).

  After he had in turn solicited my own views on Sotheby's, a couple of the galleries down Madison, and various North Italian eateries, he suggested we go on upstairs and preview the lots.

  All the while Miss Mori appeared to ignore us, standing there like a statue of some Shinto goddess, except for the occasional tug at her dark hair. Maybe she didn't give a damn about this obligatory small talk, thought it was old-fashioned. Or possibly she liked the idea of being the only one not to show a hand. And as Noda led the way up toward the exhibition rooms, she trailed behind like a dutiful Japanese woman—while we, naturally, continued to talk of everything except, God forbid, why we were there.

  In the first room we were suddenly in my arena—samurai swords and battle gear.

  "This is your special interest, is it not, Mr. Walton?" Noda smiled, then turned to admire the row of shining steel tachi, three-foot-long razors, now being watched over by a trio of nervous guards. Sotheby's didn't need some amateur Toshiro Mifune accidentally carving up the clientele. "I understand you have a notable collection yourself."

  What? What else did he know about me?

  Easy, Walton. Play the game. I knew what a Japanese would expect in reply.

  "Matter of fact, I've lucked onto a couple of items over the years." Then the standard disclaimers. My own painstaking collection was merely a grab bag of knickknacks, the fumbling mistakes of a dabbler, etc., etc.

  Noda monitored this culturally correct blarney with satis­faction. "As it happens, Mr. Walton, I was in Nagoya last year when several of your pieces were on loan for the show at the Tokugawa Museum. I still recall certain ones, particularly that fine fifteenth-century katana, attributed to the Mizuno clan. Unusual steel. No date or mark of the swordsmith, but a remarkable piece all the same." A split-second pause. "Your reluctance to part with it was most understandable."

  This man had done his homework! Or maybe he'd been the one who had tried to buy it. The steel was unusual, too heavy on copper. I'd even had a little metallurgical testing done on it down at Princeton, just to prove that hunch. But it was no big deal, merely an oddity that had fallen my way via an estate sale. There was an anonymous inquiry shortly after the exhibition opened, with an insistent offer, but I'd turned it down.

  Poker time. "I was honored. Your figure was more than generous."

  He laughed—bull's-eye. I watched as he glanced back at Miss Mori, maybe a bit nervously. Then he returned his attention. "Merely a small gesture for the museum. I felt it should be back in Japanese hands." He continued, his voice now sober. "You do understand?"

  "Certainly." I just stared.

  "Good. I see I was right." He had paused to examine a large monochrome screen. It was eighteenth century and he inspected it with only mild interest, then moved on.

  I was still knocked over. Could that be why he'd retained me as his U.S. legal counsel? Because of some damned antique sword? Okay, I was already getting the idea Matsuo Noda might be a trifle eccentric, but all the same . . .

  "Interesting." He was pointing at a long picture, part of a series locked in a wide glass case. "Honto ni omoshiroi, desu ne?'

  Miss Mori was already there. In a voice scarcely above a whisper she proceeded to give him a rundown of pros and cons. It was the first time I'd noticed any enthusiasm out of the woman all night.

  I checked my catalogue. The piece was a Heian hand scroll, said to be "exceedingly rare." After a few moments Noda motioned me over. "Perhaps you could give us your opinion. What do you think?" He pointed down. "The subject is intriguing. These are ladies-in-waiting for the emperor, Fujiwara. Notice the delicate refinement of the coloring, the matched fabrics, each enhancing the other like flowers in a bouquet. That was eight centuries ago, just before the rise of the first shogun, the first 'generalissimo' who would rule in the emperor's name."

  When he said "shogun," niece Mori shot him a quick admonitory glance. There was some kind of unmistakable electricity passing. Something left unspoken.

