"As you might surmise, we are not enlarging our presence here to no purpose. Tonight I wanted to tell you something about the objectives of Nippon, Inc. And then let you decide if what we propose merits your partic.i.p.ation. Your financial expertise could make you a great a.s.set to us."

Hang on, I thought. This thing is starting to go a little fast.

"What do you have in mind?"

"First let me say you are a man I have long admired. Your style is not unlike my own. We both understand the importance of moving cautiously, of keeping our adversaries off guard. Most of all, there is a rigorous discipline about your work. That is the style of _bushido_, the way of the warrior." He smiled, and his tone lightened. "I think we could cooperate very effectively."

Already I was wondering whether I really wanted to "cooperate" any further with Matsuo Noda. Something about the man, and Miss Mori, made me very nervous. Besides, I was trying to finish off work now, not begin more. But he'd found out the one line that would keep me listening. He'd somehow discovered I was a deep admirer of the old-time military strategists of the East--such as Sun Tzu and Miyamoto Musashi.

Like a hostile takeover bid, the ancient j.a.panese way of

combat was ritualized, as mounted warriors rode out, announced their lineage (to the SEC?), then matched up with men of equal renown. The samurai prized flexibility over brute strength; they had steel swords that handled like scalpels and body armor that was a woven mesh of lacquered-iron scales laced together in rows to create a "fabric" of metal. Those weapons and armor made for agile movement, easy feints, fast changes in strategy--all trademarks of mine on the corporate takeover battlefield.

As a result, I fancied myself some kind of samurai too. . . .

The question was, how did _Noda _know this?

For some reason just then I glanced over toward Akira Mori. She appeared to be studying a scroll with the detachment of a Zen monk in _zazen_ meditation, but she wasn't missing a syllable.

"Care to run through whatever it is you have in mind?" I indicated one of the ottomans along the side of the room, now clearing as bidders rose to go inside. I watched as the dark- suited j.a.panese businessmen filed past, none with Noda's sense of style, and noticed that several seemed acquainted with him, pausing to offer obsequious bows.

"With pleasure." He settled himself. Mori, now looking over some screens, still didn't elect to join us. "First, may I presume you already know something of Nippon, Inc.?"

"No more than what I gleaned from that package you forwarded. Almost nothing, really."

He laughed, a flash of even teeth. "Perhaps I should be pleased. These days too much visibility in the U.S. can sometimes stir up 'friction'."

"Your prospectus indicated you help banks manage capital, so I a.s.sume you're looking to enter the financial picture here."

That was the funny part, recall? There was no indication of any U.S.

action in his prospectus. Yet I knew that, overall, j.a.pan's U.S.

investment, private and public, was in the tens and hundreds of billions. Pension funds and industries were building factories, financing corporations, snapping up Treasury paper. j.a.pan had become a major source of fresh money for the U.S. and for the world. But Nippon, Inc. wasn't one of the players.

"Yes, we intend to be concerned, initially, with the position of j.a.panese capital in the U.S. We are particularly interested in the matter of Treasury debentures."

That was what anybody would have figured. Just that week the Journal had noted that j.a.panese investors were expected to cover half of our Treasury overdrafts for the year. They were advancing us the bucks to keep up that spending spree known as the national deficit. They sold us Toyotas; we sold them federal IOUs, using the proceeds to buy more Toyotas. In effect they were financing the good life, supplying us the "revolving credit" to buy their cars and DVDs and semiconductors.

"Treasuries always make a lot of sense." I picked up the thread. "Full faith and credit of the U.S. government, all the rest."

"Quite so, Mr. Walton, but since all things are theoretically possible, over the past few months I've undertaken a small program through subsidiaries of Nippon, Inc. to begin cushioning j.a.pan's exposure in your Treasury market somewhat." He paused. "Now that my effort may be expanding significantly, I was wondering if perhaps you might consent to serve as our American agent in that endeavor."

For a second I didn't grasp what he was driving at, probably because my involvement seemed totally unnecessary. Surely he realized Treasuries were bought and sold here every day on the open market through dealer banks? No big deal. Why bother hiring a middleman?

"I can make this quick. Why don't you just contact some of the authorized j.a.panese brokers here in New York? You must have used them before. Nomura Securities is well respected. There's also Nikko Securities. And Daiwa Securities America. They're all primary dealers in Treasury paper now. Buy or sell whatever you like."

Noda nodded. "Of course. But we both know the financial markets can be very delicate. Impressions count for much, which is why I have chosen to keep a low profile. Consequently, I would prefer to continue to operate for a time outside normal channels. And in that regard, I now believe it would be desirable to have an experienced American financial specialist a.s.sist us. You, in particular, would be ideal."

I studied him. "Let me make sure I understand this. You're asking me to step in and begin fronting for you here in the Treasury market?"

