There are episodes in history that deservingly draw our attention -- some very small in scale but major in impact. In American history, one such moment at the start of the Revolutionary War has come to be known as "the shot that rang through the world." Another such momentous event recently appeared in Japan which, wrecked by a decade-long economic malaise and the potential threat of a financial implosion, saw its Nikkei stock index rise on a day that it should have plummeted.
After the tragic terrorist attacks in Washington and New York, Tokyo's stock index rose, baffling those who noticed and were not otherwise glued to the visual images of airplanes crashing into skyscrapers. Why did the Nikkei move up? What could explain the breath of life in an otherwise flat and dreadfully stale Japanese economy? Prime Minister Junichiro Koizumi and his fellow LDP colleagues should have called a Diet hearing to investigate. Or perhaps the prime minister's economic policy czar, Heizo Takenaka, should have attempted some explanation as to why Japan's stock index seemed to power past the shock of the day's earlier traumatic events.
What triggered this shiver of hope was the bankruptcy of Japan's third-largest retailer, Mycal. Rather than prolonging by sleight of hand its insolvency, Mycal forced a real and transparent reconciliation of its deteriorating assets and accumulating debts. In contrast to the life support that the Japanese government and several lead banks continue to apply to Daiei, Mycal's action earned the applause and support of markets.