Scandal Shakes Japan, Won’t Topple Party

Japan’s political world is embroiled in a major bribery scandal, creating a crisis of confidence for the conservative, pro-American party that has ruled without serious challenge for more than 33 years.

Opinion polls suggest the public is furious. Leftist opposition parties are sabotaging proceedings on the budget in Parliament. An ostensibly independent prosecutor’s office is flexing its muscles, having arrested a dozen people--including a top bureaucrat and a venerable business leader--and aroused fears that several lawmakers may become targets in a widening criminal probe of influence peddling in the Recruit affair.

No need for alarm, though. Despite the atmosphere of near-panic, nothing fundamental is expected to change here--even if the Cabinet of Prime Minister Noboru Takeshita collapses, even if prosecutors find reason to indict former Prime Minister Yasuhiro Nakasone, even if the ruling Liberal Democratic Party suffers an embarrassing setback in an election for the upper house of Parliament tentatively scheduled for July.

No one, not even the most vociferous detractors of corrupt “money politics,” doubts that the Liberal Democrats will keep their perennial grip on Parliament through what has become a de facto one-party system. Although there may be some concessions made on “political reform,” a buzzword for re-engineering questionable political fund-raising techniques, Japan’s domestic and foreign policies are unlikely to change a jot.

“Unfortunately, the Japan Socialist Party isn’t strong enough to take power if Takeshita falls,” conceded Osamu Yatabe, a member of Parliament who heads the Socialists’ task force on the Recruit matter. “We can only submit ourselves to the people’s judgment once the lower house is dissolved.”

That may be wishful thinking. Takeshita and his party have rejected calls for the dissolution of Parliament or for a double election in July, and the prime minister has summed up his political philosophy in the face of adversity with the single word perseverance.

In other words, Takeshita believes, resolutely, that he does not need to budge. Even if he does fall, he would surely be replaced by another conservative with a nearly identical program.

Critics See Ethical Vacuum

Still, the Recruit scandal, as the stock-trading and influence-peddling affair is called, warrants the attention of the world because it exposes what critics contend is an ethical vacuum in the highest echelons of the Japanese leadership, a matter of concern as Japan expands its role as a global power.

To outsiders, the affair is murky to the point of opacity, and it hinges on some rather picayune details that resist comprehension by the legalistic Western mind. But it is well worth the effort to plumb the meaning of the Recruit scandal, if for nothing else than a better understanding of Japan’s special brand of democracy, where stability reigns supreme.

Public opinion surveys would lead one to believe that Takeshita’s days are numbered and that the Liberal Democrats are on the run. Public support for Takeshita’s Cabinet has plummeted to extraordinary lows--15% according to the Asahi newspaper, and 13.1% according to the Nihon Keizai Shimbun, the leading financial daily.

The problem stems from allegations that Takeshita and other top leaders of the ruling party, including former Prime Minister Nakasone and several top contenders to succeed Takeshita, received windfall profits from insider trading in unlisted shares of a subsidiary of Recruit Co., a rapidly growing and diversifying employment services firm from which the scandal takes its name.

Although Takeshita and most of the 17 ruling--and opposition--lawmakers linked to the trading have said that transactions were carried out by aides without their personal knowledge, the disclosures seemed to confirm the conventional wisdom that Japanese politicians routinely turn to shady stock deals and other questionable sources of underground money to finance political activities.

With the airing of political dirty laundry since the scandal began to gyrate last July, politicians have issued abstract, half-hearted promises to reform themselves, and a hard crust of public cynicism has occasionally given way to open contempt.

“Parliament is a zoo,” scolded Ichiko Ishihara, a prominent business executive, when she appeared before the Liberal Democrats’ committee on political reform earlier this month. “Politicians forget common sense when they become lawmakers. They speak words of vague meaning that have currency only in their own society. It’s necessary for people in positions of responsibility to abandon their greed.”

A cycle of scandal, ritual outrage, atonement and consolidation has repeated itself throughout the regime of the Liberal Democrats, a loose coalition of conservatives who banded together and took power in 1955. The most notorious example was the Lockheed scandal, which saw former Prime Minister Kakuei Tanaka emerge the most powerful political kingmaker in postwar history, even after his arrest and later conviction on bribery charges.

The Recruit affair, however, is a scandal with a somewhat broader scope than the Lockheed case, which centered on cash bribes paid by the U.S. aircraft manufacturer to a select core of politicians and businessmen.

Now, the stain of corruption has spread to the sacrosanct upper ranks of the bureaucracy, where Japan’s elite officials have long managed the affairs of government, entirely above suspicion. The myth of the untouchable technocrat was destroyed March 8, when prosecutors arrested Takashi Kato, a former vice minister in the Labor Ministry, for receiving bribes.

The power of the Recruit scandal is that it sheds light on the informal system of gift-giving, influence peddling, connections and collusion by which important decisions are often made in Japan’s government and business circles. Foreigners who are perplexed about why they can’t get anything done in this country might be interested to take note of what is happening here.