"That is correct, Mr. Walton." He rose and strolled over to the row of _tachi _swords, where Miss Mori was still standing. They were lying on a spread of dark velvet, and she was scrutinizing them with a connoisseur's eye.

Now, I'd like to think I was a quick study of a situation, but this one was definitely out of whack somehow. If all Noda wanted was to roll over a little government paper, why the hush-hush? More to the point, why a whole building in midtown? He could easily do it from Tokyo. The scenario didn't compute.

"Before this conversation goes any further, I'd like a better idea of the kind of activity you're talking about. Selling Treasuries? Moving the funds into corporate bonds or munis? Commercial paper, equities."

"Sell?" He abruptly paused to watch as the staff began carefully a.s.sembling the weapons to take inside for the sale, and his mind seemed to wander. "You know, Mr. Walton, the sword always has held the greatest fascination for me. To make one of these, layers of steel of different hardnesses were hammered together like a sandwich, then reheated, hammered out, folded, again and again, until there were perhaps a million paper-thin layers." He pointed to one of the long blades now glistening in the light. "You cannot see it, of course, but they used a laminate of soft steel for the core, harder grades for the cutting edge. And whereas the edge was tempered quickly to preserve its sharpness, the core was made to cool very slowly, leaving it pliant."

He suddenly smiled with what seemed embarra.s.sment and turned back. "I take great inspiration from the sword, Mr. Walton. The man holding one must learn to meld with the spirit in the steel. He must become like it. What better than to meet the world with your hardest surface, yet maintain an inner flexibility, able to bend to circ.u.mstance as the need may arise?"

He stood a moment as though lost in some reverie then chuckled.

"Sometimes I do tend to go on and on. I believe it was selling you asked about. The fact is you would not be actually selling Treasury obligations."

"Then what . . . ?"

"Are you familiar with interest-rate futures?"

"Of course." The question was so unexpected I answered almost before I thought. Futures contracts were part of the big new game on Wall Street, although most of the action was still out in Chicago, places like the Merc and the Board of Trade, left over from the old days when farmers sold their crops in advance at an agreed-upon price. The farmer "sold" his grain harvest to a speculator while it was still nothing but green sprouts. He was worried the price might drop before he got it to market; the speculator was praying it would head up. The farmer, interestingly, was selling something he didn't yet have. But even if the price of wheat suddenly tanked, he was covered.

These days futures contracts were traded for all kinds of things whose value might change with time. High on that list were financial instruments such as Treasury notes and bonds, whose resale worth could drop if interest rates unexpectedly rose. If you owned a bond and were worried it might go down in value, you could hedge your exposure with a futures contract, in effect "selling" it in advance at the current price and letting somebody else a.s.sume the risk of future market uncertainty.

Modern finance being the marvel it is, you could even sell bonds you didn't own, just like the farmer's nonexistent grain. The Wall Street crowd called this a "naked" contract, since you were obligated to go out and acquire that bond in the open market on the day you'd agreed to deliver it, even if the price had skyrocketed in the meantime. Or you had to try and buy back the contract. Of course, you were betting that price would go down, letting you pocket the difference.

Pious spirits on the futures exchanges called these deals high finance and risk hedging. They operated, however, remarkably like legalized gambling. Dabbling in interest-rate futures was not for those with a dicey heart.

"Our objective," Noda went on, "is to cushion j.a.pan's exposure somewhat."

"With futures contracts?"

"Precisely. U.S. Treasury obligations are held by a variety of investors in j.a.pan, but up until now we have made very little use of the protection possible in your futures markets. Nippon, Inc. will concern itself with that."

I listened thoughtfully. "So you're saying you want to create an insurance program for j.a.panese investors in case the price of Treasuries weakens?"

It made sense. If interest rates went up here, reducing the value of their government paper, then the price of his futures contracts would rise to offset the loss.

I glanced over at j.a.pan's monetary guru, Akira Mori, who

was carefully examining her bronze fingernails. Was she the one behind all this sudden nervousness about America's financial health? What could these two know that we didn't, I wondered. It was all a bit mysterious.

One thing was no mystery, though. Whatever was going on with Matsuo Noda and Akira Mori gave me a very unsettled feeling.

"I'm flattered." I looked him over. "But afraid I'll have to pa.s.s. This fall I plan to take off for a while and . . . catch up on some personal matters that--"

"Mr. Walton," he cut in. "I would urge you not to lightly dismiss my proposal." He was staring back at me intensely. "I can only say for now that issues are involved . . . well, they encompa.s.s matters of grave international consequence." Another pause, followed by a noticeable hardening of tone. "Your other obligations cannot possibly be as important. It would be in your best interest to hear me out."

Want the truth? At that moment all my negative vibes about Matsuo Noda crystallized. He wasn't threatening me exactly. Or maybe he was. The large viewing room was all but empty now. Maybe he'd deliberately waited before getting down to his real agenda.

"My other 'obligations' happen to be very important to me just now."

"Then please consider rearranging them."