Japan’s Money in the Mists

Shigezo Hayasaka, a gravely voiced, chain-smoking political consultant and former operative for one of Japan’s most legendary political bosses, well remembers when large amounts of campaign cash changed hands in the dead of night.

“I served as a postman carrying cash,” said Hayasaka, who for 23 years was a loyal aide to Kakuei Tanaka, the former prime minister. “Mainly I moved around during the night. This meant that I would deliver cash to the candidates under the instructions of Mr. Tanaka. The person who would receive the cash would be holding my hand and crying and thanking me and the boss.”

After resigning in 1974, Tanaka was convicted of taking a $2-million bribe from Lockheed Corp. That event began a series of campaign finance reforms that allows voters today to see “70% of the entire picture,” said Hayasaka. “The remaining 30% is in the mists.”

But what remains in the mists tells much about Japan’s current woes.

The Japanese put up with political corruption for years as a price of prosperity. Now, faced with a protracted economic downturn, many view the government as both dishonorable and incompetent.

Japan’s campaign finance situation in some ways parallels the well-known problems in the United States: vested interests routinely provide large contributions to elected officials while seeking special access and benefits from the government. But in Japan, where pork-barrel politics is the rule, the role of these private donors is more insidious, and the porous system of public disclosure makes it more difficult to track who is bankrolling the candidates.

Tales of financial and political venality have continued to dog Japan’s ruling Liberal Democratic Party and the government since Tanaka’s resignation. In 1993, $50 million worth of gold bars, cash and securities were found in a powerful lawmaker’s home and offices; this year, four senior bureaucrats were arrested for accepting lavish dinners and other gifts from interests they regulate.

The scandal-plagued system, driven by massive special-interest money, is now being blamed for contributing to the excesses of Japan’s “bubble economy” in the late 1980s and for helping to prevent the ruling Liberal Democratic Party from taking long-overdue corrective action against some of its longtime backers to revitalize the moribund Japanese economy. This includes cracking down on banks saddled with bad loans and shutting off credit to nearly insolvent construction companies.

One Country Tries to Reduce Corruption

Japan sought to reduce corruption in recent years through reforms, including limits on political contributions, partial government financing of election campaigns and increased disclosure of private contributions. Public funds now provided to political parties--which amount to 50% or more of campaign spending by most parties--have reduced the need for private donations.

But the changes by no means have led to genuine openness or “transparency”--a buzzword among today’s Japanese reformers. Getting a handle on the financial clout of vested interests remains virtually impossible--no doubt, by design.

Nor have the reforms restored confidence among cynical voters.

“Behind the scenes, everything is stained with money,” Satoru Sonoda, 54, a white-collar worker, said on the eve of July’s national election.

The July 12 Upper House vote in which the LDP suffered a stunning setback, forcing Prime Minister Ryutaro Hashimoto to resign, was sparked by anger with the LDP’s business-as-usual reign. But it also reflected growing disenchantment with the country’s political institutions.

“For Japan, the most important thing is how to recover the trust in the political system,” said Shinichi Yoshida, a political reporter and columnist for Asahi Shimbun, a leading newspaper.

A Public Distrust of Political Funds

Virtually no one accepts the public accounting of political funds raised by Japanese lawmakers--totals that can exceed $1 million a year per candidate.

“Japanese politicians are particularly averse to disclosure of this information,” said Tomoaki Iwai, a Tokiwa University professor who specializes in campaign finance. “They do not want private citizens to look into their finances because they know money may be their Achilles’ heel.”

Earlier this year, the LDP derailed a Socialist-sponsored ethics bill that would have barred legislators from accepting payment in exchange for intervening with government officials on behalf of private interests.

For Japanese candidates, some of the biggest financial donors and best-organized political forces--construction companies, banks and agricultural interests--are among the most inefficient sectors of the economy. These interests also are heavily dependent on the government for subsidies, contracts, tax breaks and protection from foreign competition.

The Japanese even have a term--zoku-giin--for members of the House of Representatives who act as intermediaries between private interests and the entrenched bureaucracy. This spares companies the need to hire lobbyists since they can, in effect, rent lawmakers.

“There is no transparency,” said Keizo Takemi, an LDP member of the Upper House and son of the former head of the politically potent Japan Medical Society.

Japanese law distinguishes between “political funds” raised during a parliament member’s entire six-year term and “campaign funds,” which cover only the brief official election period itself. Candidates are required to file annual reports with the Ministry of Home Affairs disclosing donors and how the money is spent.

Spending during the campaign period itself is limited based on the number of voters in each district--between about $300,000 and $500,000 most recently--but there are no such restrictions for the rest of the term. The total amount of annual contributions by individuals, companies and labor unions is subject to various limits.

Financial Trail Hard to Follow

The stakes are high. In 1996, an election year, the average LDP candidate raised $800,000, the Asahi Shimbun reported. (This exceeds the $724,208 that the average U.S. House incumbent raised during the two-year 1996 election cycle.)

