Japan’s Justice Chief Quits in Stock Scandal

Justice Minister Takashi Hasegawa resigned early today amid criticism over donations he received from Recruit Co., the company at the center of a stock-trading and alleged influence-peddling scandal that is rocking the Japanese government.

Hasegawa had been appointed to the post just three days earlier in a Cabinet reshuffle aimed at restoring public confidence in the administration of Prime Minister Noboru Takeshita.

Although Hasegawa, 76, was not accused of breaking any law or ethical code in receiving the Recruit donations, which totaled about $46,000 over the last 12 years, the financial link to the company damaged his credibility as the very official named to oversee a widening criminal investigation of the affair.

Hasegawa, a vocal critic of political corruption who was characterized as a reform-minded cornerstone of the new Cabinet, declared that he had “no connections” to Recruit when he assumed the Cabinet post on Tuesday.

The 12-term lawmaker has said he did not know about the donations from Recruit at that time. In a news conference this morning, he apologized for his carelessness and said he is resigning because “it was not proper for a Cabinet minister in charge of investigating the Recruit scandal to have received donations from the company.”

Opposition politicians had called for his resignation and threatened to raise the issue when Parliament reconvenes in February.

Meanwhile, Keizo Obuchi, whom Takeshita reappointed as chief Cabinet secretary, said in a news conference Thursday night that he also received regular donations from Recruit amounting to about $2,000 a year. Takeshita had asked Obuchi to investigate whether any other Cabinet ministers had received donations.

Obuchi told reporters this morning that he would not resign his post.

None of the politicians accused in the Recruit affair, which has festered for the last six months, have been subject to criminal charges. Although a criminal investigation appears to be closing in on some peripheral characters in the case and one Recruit employee has pleaded guilty to attempted bribery, it remains doubtful that authorities will ever be able to prove that politicians committed any serious crimes.

But mounting public furor over the case suggests that the Japanese are coming to grips with broad ethical questions about the way their political leaders raise funds.

Ironically, the crux of the Recruit scandal is the widespread belief that Japanese politicians seek underground funds because they can no longer survive on tightly regulated, above-board contributions of the kind Hasegawa and Obuchi received from Recruit. Organizations can donate no more than 1.5 million yen ($12,000) a year to each politician.

Stock Market a Source

Analysts say the most lucrative method of raising surreptitious political money is to turn to Japan’s bullish stock markets, where price manipulation, insider trading and wildly profitable capital gains are common.

Takeshita himself was among those found to have benefited from questionable transactions in unlisted shares of a Recruit subsidiary. He attempted to allay criticism and seize the initiative in the nation’s soul-searching by reshuffling his Cabinet on Tuesday and investing it with a mandate for “political reform.”

Takeshita further announced Wednesday that he would create special committees in the government and the ruling Liberal Democratic Party to study reforms in political fund-raising and the electoral system. But his image as a reformer unraveled with the disclosures of donations by Recruit to Hasegawa’s political support group.

Besides Hasegawa, news reports said that Tsutomu Hata, the new agriculture minister, and Ken Harada, newly appointed director general of the Economic Planning Agency, also acknowledged that Recruit had bought tickets for their fund-raising parties. Hata said the ticket-buying was in 1986, but he did not disclose the amount. Harada said he had received donations from Recruit for more than 10 years.

Takeshita already had lost the most senior member of his administration when Kiichi Miyazawa, once a contender to become premier, was forced to resign as finance minister Dec. 9 because he repeatedly changed his story about his involvement in the Recruit affair.

Takeshita, Miyazawa and many other prominent members of the ruling party, as well as a number of opposition politicians, business leaders and bureaucrats, benefited from trading in unlisted shares of Recruit Cosmos Co., the booming real estate subsidiary of the Recruit Co. conglomerate.

Privileged investors, in many cases trusted aides of the politicians, were able to reap tax-free windfall profits when the share price skyrocketed after the stock was listed on the over-the-counter market in October, 1986.

In a rare confirmation by a politician that such activities are well-established, Michio Watanabe, chairman of the ruling party’s policy research council, said earlier this month: “Stock prices in Japan have been on the rise consistently in recent years, and I’m sure there are some (politicians) who have engaged in financial engineering to raise funds.”

Watanabe, who also has been linked to Recruit Cosmos trading, decried the burdensome costs of politicking in Japan. To meet the rising expenses of election campaigns and routine administrative work, lawmakers must increasingly turn to alternative sources.

Although the investors apparently broke no laws, critics contend that Hiromasa Ezoe, the entrepreneurial founder of Recruit Co., was in effect buying influence among the politicians by inviting them to invest in a stock that was certain to gain value.