Jeremy Warner's Outlook: If Japan is abandoning its zero interest rate policy, the times really must be a-changing

NatWest 3: justified extradition; Bow Street court and Guinness;

In the topsy-turvy world of zero interest rates which Japan has lived with for the past six years, lenders pay you to borrow and depositors must pay to lend. Welcome to the land of the setting sun, where price deflation has meant that you get richer by simply keeping your money under the mattress. In such an environment, to spend is madness, since you know that whatever you buy will be cheaper if you wait.

Of course, it was never quite like this. Any visitor to Tokyo would be hard pressed to recognise Japan's reluctant spenders among the throngs of shopaholics that crowd the capital city's streets. Yet though exaggerated, the analysis is essentially sound. Ever since the property and equity market bubbles burst in the late 1980s, Japan's problem has been lack of domestic demand. People have preferred to save, even on zero rates of interest, than to borrow and spend.

So although well flagged, yesterday's decision by the Bank of Japan to raise the discount rate to 0.25 per cent after six years of zero interest rates was a landmark event. The policy of pumping the system with liquidity was ended six months ago. Now, with the end of price deflation, interest rates are following suit.

Has the Bank of Japan moved too soon, with a rate hike which as in the past nips a still nascent economic recovery in the bud? Personally, I don't think so. Japan's economic woes are not confined to domestic demand, which is now again reasonably robust. An almost equally serious negative has been the closed nature of the Japanese economy, which remains acutely hostile to inward investment. The other major problem is the uneconomic nature of vast swathes of Japanese industry and investment.

Both these phenomena are supported by zero interest rates. Even if barriers are dismantled, foreigners are not going to invest if they cannot earn a return, and as long as fundamentally uncompetitative businesses pay nothing for their capital, they will continue to thrive, depriving Japan of progress. A quarter point is hardly anything. What's more, rates are unlikely to rise again until next year. But it is a start.

NatWest 3: justified extradition

Out of human sympathy for the men and their families, I have to date not fully spoken my mind about the case of the NatWest Three. But now they are gone I can restrain myself no longer. What a lot of nonsense has been written and said about this affair, right down to the title alone which, like the Birmingham Six, depicts them as victims of some gross miscarriage of justice.

In fact, these men are implicated in one of the biggest corporate frauds of the modern age, a reality which seems to have been entirely forgotten in all the table thumping about the well established inequities of the present extradition treaty.

In the circumstances, it is only proper that they should stand trial for a set of events which any right thinking person would regard as, at the very least, extraordinarily suspicious. The notion that David Bermingham and his colleagues should have been tried in Britain because the crime alleged happened here and was against a British institution is misleading and disingenuous. Even a cursory reading of the indictment reveals this to be a conspiracy which was concocted and largely executed in America. It was also Enron's money, not that of NatWest, which ended up in the three's personal bank accounts.

It is quite absurd to suggest that these men will not get a fair trial in a country whose legal process offers far more protections and safeguards against abuse than our own. As one e-mailer, Barry Turner, a lecturer in criminal law and criminal evidence at Leeds Law School, points out, the US has an enviable set of anti-fraud laws which, unlike Britain, actually have teeth.

Since I couldn't put it better myself, I'll let him speak for himself. "If we in the UK had such effective legal tools at our disposal then there would be good grounds for suggesting that the three should have been tried here. As it is, our fraud laws and feeble anti-white-collar-crime strategies would be totally inept at dealing with a fraud involving US companies and US shareholders". I hesitate to say it, but that perhaps was why the NatWest Three were so desperate to be tried here.

The new director general of the CBI, Richard Lambert, complains that the UK's role as a leading financial centre is being put in jeopardy by the imbalance in the extradition arrangements. This I very much doubt but even if he's right, just what is he trying to say here? That the City's position benefits from being thought a safe harbour for fraudsters and untoward behaviour?

No investment banker I know of, looking impartially at the facts of this case, would regard them as anything other than a dishonest endeavour. It is small wonder that the three left it until the moment they had resigned from NatWest to put their plans into action, for no compliance department worthy of the name would ever have sanctioned such a self-evidently disreputable series of transactions.

Law-abiding business people and financiers have nothing to fear from US prosecutors. If trade and confidence has been undermined, it is the self-serving scaremongering of the NatWest Three which has done the damage, not the fact of the extradition. Mr Bermingham and his colleagues should have gone to the US to face the music right at the start if they truly believed themselves to be innocent. The fact that they did not speaks volumes.

Bow Street court and Guinness

From Casanova to the Krays and from Jeremy Thorpe to Jonathan Aitken and the NatWest Three, Bow Street Magistrates Court is resonant with history. Besides the Old Bailey, it is probably the most famous court in the land, having down the ages played host to an extraordinary gallery of rogues, chancers and charmers. Now it is to be closed and moved to premises new, with the old site converted into a hotel. I cannot help but think this a terrible shame.

Thankfully, my own experience of the court has always been confined to reporting on it dealings. Among the most memorable to me were the four charged in connection with the Guinness affair. Before his appearance, Ernest Saunders, the former Guinness chairman, had been held overnight in a cell where he had had his shoe laces removed and been placed on suicide watch.

He looked terrible but was defiant and angry. It was the first time he had appeared in public since his sacking, but he was in no mood to talk to the press. After the hearing, he sped off down the road. "Mr Saunders. Did you do it?" someone pointlessly yelled after him. Answer came there none.

Sadder still was the appearance some months later of Tony Parnes, the stockbroker at the centre of the Guinness shares fraud. A man of boyish enthusiasm and strangely naive, wide-eyed innocence, there was a beguiling quality about him which was impossible to dislike. His nickname was "the animal", not as widely assumed at the time because of his supposedly aggressive style of doing business, but because when he started as a blue button on the floor of the stock exchange he had longish hair, which other traders likened to one of the top bands of the time, The Animals.

His appearance at Bow Street Magistrates Court followed a 12-hour flight from America, where he had fled in the hope of beginning a new life. He didn't get long to enjoy the Californian sunshine. When he arrived he was met on the tarmac by US marshals, who banged him up in a high security penitentiary until he agreed voluntarily to return to the UK to face charges. No messing about here. In the US, they know how to do extradition.

I always had a soft spot for Mr Parnes, who I grew to know quite well during the subsequent, interminable legal proceedings. He ended up serving more time behind bars than the rest of the Guinness defendants put together, quite unfairly in my view, but perhaps because of his attempted flight from justice. Let that be a lesson to us all.

j.warner@independent.co.uk