Wealth & Money Quote by Toshihiko Fukui

A former central banker doesn’t need to name names to land a punch. Fukui’s line is a quiet indictment of what happens when the institutions meant to allocate capital become too fragile to admit their own mistakes. “Weak balance sheets” isn’t just accounting jargon; it’s a psychological condition. Under-capitalized banks can’t afford to recognize losses, because writing down bad loans would expose them as weaker still. So they do the next best thing: extend and pretend.

The deceptively mild phrasing - “continue lending” and “leave them existing” - points to a deeper pathology: survival financing. Credit isn’t being used to fund productivity or risk-taking; it’s being used to avoid embarrassment, regulatory scrutiny, or outright failure. The subtext is that the bank’s incentives flip. Instead of disciplining unprofitable firms, it props them up, because liquidation would boomerang back onto the lender’s own books. Unprofitable businesses become “zombies,” and the bank becomes their life-support machine.

The context is Japan’s post-bubble era, when the bad-loan overhang and hesitant recapitalization produced a long economic malaise. Fukui is gesturing at a macro-level consequence that reads like a moral lesson: when banks can’t take losses, they can’t tell the truth about the economy. Resources get trapped in the past, new entrants are starved of credit, and “stability” becomes a euphemism for stagnation. In one sentence, he sketches how financial weakness quietly reproduces economic weakness.