Argument

Yen and the Art of Political Scandals

What the downfall of Japan’s economy minister tells us about the surprising amount of corruption in honest Tokyo.

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Economy Minister Akira Amari, one of the chief architects of Japan’s economic policies, resigned on Jan. 28 in a scandal over payments by a construction company looking for political favors. The sudden departure had a dreary familiarity in Japan’s political world: Amari is the fourth cabinet member to step down in scandal since Prime Minister Shinzo Abe took office in December 2012. His disgraceful departure is the 12th for Japan’s government that have involved political funding scandals since 2000.

Aside from the normal embarrassment of such a high-level resignation, Amari’s departure is especially worrying for Abe since he was Japan’s point person on the Trans-Pacific Partnership, the critically important draft free-trade agreement. Led by the United States and Japan, the TPP involves 12 nations on the Pacific Rim — representing 40 percent of global GDP — and counterbalances a growing China. The resignation also comes as new warnings emerge about the much-vaunted program of “Abenomics” that is meant to revive Japan’s growth and end 25 years of deflationary pressures that have crimped demand. In a tacit admission that all was not well, the Bank of Japan introduced in late January negative interest rates on some types of accounts that commercial banks hold — to penalize banks that park their money at the central bank and to put further pressure on them to reinvigorate loan operations.

The Amari scandal first emerged on Jan. 21, when Shukan Bunshun, one of Japan’s notoriously gossipy and therefore widely read weekly magazines, said that Amari had accepted roughly $100,000 from a construction company looking for help with government regulators over a three-year period. In response, Amari said that an independent investigation confirmed that his aides had received $42,000 but failed to report $25,000 of the money as a political donation and instead pocketed the cash. Amari said he himself had received another $8,300 but properly declared it as a donation. While blaming his aide for the missing money, Amari said he was resigning “in consideration of my responsibility to oversee my secretaries as a national lawmaker, my duty as a minister, and my pride as a politician.” (Two aides have also since resigned.)

Amari is the fourth minister to resign under a cloud since Abe took office in late 2012, but the scandals came even more fast and furious when he was last prime minister in 2006-2007: There were five such notable events in his just 12 months in office, including the suicide of an agriculture minister who was under fire for a political funding scandal. Then, a perfect storm of problems — the scandals, an accompanying drop in public support levels below 30 percent, Abe’s Liberal Democratic Party (LDP) losing control of the upper house of parliament for the first time in more than 50 years, and health problems — forced him to step down after only 12 months in office.

Despite Japan’s famed image for honesty — it has among the lowest overall crime rates in the world with a homicide rate ranked second after Singapore — it does less well on the global scale in terms of corruption. According to the accountability organization Transparency International, it comes in at a respectable but by no means squeaky-clean ranking of 18th (the United States actually does slightly better, at 16th).

Such political scandals are often referred to in Japan as a form of Kabuki, the highly stylized national dramatic theater. Still, this resignation came as a surprise. Major newspapers had predicted that he would weather the storm given his close ties to Abe. Just a day before the resignation, Abe said that he hoped Amari would “continue to push forward his important duties including economic revitalization and TPP.”

Another surprise was the detailed account of the Shukan Bunshun story, which went beyond the usual innuendo and rumor-mongering. The source of the story, described as executive Takeshi Isshiki from an unidentified construction company, told the magazine that he kept meticulous records of each exchange, including 50 hours of recorded conversation with Amari and his aides — and serial numbers of some of the cash paid to the minister. The day that he resigned, a new edition of the magazine hit the streets with more details, including a description of how its reporter witnessed and caught on camera a scene where the executive exchanged cash with one of Amari’s aides.

Abe’s camp was quick to defend Amari against what it argued was entrapment. “With all the recording and photos, the whole thing sounds like a setup,” the LDP’s vice president, Masahiko Komura, told reporters in late January. But some analysts said that the amount of evidence gathered made it difficult for Amari to deny the suspicious flow of cash. “What comes as a surprise is the amount of money and the extended period of time in which it was paid,” said Yasunori Sone, a political science professor at Keio University. While Sone says that payment in the amount that Amari personally received — roughly $8,300 — is likely a common occurrence among Japanese lawmakers, that a cabinet minister of Amari’s importance could attempt to influence a government agency for an individual corporation is a glaring problem in Japan’s political system. “Amari could very well not have known any of the details,” he said. “But it’s evident that his aides were using his name for personal gain — he’s accountable for his ignorance.”

Tokyo embarked on a serious drive to curtail corruption after the “father of all scandals”: In 1974, the monthly magazine Bungei Shunju brought down Prime Minister Kakuei Tanaka, the country’s most powerful postwar leader, by reporting that he had accepted bribes from Lockheed Corp. (The company later said that it had paid around $2 million for help winning an aircraft contract with a Japanese airline.) Today, there is much more of a system of strict accountability for bribe-taking and a far tighter standard of campaign finance than in the United States. Indeed, by U.S. standards, running for office in Japan is cheap: The laws severely restrict television ads and other forms of advertising. But paying small amounts of money for favors remains common in Japanese culture, not only in politics but in society. A blessing for yourself or your business by the local Shinto priest, for example, comes at a set price. The refusal of politicians to stop exchanging favors for relatively small amounts of money — even after campaign-funding laws have been tightened — is what drives scandals, said Jun Iio, a political science professor at the National Graduate Institute for Policy Studies in Tokyo. The reality, Iio said, is that Japan’s political machinery continues to exist in the world of pork-barreling and kickbacks.

Today, even small transgressions can mean resignations from high office. In October 2014, Yuko Obuchi, the country’s high-profile trade and industry minister, stepped down over media reports that her official campaign group had paid for theater tickets for supporters. Obuchi, daughter of a former prime minister, was already being touted as a potential prime minister, despite her relative inexperience. And Justice Minister Midori Matsushima resigned at the same time in a separate scandal when she allegedly broke laws against bribery by handing out inexpensive hand-held fans to supporters that were printed with her name and photograph.

But the shame of scandal doesn’t always mean a political death. One of Amari’s predecessors, Economy Minister Fukushiro Nukaga, was forced to step down in 2001 amid a political funds scandal. By 2003, he was the LDP’s policy chief and by 2007, finance minister — a position often far more powerful than his previous role. In 2004, Yasuo Fukuda had to resign from the powerful post of chief cabinet secretary for not paying his social insurance taxes; three years later, he was elected prime minister.

Similarly, Amari’s career will probably survive this scandal. “The political culture in Japan is to nip scandals in the bud and to not draw them out,” Iio said. “Amari did just that, and while he may have gotten burned in the short term, it’s hardly the end of his political career.” But the tumult caused in the Amari departure has also distracted from the structural economic reforms necessary to build a lasting economic recovery. In other words, the final scorecard for this scandal is: fine for Amari, bad for Japan’s economy.

Image Credit: JIJI PRESS/AFP/Getty Images

Toko Sekiguchi, formerly a correspondent with the Wall Street Journal and Bloomberg, is a freelance writer based in Tokyo.

William Sposato is a Tokyo-based writer who has been following Japan’s economy and financial markets for more than 15 years.

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