In league with the yakuza
For several days in early 1996, something happened in Japan that would have been unimaginable anywhere else. The Ministry of Finance, the most powerful branch of Japan's bureaucracy, was being besieged by yakuza - or gangsters.
Riot police surrounded the ministry while bureaucrats were forced to use a side entrance as specially equipped trucks containing hundreds of gangsters disguised as right-wing radicals drove around the ministry in slow circles, broadcasting messages aimed at ministry officials.
This display of gang might was made as the Government cobbled together its policy on how to use public money to shut down the jusen, housing loan companies.
'Go home, you must be tired, you are wasting electricity by staying in your offices,' was the message repeatedly broadcast from one truck, in an effort to demoralise ministry officials. The unspoken threat was obvious. Tadashi Ogawa, the ministry's top bureaucrat, when asked by reporters at the time if he feared for his life, tried to dissociate himself from any effort to crack down on the perpetrators of a jusen fraud which involved the yakuza.
The jusen were originally set up as housing loan companies in the 1970s but began lending to speculators in the late 1980s after banks took over the housing loan market. The companies had been borrowing money from banks and agricultural co-operatives and lending it to speculators, including gangsters. When the jusen went broke, the Government repaid part of the loans. Taxpayers' funds were needed because it turned out the jusen had lent about half of their 13 trillion yen (about HK$793 billion today) in still outstanding, and mostly non-recoverable, loans to gangsters.
In 1995 a long suppressed report arising from a government investigation revealed that the jusen, which were mostly run by former Finance Ministry officials, had formed corrupt associations with gangsters. It also revealed the full extent of their exposure through bad loans to the gangs.
To this day, the gangs have not paid back a penny of the money loaned to them and only a few token arrests have been made in one of the largest cases of financial fraud in history.
One of the keys to how corruption on such a grand scale was allowed to come about could be seen in a small incident at the time the ministry was under siege. Amid the intimidating broadcasts, a member of Japan's Security Police boarded the gangsters' control vehicle. The driver and the police officer were seen smiling at each other and seemed to be on extremely cordial terms. 'We will do one more circuit and then call it a day today,' the driver was heard telling the officer. The friendly aside revealed one of the sources of the enormous power Japan's gangsters wield: extremely close, almost symbiotic, relations with the police. They were able to threaten the very centre of Japan's power structure in part because of their relations with the police.
The relationship is one of mutual dependence. The police turn a blind eye to illegal activities in exchange for information, bribes and post-retirement jobs in gang-controlled industries. The gangs, for their part, rely on police protection to openly run, and advertise, illegal gambling and prostitution businesses throughout Japan.
The links are so open and systematic that few people in Japan bother to recall that they are indeed illegal. The most obvious example is pachinko, a form of slot-machine gambling that, with annual sales of 33 trillion yen, accounts for a greater portion of Japan's gross domestic product than automobiles do.
Playing pachinko is illegal, a crime compounded by exchanging prizes from it for cash. According to Koki Chuma, a ruling Liberal Democratic Party legislator who has been pushing to legalise pachinko, this exchange provides Japan's gangsters with one of their biggest sources of income.
The police have been actively lobbying to prevent pachinko from being legalised, he said. The reason? Because, while banned, the pachinko industry is one of the greatest sources of post-retirement jobs for the police. Even the public relations department at the National Police Agency admits many officers retire to jobs in the pachinko industry.
Mahjong for money is played brazenly at tens of thousands of mahjong parlours in Japan. 'Every so often the police will come and ask for some bribes but otherwise they leave us alone,' said Hiro Takahashi, owner of the Showa mahjong parlour near Shinjuku in Tokyo.
'Once every year or so they have some sort of week when they are supposed to crack down but it never really amounts to anything much,' said Kazuhiko Niinuma, a devoted mahjong player.
In the case of underground casinos, though, the police will often try to at least convey the appearance of cracking down. Ikuko Hamane, who worked as a dealer in an illegal baccarat establishment in Roppongi, said it had to be shut down when a new police chief arrived in the district. 'We knew several weeks in advance when the police were going to raid the place,' she said.
Another link in the chain binding gangsters to police is the nation's sex industry. Prostitution is illegal in Japan but that does not stop the thousands of 'soapland' brothels from setting up big neon signs and operating openly in the heart of most Japanese cities' entertainment districts.
As with the illegal gambling industry, police often find post-retirement jobs as 'advisers' to the 'soaplands', cabaret clubs, and massage parlours of the sex industry. 'Usually they will work for some company that operates a chain of cabarets or brothels. Their job is to get advance warning of raids and smooth things out with active duty police,' said Michinao Kodama, chairman of the Nippon Detective Association. He said he personally knew of at least one sex industry company with a retired police officer on retainer.