Recruit’s founder and former chairman, Hiromasa Ezoe, 52, is accused of offering undervalued shares of Recruit Cosmos Co., his booming real estate development subsidiary, to about 160 business leaders and government officials in the mid-1980s in an attempt to buy his way into the clubby Japanese Establishment.

Ezoe apparently sought legitimacy for his upstart conglomerate, and persuaded then-Prime Minister Nakasone to appoint him to a prestigious government advisory panel on tax reform.

Three of Nakasone’s aides were among investors invited to buy Recruit Cosmos stock in 1985, before it was listed on the over-the-counter market and quadrupled in value the following year. The transactions netted nearly $1 million in tax-free capital gains for some investors.

Ezoe has been arrested for using the hot stock to bribe officials of the recently privatized telecommunications monopoly, Nippon Telegraph & Telephone (NTT), allegedly in connection with Recruit’s drive to diversify into the communications industry. He brought down with him one of the leading captains of Japanese industry, NTT’s former chairman, Hisashi Shinto, 78, arrested on bribery charges March 6.

Much controversy also surrounds the purchase by NTT of two U.S. supercomputers and their subsequent resale to Recruit.

Opposition members of Parliament allege that Nakasone served the interests of Recruit by arranging the computer sales, under the guise of acting to improve the bilateral trade imbalance, in his personal dealings with then-President Ronald Reagan.

Nakasone has vehemently denied the charge and engaged his detractors in a hair-splitting debate over the dates of contracts, news reports and summit meetings. NTT bought a total of four computers from Cray Research Co. and resold two of them to Recruit, which leases them out on a time-sharing basis.

The upshot of Nakasone’s defense appears to be that the former prime minister is either prevaricating before the Japanese public now, or that he slyly misrepresented one of the supercomputer sales two years ago to the American public. When Nakasone met Reagan in 1987, he unveiled an NTT supercomputer contract that he portrayed as a new concession to defuse mounting trade friction. But he now says he was only taking credit retroactively for a previously announced contract that, incidentally, happened to have been unrelated to Recruit.

Impasse in Parliament

To get to the bottom of the matter, the opposition has demanded that Nakasone testify before Parliament and vowed to obstruct parliamentary action on the fiscal 1989 budget, which is supposed to go into effect April 1, until he complies. Nakasone declined the invitation to salvage his tarnished name, and his position is backed by Takeshita and party leaders.

Although the opposition occupies so few seats that it has no formal leverage over parliamentary proceedings, its boycott of budget deliberations has resulted in an impasse in the chamber because the ruling party wishes to avoid appearing dictatorial. The bully image could hurt white-gloved conservative candidates at the polls far more than mere allegations of institutional corruption.

Harmony, knowledgeable pundits say, is second only to stability as a cardinal virtue in Japanese politics. The Liberal Democrats are already on thin ice in that department after ramming through unpopular tax-reform legislation during a Christmas Eve filibuster by the opposition. A new 3% consumption tax that goes into effect April 1 has been lumped together with the Recruit scandal in the disapproving eye of the public.

The Liberal Democrats recently suffered setbacks in strategic by-elections, losing a key vote for an empty upper house seat in Fukuoka, hastily withdrawing their candidate for governor in the conservative stronghold of Miyagi, and achieving a Pyrrhic victory in the Chiba gubernatorial race last week.

But if the lessons of the past hold true, the protest vote dares go only so far. The Japanese public tends toward malaise rather than electoral revolt, partly out of a sense of resignation that although the ruling party may be flawed, the alternative is a sanctimonious opposition that is hardly fit to govern.

The largest opposition party, the Socialists, advocates scrapping security ties with the United States, a proposition that is unacceptable to many Japanese. The Japanese Communist Party came out of the Recruit scandal untainted.

A bombshell arrest of a ranking politician could drastically alter the course of events, but that, too, appears unlikely. Although Yusuke Yoshinaga, chief prosecutor on the Recruit case, has a reputation as a crusader, he must work within a system that does not encourage the pursuit of blind justice.

INSIDER TRADING: THE SCANDAL IN JAPAN

The Recruit scandal sheds light on the informal system of gift-giving, influence peddling, connections and collusion by which important decisions are often made in Japan’s government and business circles. The affair involves insider stock trading of unlisted shares of a subsidiary of Recruit Co., a rapidly growing and diversifying employment services firm. Here are some key points in the scandal:

Recruit’s founder and former chairman, Hiromasa Ezoe, is accused of offering undervalued shares of Recruit Cosmos Co., his real estate development subsidiary, to about 160 business leaders and government officials--including Prime Minister Noboru Takeshita--in the mid-1980s, before it was listed on the over-the-counter market and quadrupled in value in 1986.

Ezoe has been arrested for using the hot stock to bribe officials of the recently privatized telecommunications monopoly, Nippon Telegraph & Telephone, allegedly in connection with Recruit’s drive to diversify into the communications industry. NTT’s former chairman, Hisashi Shinto, has been arrested on bribery charges.

Takeshita and most of the 17 ruling--and opposition--lawmakers linked to the trading have said that the transactions were carried out by aides without their personal knowledge.