Japan’s Finance Chief Quits Over Scandal

Finance Minister Kiichi Miyazawa resigned this morning to take responsibility for mishandling disclosures about his role in a major stock scandal, thereby removing the last key obstacle to passage of a sweeping tax reform package now stalled in the upper house of Parliament.

Miyazawa, the most senior Cabinet member who was one of three candidates considered for prime minister last year, had been sharply criticized by the opposition for being less than forthright about his connection to the scandal. So far, 16 members of Parliament or their aides have been implicated in insider trading of unlisted shares in Recruit Cosmos Co.

Already Miyazawa has changed his account three times on how his aide bought and sold the shares--in Miyazawa’s name, he was forced to admit, and for a profit of about $181,000, he disclosed on Dec. 1.

Critics were zeroing in on the question of whether the purchase was made with a controversial loan from a Recruit affiliate, and threatening to boycott deliberations on the tax reform legislation, when Miyazawa announced his resignation after a meeting with Prime Minister Noboru Takeshita.

Miyazawa, 69, told reporters he felt “deep responsibility” for his “inaccurate” testimony before Parliament on the affair.

“My thought is only to pass the tax reform as soon as possible,” he said. “I don’t care what happens to me.”

It was a crushing setback for Miyazawa, who is widely regarded as having an international outlook and is one of the few Japanese politicians who speaks fluent English. As finance minister since July, 1986, he has been identified as the architect of several major policy initiatives, most notably a Third World debt relief plan unveiled by Takeshita at the Toronto economic summit in June.

Miyazawa, like Takeshita and other leaders of the ruling Liberal Democratic Party, had staked his domestic political reputation on winning passage of the tax reform. Until today it was assumed he would stubbornly reject calls for his resignation until he saw the legislation through Parliament.

Takeshita, himself a former finance minister, will temporarily replace Miyazawa--holding both posts until he appoints a permanent replacement. A ranking official of the ruling Liberal Democratic Party said that would happen when Takeshita reshuffles his Cabinet, probably in January. Any shift in economic policy as a result of the change is extremely unlikely.

Miyazawa, a former Finance Ministry bureaucrat, rose to the top of the political world despite not fitting the mold of the traditional Japanese politician. He has been characterized as an aloof intellectual who lacks some of the people-handling skills of his rival Liberal Democratic faction leaders.

Although he was finance minister when the ethically questionable transactions of Recruit Cosmos stock took place--just before and after the real estate development firm was listed on the over-the-counter market in October, 1986--criticism has been heaped against Miyazawa primarily for mishandling the disclosures and not for his involvement in the affair.

“Everybody bought the stock,” said the high-ranking party official. “But there was the appearance that Mr. Miyazawa was lying about it until the truth came out.”