Japan

Ian Murray seamus2001 at attbi.com
Thu Jan 10 20:28:18 PST 2002


[there's an even bigger piece at < http://www.feer.com > ]

Bankers who must never walk alone

Yakuza gangsters, who reign in a parallel world of glamour and degradation, are blamed for prolonging Japan's recession

Jonathan Watts in Tokyo Friday January 11, 2002 The Guardian

To get an idea of how frightening the banking business can be in Japan, it is only necessary to listen to the pep talks given each morning at the Kawasaki branch of one of the country's biggest banks.

Over the past decade, these meetings before the start of business were used to boost morale amid the bankruptcies, bad loans and reorganisations that have plagued the financial sector since the bubble economy burst.

Managers recently added two chilling warnings that suggest unemployment is not all that bankers have to fear. "After work, never walk alone to the station. Try to find a partner" and "Make sure you stand well away from the edge of the platform while you are waiting for a train."

Such precautions highlight the anxieties that pervade the financial industry as Japan's contraction once again exposes the pernicious influence of the Yakuza crime syndicates in business and politics.

For the second time in three years, the talk in Tokyo is of a looming banking crisis ahead of the abolition in April of unlimited guarantees for deposits.

"At the end of March, we will have a financial crisis. That is 100% true," predicts Yoichi Masuzoe, a member of parliament in the ruling Liberal Democratic party. "Out of four or five big banks, only two or three will survive."

Whether or not the banks actually fall, there is a growing likelihood of another multitrillion-yen bailout of the financial sector with taxpayers' money, which once again means that public ire is focusing on bankers who were too willing to lend to suspect borrowers and then too slow to act when those debts turned sour.

Crime syndicates

Surprisingly little attention is being paid to one of the reasons why the finance industry has fallen into such a hole: the crime syndicates who helped to create the bad loan problem during the bubble economy of the late 1980s and have since been delaying its resolution.

An exception is Raisuke Miyawaki, the former head of the anti-crime syndicate division of the national police agency, who says Japan has been in a "Yakuza recession" for the past decade.

Using their strong connections in the the LDP as well as the property, construction and finance sectors, he says gangsters helped to ramp up the value of land in the 1980s and have since profited by covering up the scale of the bad debts and blocking attempts at a clear up.

"The key issue today is that a substantial portion of bad loans cannot be recovered solely by the effort of bankers, as the original loans involved politicians, bankers and Yakuza," Mr Miyawaki says.

The scale of Yakuza involvement is as hard to quantify as the size of Japan's bankruptcy risk loans, which are estimated to range between ¥24 trillion, or £125bn, (according to the authorities) and ¥170 trillion (according to Goldman Sachs).

An idea may be had, however, from figures released by the Resolution and Collection Corporation, the government body set up in 1997 to buy up and resolve bad loans. Between 1999 and 2001, the RCC collected just over one trillion yen's worth of bad loans, of which it says 18.4% were related to "antisocial elements."

"Collecting is dangerous, but we have to do it," said Masami Takesue of the RCC. "We take lawyers and we are backed by police, so until now there has been no loss of life or injuries, but every time the Yakuza are involved it slows the whole process of collection and makes it more expensive."

With RCC officials admitting they are worried despite police protection and legal advisers, the position of ordinary bankers who are told to classify or collect problem loans from firms with Yakuza connections can be imagined.

"Sometimes you just cannot say no to their requests," admits one of the bankers at the branch in Kawasaki, an industrial city bordering on Tokyo. "They know the law inside out, they keep you in their offices for four or five hours and, while they never threaten you directly, they get their message across in other ways, for example by polishing a samurai sword as they talk."

The Yakuza's role in the bad loan problem takes a number of forms. Some specialise in occupying land used for collateral so that it cannot easily be repossessed. Others prey on weak or scandal-hit firms by offering loans, buying shares or promising to act as intermediaries in bankruptcy negotiations.

It is not just about extortion. In many cases the Yakuza provide their services on request. There is little social stigma involved in seeking their help. As hundreds of Japanese films have depicted, the syndicates maintain a romantic image as the true upholders of samurai values. Many set themselves up as consultants.

Although best known outside of Japan for their tattoos, missing fingers and their involvement in gambling, prostitution and drug dealing, Yakuza gangsters - who are now often indistinguishable from regular businessmen - have long also played an important role as mediators in disputes in a country with very few lawyers. Some are even used by consumer finance companies to collect loans.

Mixed success

The government's Yakuza crackdowns have had mixed success. Following the 1993 anti-crime syndicate law, police figures showed a brief decline in the number of syndicate members, but over the past five years this has levelled off at about 80,000. Many gang offices still brazenly carry Yakuza nameplates.

The gangsters are said to have considerable political clout. A senior Yakuza source says his organisation receives a 4%-5% cut of most public works projects, of which they pay about half to the LDP.

These Yakuza and political connections have helped to ensure the survival of many of the country biggest "zenikon" - or general contractor - construction firms, which head a legion of zombie corporations that continue to lurch onward although they have long been dead in terms of their business performance and ability to repay loans. Such ties were also a factor during the ¥13 trillion bailout of housing loan corporations, more than half of which were said to be tied to Yakuza groups.

Most of the time this influence and an expert knowledge of the law ensures that Yakuza do not have to resort to violence, but there have been murderous exceptions in the finance industry.

The most notorious was the shooting of Kazufumi Hatanaka, the manager of a Nagoya branch of the Sumitomo bank in September 1994 after he tried to collect debts from gangsters.

Suspicions also continue to surround the death of Tadayo Honma, who was found hanging in a hotel room in September 2000 just two weeks after he began his job as president of Nippon Credit Bank by examining which non-performing loans in the Yakuza heartland of Kansai should be sold to the RCC. It was one of seven apparent suicides among senior Japanese bankers and financial inspectors since 1997.

With statistics like those and constant threatening phone calls, the Kawasaki banker and his colleagues are understandably uneasy as they enter a year when another major shake-up of the finance industry is expected. .

As the United States and the International Monetary Fund push Japan to move more quickly to clear its mountain of bad loans, they know their bank will be asked to apply more pressure on the Yakuza, which means they will be well advised to stand several steps back from the edge of station platforms.



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