  "The Heian era ended with the great conflict between the Heike and Genji clans that led to the death of the ruling emperor in 1185 and the loss of the imperial sword at sea." Next he said something in guttural Japanese to Mori, obviously very intent, and indicated one corner of the painting, where the emperor sat. Her reply was quick and curt. Now, I only know a little of the language, maybe a couple of cuts above Berlitz level, but I did manage to pick up she wasn't talking
about the painting. Something to do with the emperor himself, though I missed the rapid-fire delivery.

  In response to Noda's question I tried to sound intelligent, saying the ink coloring looked well preserved, or some such auction house mumbo jumbo. It wasn't my thing really, which the man surely knew. He seemed to know everything else about me. After he listened politely, they switched back to Japanese and finally settled on a bid. I watched as she marked it in the catalogue—low six figures.

  Walton, I thought, you're dealing with a pair of heavy­weights.

  By then I'd decided not to bother bidding on anything. There were too many curious twists, not to mention the building deal. Surely the ritual had gone far enough, the samurai negotiating ploy of making your adversary be first to reveal his game plan.

  Why not bring up why we were there, just for the hell of it?

  When I did, Noda betrayed a fleeting smile. "But of course, the building." He made it sound like some kind of trivial annoyance, a nuisance to get out of the way so we could all get back to the serious work of admiring the pretty pictures.

  Touche, I thought. Round one to Noda, on points. "I assume you've had a look at the package of materials I messengered up to your hotel yesterday?"

  A broker friend had put together some listings for office buildings around midtown—it turned out the market was softening a touch due to the latest construction binge—and I'd hoped that maybe something would catch Noda's eye. Matter of fact, there were a couple of real bargains over near Sixth.

  "My people have examined it in detail. We would like to move forward on the twenty-story building on Third Avenue."

  For a second I thought he was joking. Sure we'd tossed in the write-up, because it fit his profile, but it was a crazy all- cash deal, and they wanted ninety million, firm.

  "Did you read the terms on that one? It's all—"

  "There is a vacant floor, is there not? Available immediately?"

  "Well, yes, but—"

  "There may be a few items to clarify—we would like your legal opinion concerning the leases of the existing tenants—but nothing major. If the seller is prepared, I think we could even go to contract early next week, while I'm here. I would like very much to close as soon as possible. If some of my staff can meet with the seller's attorneys over the weekend, perhaps we can start work."

  Over the weekend? No counter bid, no haggling? Now, you didn't have to be a brain surgeon to realize this was a fast-track deal; Matsuo Noda was a man in a hurry. "Looks like you just may have yourself a piece of property. I'll try and get hold of them in the morning, if I can, and start the ball rolling."

  "Excellent." He hesitated a moment, as though framing his words, then continued, "But in fact, Mr. Walton, we'd actually wanted to meet you tonight for an entirely different purpose. I'd hoped we might be working together on, well, some additional matters."

  "Something else?"

  "As you might surmise, we are not enlarging our presence here to no purpose. Tonight I wanted to tell you something about the objectives of Nippon, Inc. And then let you decide if what we propose merits your participation. Your financial expertise could make you a great asset to us."

  Hang on, I thought. This thing is starting to go a little fast.

  "What do you have in mind?"

  "First let me say you are a man I have long admired. Your style is not unlike my own. We both understand the impor­tance of moving cautiously, of keeping our adversaries off guard. Most of all, there is a rigorous discipline about your work. That is the style of bushido, the way of the warrior." He smiled, and his tone lightened. "I think we could cooperate very effectively."

  Already I was wondering whether I really wanted to "cooperate" any further with Matsuo Noda. Something about the man, and Miss Mori, made me very nervous. Besides, I was trying to finish off work now, not begin more. But he'd found out the one line that would keep me listening. He'd somehow discovered I was a deep admirer of the old-time military strategists of the East—such as Sun Tzu and Miyamoto Musashi.

