Modern Villainess – Volume 1 Chapter 2 Explanation

Author: Flowingcloud    Editor: Arocks141

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Warning! Contains spoilers of V1C2 of Modern villainess!

Welcome to the ​It’s a Little Hard to be a Villainess of an Otome Game in Modern Society Volume 1 Chapter 2 economic explanation chapter.

Preface
Many people have mentioned that they enjoyed the chapter but don’t really understand what was going on. I thought I’d write like a super long translator note, but I decided to just make a special page just for it. I plan to write one of these at the end of every chapter heavily focused on economics or politics.

Differences Between Novel World and Real Life
First, this is an alternative universe, thus there are slight differences that do not exist in the real world, but apply to the “otome game” world that Runa’s in. The biggest one is “zaibatsu” translated as ‘business conglomerate’ or simply ‘conglomerate’. This is very similar to ‘chaebol’ in Korea. Basically, these “zaibatsu” are large industrial conglomerates that are run and controlled by an owner or family. A conglomerate, for those who do not know, one corporate group that controls many companies in different fields.

Let’s use the Far East Group as an example. Far East Group had many subsidiaries under them: Far East Bank (defunct, now ‘Keika Bank’ after the merger), Far East Life, Far East Hotels, and Far East Land Development. These are companies in different fields, and this is what a conglomerate is. There are many conglomerates, but what makes a conglomerate a “zaibatsu” is that the majority of shares belong to a single family or individual. On top of that, “zaibatsus” are vertical monopolies.

What is a vertical monopoly?

(From Wikipedia)

“Zaibatsus” have companies that have control of every single part of the production process. I can keep explaining, but you should do your own research if interested. After World War II in the real world, the Japanese had to unconditionally surrender but they did not have to in this world. One part of the unconditional surrender was that all “zaibatsu” had to dissolve.

Japanese Economy History
There was a bit of Japanese economic history that you probably needed to understand prior to reading. Japan was doing very well in the 70s and 80s and people throughout the world were trying to copy the Japanese business model, but most of this all went downhill after the Japanese asset price bubble. From 1986 to 1991, Japanese real estate and stock prices were VERY inflated. In early 1992, this price bubble burst, and Japan’s economy stagnated. There was no “huge crash” that happened all in one day, but the process happened over time. From here on, the Japanese economy for the next decade had stagnated. Understanding this backstory is very important. This is why Runa had to throw herself into the world of economics and politics in order to save her father’s group, Far East Group, from dragging the rest of Keika Group into going under. Additionally, there are many things that occurred in the novel due to the bubble.

Part 5 and 6
In part 5 and 6, Runa makes her first sack of cash through IT. I believe I do not have to go in-depth about how IT-related businesses were in a bull market (basically, stocks only go up) at the time. This eventually leads to the Dot-com Bubble, but that is for another day. Additionally, she earns money from FOREX. She trades when the yen is roughly at 1 USD to 80 YEN. From this, we can recognize that she is currently in 1995 since this is when the huge drip occurred for the one-year period.

Non-Performing Loans (NPL)
A HUGE issue revolving around this entire chapter is NPL. A non-performing loan (NPL) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full (due to reasons like bankruptcy, etc.).

Far East Group is suffering from the bubble I mentioned early. The group, via Far East Land Development, over-speculated and is now suffering from NPL. How do you ask? Remember I mentioned a vertical monopoly? Far East Land Development “borrowed” money from Far East Bank. See how they’re screwed now? Far East Bank is suffering from NPL from a company from THEIR OWN GROUP. Even if Far East Bank took the collateral of Far East Land Development and sold it off, it wouldn’t be worth much since land value had devalued.

Thus, Runa had to earn money to pay off their debts so Far East Group doesn’t drag down Keika Group. (Don’t forget Far East Group is a subsidiary of Keika Group right now due to Runa’s father’s scandal.) I won’t explain exactly how NPL are disposed of, but in the novel, it seems like they are being disposed of through asset management companies.

