Root Out Japan's Yakuza

Japan is embarking on what may become the first publicly financed bailout of a national criminal underworld, its yakuza. No wonder Japanese taxpayers are up in arms! The Ministry of Finance is trying to rebuild Japan's fragile banking system following the excesses of the "bubble economy" of the late 1980s. But MOF bureaucrats are saying that the yakuza hold many of the nonperforming real estate and construction loans. And the tattooed tough guys refuse to pay up or sell off their assets. So, MOF officials believe the only solution is to finance the cleanup with public money.

Of course, it was the MOF that first permitted the yakuza to get their hooks into the legitimate financial community. Before the Eighties, gangs were consigned to the murky, marginal economic world of prostitution, drugs, and gambling. The yakuza moved out into the financial sunlight only when MOF officials turned a blind eye as banks began using subsidiaries for risky real estate speculation. These subsidiaries often relied on gangsters to "persuade" ordinary people to leave their apartments. Many Japanese were physically coerced. Gangsters then moved directly into the real estate business for themselves, borrowing huge sums of money.

The police, for whatever reason, allowed gangsters to threaten and bully people so that large tracts of property could be put together for commercial building. In a country so proud of its safe streets and low crime rate, it remains a mystery as to why the police, especially in Osaka, Kansai, and Tokyo, looked the other way when citizens were under attack from gangsters. Who gave the orders?

As much as 10% of the bad bank loans on the books are now believed to have gone to the yakuza. The MOF puts the bad loan figure at $350 billion, but others estimate the number is up to $800 billion. That means that some $35 billion to $80 billion were lent to gangsters by legitimate banks. This is surely an amazing sum to go to gangsters.

The yakuza have always played a special role in Japanese society. They are romanticized in the movies as social outcasts with good souls keeping the samurai spirit alive in modern Japan. They are used by businesses to keep unruly unions and shareholders in line. And they have been used by politicians, particularly those on the right, to break heads.

It is time for Japan to push back the yakuza into the margins of society. No good can come of gangsters wielding strong economic and financial clout. Prime Minister Ryutaro Hashimoto shares responsibility for the current banking mess because he was head of the MOF from 1989 to 1991. He must make sure that enough political pressure is put on MOF bureaucrats so that they seriously go after yakuza assets. He should also order an investigation into why the police permitted ordinary Japanese to be victimized by gangsters working with banks and construction companies.

Bankers have stopped trying to collect on bad loans to the yakuza because many have been threatened and one even killed by gangsters. A new government organization with police power is being set up to bail out the banks. It should root out gangster real estate cash and assets. This would do more than save the Japanese taxpayers billions of dollars. Aggressive action would break the back of the yakuza and drive them back into the shadows, where they belong.

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