  Like a hostile takeover bid, the ancient Japanese way of combat was ritualized, as mounted warriors rode out, an­nounced their lineage (to the SEC?), then matched up with men of equal renown. The samurai prized flexibility over brute strength; they had steel swords that handled like scalpels and body armor that was a woven mesh of lacquered-iron scales laced together in rows to create a "fabric" of metal. Those weapons and armor made for agile movement, easy feints, fast changes in strategy—all trademarks of mine on the corporate takeover battlefield.

  As a result, I fancied myself some kind of samurai too. . . .

  The question was, how did Noda know this?

  For some reason just then I glanced over toward Akira Mori. She appeared to be studying a scroll with the detach­ment of a Zen monk in zazen meditation, but she wasn't missing a syllable.

  "Care to run through whatever it is you have in mind?" I indicated one of the ottomans along the side of the room, now clearing as bidders rose to go inside. I watched as the dark- suited Japanese businessmen filed past, none with Noda's sense of style, and noticed that several seemed acquainted with him, pausing to offer obsequious bows.

  "With pleasure." He settled himself. Mori, now looking over some screens, still didn't elect to join us. "First, may I presume you already know something of Nippon, Inc.?"

  "No more than what I gleaned from that package you forwarded. Almost nothing, really."

  He laughed, a flash of even teeth. "Perhaps I should be pleased. These days too much visibility in the U.S. can sometimes stir up 'friction’."

  "Your prospectus indicated you help banks manage capital, so I assume you're looking to enter the financial picture here."

  That was the funny part, recall? There was no indication of any U.S. action in his prospectus. Yet I knew that, overall, Japan's U.S. investment, private and public, was in the tens and hundreds of billions. Pension funds and industries were building factories, financing corporations, snapping up Trea­sury paper. Japan had become a major source of fresh money for the U.S. and for the world. But Nippon, Inc. wasn't one of the players.

  "Yes, we intend to be concerned, initially, with the position of Japanese capital in the U.S. We are particularly interested in the matter of Treasury debentures."

  That was what anybody would have figured. Just that week the Journal had noted that Japanese investors were expected to cover half of our Treasury overdrafts for the year. They were advancing us the bucks to keep up that spending spree known as the national deficit. They sold us Toyotas; we sold them federal IOUs, using the proceeds to buy more Toyotas. In effect they were financing the good life, supplying us the "revolving credit" to buy their cars and DVDs and semi­conductors.

  "Treasuries always make a lot of sense." I picked up the thread. "Full faith and credit of the U.S. government, all the rest."

  "Quite so, Mr. Walton, but since all things are theoretically possible, over the past few months I've undertaken a small program through subsidiaries of Nippon, Inc. to begin cush­ioning Japan's exposure in your Treasury market somewhat." He paused. "Now that my effort may be expanding signifi­cantly, I was wondering if perhaps you might consent to serve as our American agent in that endeavor."

  For a second I didn't grasp what he was driving at, probably because my involvement seemed totally unnecessary. Surely he realized Treasuries were bought and sold here every day on the open market through dealer banks? No big deal. Why bother hiring a middleman?

  "I can make this quick. Why don't you just contact some of the authorized Japanese brokers here in New York? You must have used them before. Nomura Securities is well respected. There's also Nikko Securities. And Daiwa Securities America. They're all primary dealers in Treasury paper now. Buy or sell whatever you like."

  Noda nodded. "Of course. But we both know the financial markets can be very delicate. Impressions count for much, which is why I have chosen to keep a low profile. Consequent­ly, I would prefer to continue to operate f
or a time outside normal channels. And in that regard, I now believe it would be desirable to have an experienced American financial specialist assist us. You, in particular, would be ideal."

  I studied him. "Let me make sure I understand this. You're asking me to step in and begin fronting for you here in the Treasury market?"

  "That is correct, Mr. Walton." He rose and strolled over to the row of tachi swords, where Miss Mori was still standing. They were lying on a spread of dark velvet, and she was scrutinizing them with a connoisseur's eye.

