The blow to the national psyche shouldn't be ignored. What the rock-solid deutsche mark was to Germans following World War II, banks were to the Japanese. Huge, dominant and innovative, Japan's financial institutions long have been a source of pride and confidence here.
Yet the embarrassingly shaky start to the new fiscal year -- which began April 1 -- leave banks little latitude to argue they're on the path to recovery. Tokyo's response to Mizuho's problems also is instructive.
Sure, Japan's prime minister said the bank "has been really slacking off" and its finance minister said the fiasco "shows how unprepared the financial institutions are." But if government officials really meant business, they'd be calling for resignations at Mizuho. If bankers, especially ones at the world's biggest bank, can't conduct business effectively, pink slips seem in order.
All of this gets to the core of Japan's economic problems.
Like Mizuho, Japan's economy long ago grew too big for its own good. Asset markets, wages and prices all rose more in recent decades than the economy's underlying strengths supported. The bursting of Japan's bubble a decade ago set in motion deflationary forces that are gradually whittling away at a bloated economy.
But unlike Mizuho, which is too big to fail, Japan's economy has become both too big to succeed and too big to save. As globalization chips away at Japan's socialist infrastructure, the nation is realizing that its costs and wages are too high to compete with China and Southeast Asia.
Yes, size does matter, and Japan is realizing that bigger isn't always better.
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