Hokkaido Takushoku Bank
The latter half of the chapter focuses heavily on events that occurred in 1997—namely the bankruptcy of Hokkaido Takushoku Bank. This was a HUGE issue at the time. How big? They were the 11th biggest bank in Japan at the time. Let’s start off with the line mentioned in part 7.

“From the stock price perspective, it’s practically bankrupt.”
—March 1997, a few words from the commentator from “Sunday Project” news program—

Like many other banks, Hokkaido Takushoku Bank suffered from NPL as well, however, they were down bad. They had NPL that exceeded over one trillion yen in the early 90s (later 2.3 trillion mentioned in part 8). This was roughly 20 billion USD in 1997 time, which would be worth a lot more now in modern days.

Sankai Securities and Ichiyama Securities are parodies of Sanyo Securities and Central Gunma Trust Fund (now Gunma Trust Fund). Runa acquires them in part 7 because she wanted to stop the chain bankruptcy caused by them. In history, Sanyo Securities went bankrupt in November 1997 which caused Central Gunma Trust to default on roughly one billion yen worth of unsecured loans. This caused every funding facility, including Hokkaido Takushoku Bank, to order an emergency decrease in its credit line (the amount of money you can loan at once to an individual/group). This caused cash flow in the call market (a very complex mechanism you don’t need to understand) and caused Hokkaido Takushoku Bank to suffer even further. Thus, in the same month, the board of directors met and declared bankruptcy in the same month.

Referring to the quote above, how down bad were they? They reached 59 yen a stock at one point, almost breaking through the 50 yen barrier. Generally, once a stock goes under 1 USD then it’s doomed, and in Japan, 100 yen being the mark. Meaning, the bank was already doomed. (This was all mentioned in part 9.)

In part 8, Naomi’s son, Yuki, comes to beg Runa to deposit money at Hokkaido Takushoku Bank to keep the bank afloat. In history, by the end of September 1997, deposits had descended to 5.9 trillion yen. If you’re wondering, that’s not a good number. The reason why Yuki comes is because the merger between Hokkaido Takushoku Bank and Hokkaido Bank (the second-biggest bank in Hokkaido and was not mentioned explicitly in the novel) did not go through. This is the main reason why the bank went completely bankrupt instead of being saved one way or another. Timeline-wise, however, the events occurred at different timings.

After his visit, Runa realized that acquiring Sankai Securities was not enough and she decided to acquire the entire bank to save the economy. Ichijo uses the pudding example to explain how NPL works and she realizes that she does not have enough money to save them even if she went broke. In fact, no one does in Japan except for one entity: the Bank of Japan.

Bank of Japan’s Nichigin Tokuyu (Special Loan)
Bank of Japan is the central bank of Japan, similar to what the Federal Exchange is to the United States, etc. What is the Nichigin Tokuyu? The last resort method for the government to save companies. Why is it “last resort”? Because they’re unsecured and unlimited. What does that mean? You do not need collateral for the loan and you can borrow as much as the government is willing to give you.

Runa uses the Nichigin Tokuyu to borrow a massive amount of money, into the trillions digit, to purchase Ichiyama Securities and Hokkaido Takushoku Bank. Of course, the debt came with conditions, which included giving up rights to management (this was mentioned). Using this purchase of Hokkaido Takushoku Bank via Moonlight Fund (Runa and co), the government used this as a model of how to recover banks from the current crisis. Then, Runa merged Far East Bank with Hokkaido Takushoku Bank and a bunch of other banks who are in deep shit to save them from bankruptcy, part of the deal of dishing out the special loan, thus forming a mega-bank called “Keika Bank”, since she’s part of the Keikain family.

Conclusion
Why does Runa do this? Out of self-satisfaction in my opinion. There was nothing to “gain” for her since she just owes a crap ton of money. At least, Runa has plans to pay off her debt with the release of a certain OS system in 1998, *cough cough* Microsoft Windows 98 *cough cough*. I guess what she did end up with was politicians owning her political favors, but clearly, that’s not what she was hoping for. I’ll leave why she did this up to your own interpretation. I hope this essay-like explanation helped. Please leave a comment to tell me whether you want to see more of these explanations, as well as pointing out mistakes I made have made. See you next explanation.