  Now, I'd like to think I was a quick study of a situation, but this one was definitely out of whack somehow. If all Noda wanted was to roll over a little government paper, why the hush-hush? More to the point, why a whole building in midtown? He could easily do it from Tokyo. The scenario didn't compute.

  "Before this conversation goes any further, I'd like a better idea of the kind of activity you're talking about. Selling Treasuries? Moving the funds into corporate bonds or munis? Commercial paper, equities."

  "Sell?" He abruptly paused to watch as the staff began carefully assembling the weapons to take inside for the sale, and his mind seemed to wander. "You know, Mr. Walton, the sword always has held the greatest fascination for me. To make one of these, layers of steel of different hardness were hammered together like a sandwich, then reheated, ham­mered out, folded, again and again, until there were perhaps a million paper-thin layers." He pointed to one of the long blades now glistening in the light. "You cannot see it, of course, but they used a laminate of soft steel for the core, harder grades for the cutting edge. And whereas the edge was tempered quickly to preserve its sharpness, the core was made to cool very slowly, leaving it pliant." He suddenly smiled with what seemed embarrassment and turned back. "I take great inspiration from the sword, Mr. Walton. The man holding one must learn to meld with the spirit in the steel. He must become like it. What better than to meet the world with your hardest surface, yet maintain an inner flexibility, able to bend to circumstance as the need may arise?"

  He stood a moment as though lost in some reverie then chuckled. "Sometimes I do tend to go on and on. I believe it was selling you asked about. The fact is you would not be actually selling Treasury obligations."

  "Then what . . . ?"

  "Are you familiar with interest-rate futures?"

  "Of course." The question was so unexpected I answered almost before I thought. Futures contracts were part of the big new game on Wall Street, although most of the action was still out in Chicago, places like the Merc and the Board of Trade, left over from the old days when farmers sold their crops in advance at an agreed-upon price. The farmer "sold" his grain harvest to a speculator while it was still nothing but green sprouts. He was worried the price might drop before he got it to market; the speculator was praying it would head up. The farmer, interestingly, was selling something he didn't yet have. But even if the price of wheat suddenly tanked, he was covered.

  These days futures contracts were traded for all kinds of things whose value might change with time. High on that list were financial instruments such as Treasury notes and bonds, whose resale worth could drop if interest rates unexpectedly rose. If you owned a bond and were worried it might go down in value, you could hedge your exposure with a futures contract, in effect "selling" it in advance at the current price and letting somebody else assume the risk of future market uncertainty.

  Modern finance being the marvel it is, you could even sell bonds you didn't own, just like the farmer's nonexistent grain. The Wall Street crowd called this a "naked" contract, since you were obligated to go out and acquire that bond in the open market on the day you'd agreed to deliver it, even if the price had skyrocketed in the meantime. Or you had to try and buy back the contract. Of course, you were betting that price would go down, letting you pocket the difference.

  Pious spirits on the futures exchanges called these deals high finance and risk hedging. They operated, however, remarkably like legalized gambling. Dabbling in interest-rate futures was not for those with a dicey heart.

  "Our objective," Noda went on, "is to cushion Japan's exposure somewhat."

  "With futures contracts?"

  "Precisely. U.S. Treasury obligations are held by a variety of investors in Japan, but up until now we have made very little use of the protection possible in your futures markets. Nippon, Inc. will concern itself with that."

  I listened thoughtfully. "So you're saying you want to create an insurance program for Japanese investors in case the price of Treasuries weakens?"

  It made sense. If interest rates went up here, reducing the value of their government paper, then the price of his futures contracts would rise to offset the loss.

  I glanced over at Japan's monetary guru, Akira Mori, who was carefully examining her bronze fingernails. Was she the one behind all this sudden nervousness about America's financial health? What could these two know that we didn't, I won­dered. It was all a bit mysterious.