The National Police Agency does not make public where officers find post-retirement jobs, but several experts on gangs agreed a large portion, especially more junior officers, did indeed make their way into gang-controlled gambling and prostitution rackets.
Senior officers often find jobs with major corporations, helping them deal with gangsters, corporate espionage and other security related issues, Mr Kodama said.
Hitoshi Yamada, head of the Japan Bar Association's gangs sub-committee, said another reason for the close links between the gangs and police was rooted in the past, from a time when the gangs' strengths were used to fight communism.
A right-wing radical newspaper once ran an article saying the Tokyo Metropolitan Police Department had ordered gangsters to be mobilised to fight a left-wing demonstration, Mr Yamada recalled. More than 95 per cent of Japan's right-wing organisations were fronts for gangsters, he added.
'The Security Police would never arrest gangsters broadcasting right-wing propaganda,' he said.
'The police also originally turned a blind eye to prostitution and gambling rackets as a part of a carrot and stick approach,' Mr Yamada said. 'They would let them run these rackets in exchange for information about left-wingers and gangs dealing in drugs.' The detective association's Mr Kodama, who used to help fight communists and leftists for the Security Police, said the police had also used the gangsters to assassinate leftists.
'When you have had that sort of relationship in the past, it is hard to break it off later because [the gangs] have only to remind you of it,' he said.
The gangs also maintain strong ties with politicians, Mr Yamada said. '[Former prime minister] Yasuhiro Nakasone is known to have connections with gangsters since he used to share a secretary with Yoshio Kodama [a notorious racketeer],' he said.
Former prime minister and current power broker Noboru Takeshita is also known to have links with gangsters. These links became apparent to all in the 1980s when right-wingers embarked on a 'murder by flattery' campaign against him, broadcasting their message from trucks driven through the streets.
The so-called 'sound trucks' cruised his home and praised him in an exaggerated manner until they were called off following an undisclosed deal arranged by Mr Takeshita, Mr Yamada said. 'He had tried to become prime minister without gang permission.' Mr Yamada said gangs were also reputed to have photographs of most politicians depicted in compromising positions. Such photographs, and videos, were taken secretly when they visited gang-controlled nightclubs, Mr Kodama said. The gangsters' tentacles reach deep into Japan's corporate world.
'They run thousands of front companies in industries like real estate, finance, temporary labour, restaurants, pachinko prize exchange and talent agencies,' said Takakazu Nakamori, at Teikoku Data Bank, a credit-risk research company with an affiliated detective agency.
'It is hard to keep track of how many there are because they keep changing,' he said.
Mr Nakamori said he found it ironic to see officials from the Ministry of Finance being arrested for giving advance notice of inspections of banks in exchange for sexual bribes. 'The police are the ones who do that sort of thing the most,' he said. Mr Nakamori added that news of imminent inspections by the National Tax Agency was also leaked with disturbing frequency.
Japan's newspaper industry and mass media also have a poor track record in dealing with gangsters. For example, during a recent dispute over US presence at Japanese ports, Japan's newspapers neglected to mention that the Yamaguchi gang's control of Japan's ports was widely considered to be the real issue behind the controversy.
This correspondent, when working for the Nihon Keizai Shimbun newspaper, was warned specifically not to write about gangs. 'It is just not done, besides your life could be in danger,' an editor explained.
Several unsolved murders of newspaper reporters in recent years are believed to be gang related.
Despite the level of control Japan's gangsters still have over police, corporations, politicians and the media, some constraints are inevitable.
In the past year, 32 senior executives from Nomura, Daiwa, Nikko and Yamaichi Securities, as well as from Dai Ichi Kangyo Bank have been arrested for making illegal payments to racketeers. These companies also received administrative penalties from the Ministry of Finance after it was determined their relations with gangs were 'institutional'.
Raids and arrests related to illegal connections with gangsters have also been seen at offices of Toshiba, Mitsubishi Electric, Mitsubishi Motors and Hitachi in the past year.
Although the police actions targeted only small, independent criminals, instead of groups affiliated to major gangs, it still marked a major step in the right direction.
'After the Cold War ended, there was a change in thinking about gangsters. It was decided they were no longer needed to fight the communists,' Mr Yamada said. In 1990, the Government passed a new law that allowed police to disband groups repeatedly linked to violent incidents.
The law turned out to be ineffective because gangs would simply dissolve and re-form as either corporations or political groups, Mr Yamada claimed.
Police statistics show gangsters' numbers have declined to 80,000, but Mr Yamada said the real figure was closer to 112,000, including those passed off as right-wing radicals.
Given the extent to which Japan's gangs have spread through the establishment, it is perhaps no surprise that the jusen housing loan scandal became part of a massive cover-up.
'Gangsters are one of the reasons Japan is unable to become a true and proper democracy,' Mr Yamada lamented.