A far higher percentage of these funds--particularly for LDP candidates--comes from donors with direct governmental interests. In Japan, unlike the U.S., there is no tradition of individual political giving for ideological or personal reasons. (In the U.S., individuals contribute more than half of all congressional funds.)

This is not so for all Japanese political parties. While the Socialists and the opposition Democratic Party are bolstered by large labor union donations, the Japan Communist Party relies on membership dues, subscriptions to its newspaper and individual donations. The Komeito Party, or Clean Government Party, the political arm of the Soka Gakkai, Japan’s largest lay Buddhist organization, receives much support from its adherents.

The annual reports filed by political organizations must list all contributions exceeding about $410 from companies, labor unions or individuals. Corporate and labor interests are limited to giving about $4,100 to a single political organization annually.

While these reports contain considerable information, it is difficult to fully assess which interests are backing particular candidates--and impossible to do so in a timely manner.

Takeshi Sasaki, a political scientist at Tokyo University, said he was bluntly told by a senior politician: “We provided an enormous amount of data that you cannot analyze.”

In Japan, fund-raising reports are filed only once a year--following the voting in an election-year--which means a candidate’s benefactors are not publicly disclosed until months after the campaign. In the U.S., candidates must file periodic reports throughout an election year.

None of this information in Japan is available electronically. And visitors to the Home Ministry cannot make copies of the reports. Moreover, many of the reports are filed in prefectural government offices and not the central Home Ministry in Tokyo, scattering a complete financial portrait nationwide. Also, the Home Ministry is headed by an LDP parliament member and has no enforcement responsibilities.

In the United States, federal campaign reports are filed--and accessible by computer--at the Federal Election Commission, the agency in Washington that enforces election laws.

Candidates Don’t Paint Full Fiscal Picture

Faced with little risk for incomplete or false reporting, many candidates do not provide accurate information, Japanese officials, journalists and academicians said. They may, for instance, spend more than the campaign limit but report only the maximum.

“Japan is still a cash society, which encourages the proliferation of political funny money,” said John F. Neuffer, a political analyst for Mitsui Marine Research Institute. “It’s much, much harder to track financial transactions here than in the United States, and that’s just fine by some of Japan’s politicians.”

A favored, and legal, tactic to avoid public notice is to make numerous donations slightly below the $410 threshold for disclosure (the U.S. figure is $200). Candidates routinely hold fund-raising parties with ticket prices just under this figure so that donors do not invite undesired scrutiny.

“The most important thing is that the players do not show their strategy--that they not do things that have to be reported,” said a longtime lobbyist and donor for a major Japanese company.

But some recent changes in Japan’s campaign finance system are working. The most keenly felt reform, politicians say, has made candidates accountable for the actions of their chief campaign aides and family members. This removed the defense of plausible deniability--that the candidate did not know of wrongdoing within his own campaign.

Violators are disqualified from serving in the parliament for five years. Two parliament members already have lost their seats after being prosecuted under this law. This has made lawmakers especially careful during the brief campaign period--when a welter of laws govern a candidate’s actions and authorities are on the alert, politicians say.

Still, political and campaign funds are only two of many ways that private interests can ingratiate themselves with lawmakers. This ranges from expensive golf outings to generous travel expenses (“car money”) to lavish wedding gifts.

It occasionally extends to placing a company employee on a parliament member’s staff, allowing him to help shape legislation and attend closed-door committee meetings, say sources familiar with this practice.

Critics of the nonstop money chase--including some parliament members--say the Japanese people share the blame.

This is because Japanese lawmakers must raise money for direct payment to their support groups--known as koenkai--in the form of cash presents during the summer and New Year’s gift-giving seasons as well as for weddings, funerals and births in the families of their supporters.

Lawmakers must also pay for year-round staff, offices, telephones and transportation costs to run their koenkai. (At the same time, a separate koenkai generally raises money from local interests for the lawmaker.)

Each weekend, in a costly time-honored ritual, legislators are expected to return to their home districts for rounds of morning-to-midnight appearances. This tradition is known as kankonsosai: weddings, funerals, festivals.

Officials Exploit Political Loopholes

The Home Ministry said that political candidates are barred from making any kind of donation to constituents. But, in a glaring loophole, they are permitted to make offerings at wedding and funerals they attend as long as the amount remains “within the range considered as social common sense”--an elastic standard.

“Politics is a very money-consuming business in Japan,” said Hideo Otake, a political science professor at Kyoto University. Some politicians are “forced to do some dirty business just to survive.”

The Japanese expect such cutting of corners. Voters queried randomly in various cities expressed skepticism that reforms had made things much more open.

“In Japan, there is always something behind the scenes, something that does not appear on the surface,” said Akira Doi, 48, who owns a small market on the island of Shikoku. “I think they will never, never report correctly.”

Times Tokyo Bureau Chief Sonni Efron and researcher Chiaki Kitada contributed to this story.

Miller, a reporter in The Times Washington bureau who has done extensive work on the financing of U.S. political campaigns, recently spent two months in Japan on a U.S.-Japan Foundation Media Fellowship.