  One thing was no mystery, though. Whatever was going on with Matsuo Noda and Akira Mori gave me a very unsettled feeling.

  "I'm flattered." I looked him over. "But afraid I'll have to pass. This fall I plan to take off for a while and . . . catch up on some personal matters that—"

  "Mr. Walton," he cut in. "I would urge you not to lightly dismiss my proposal." He was staring back at me intensely. "I can only say for now that issues are involved . . . well, they encompass matters of grave international consequence." Another pause, followed by a noticeable hardening of tone. "Your other obligations cannot possibly be as important. It would be in your best interest to hear me out."

  Want the truth? At that moment all my negative vibes about Matsuo Noda crystallized. He wasn't threatening me exactly. Or maybe he was. The large viewing room was all but empty now. Maybe he'd deliberately waited before getting down to his real agenda.

  "My other 'obligations' happen to be very important to me just now."

  "Then please consider rearranging them."

  "Besides, my fees can be substantial." They weren't all that substantial, but I was looking to slow him down.

  "Your fees do not present a problem." He continued, "This afternoon a retainer of one hundred thousand dollars was deposited in your personal account at Chase."

  "What in hell . . .!"

  "Money is of no consequence in this matter, Mr. Walton. Time is."

  "You seem awfully sure I'll agree."

  "We expect your involvement to begin immediately. I cannot stress too strongly the urgency of what you will undertake." He smiled thinly. "I also feel confident a man who enjoys a challenge as much as you do will find our undertaking . . . intellectually rewarding."

  Seems I was hired and I hadn't even said yes.

  This guy had another think coming. Besides, he could get anybody to do what he wanted. He didn't need me. As I stood there, I started trying to guess the dimensions of Matsuo Noda's financial hedge. Taken all together, Japan probably had roughly a hundred billion and change tied up in U.S. government paper. No way could he be thinking of covering more than a fraction of that. I knew plenty of law clerks who could do it, for godsake. A few phone calls to a couple of floor traders in Chicago . . .

  "Look, the most I can do for you is recommend some very competent brokers I know to help you out. There shouldn't be too much to it. You'll just have to go easy. You can't hit the market makers in Chicago with too much action all at once. Prices get out of kilter. Then, too, there are exchange limits. . . ."

  "That is why we will be trading worldwide." Noda withdrew a folded sheet of paper from his breast pocket. "Perhaps you'd like to glance over our program. These are cumulative totals, which include our activity to date, but we will begin moving much more rapidly as soon as I've com­pleted all the financial arrangements with our institutional managers at home. Perhaps you will see why we need a monetary professional."

  I was still chewing on the "financial arrangements" part as I took the paper, opened it, and scann
ed the schedule of contracts. While I stood there, the room around us sort of blurred out. I had to sit down again. All his talk about samurai and nerves of steel was for real.

  Matsuo Noda had a program underway to sell futures on a pile of U.S. Treasury bills, notes, and bonds he didn't own, "naked," in an amount I had trouble grasping. I knew one thing, though: if interest rates headed down, raising the value of those presold obligations, he'd be forced to cover awesome losses. He'd be in a financial pickle that would make Brazil look flush. On the other hand, if some disaster occurred and U.S. interest rates suddenly shot sky high . . .

  Numbers? The CBOT's long-interest contracts, notes and bonds, are in denominations of a hundred thousand each; the Merc's short paper, bills and CDs, are in units of a million per. Finally I did some quick arithmetic and toted up the zeros. Something had to be wrong here. Nobody had balls that big. I decided to run through the figures again, just to be sure.

  It was along about then that I realized all Noda's pious talk about sheltering Japanese widows and orphans had been purest bullshit. Resting there in my hand was the biggest wager slip in world history. Assuming enough players could be found worldwide to take his action, he was planning to advance-sell U.S. Treasury IOUs in the amount of five hundred billion dollars. A full quarter of our national debt.

  His bet: something or somebody was about to push America over the brink.

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