Financial Scandals in Japan Could Force Shake-Up in Abe's Cabinet


The past few days have been rough for Japanese Prime Minister Shinzo Abe and his ruling Liberal Democratic Party (LDP). Following the resignation of Agriculture, Forestry and Fisheries Minister Koya Nishikawa, Education, Culture, Sports, Science and Technology Minister Hakubun Shimomura, Environment Minister Yoshio Mochizuki, and Justice Minister Yoko Kamikawa have come under intense scrutiny for impropriety with political funds under the Political Funds Control Law.

The Political Funds Control Law is meant to increase the transparency of campaign contributions. It forbids a company from making a political donation within a year of being notified that they would receive a state subsidy, in order to prevent paybacks for receiving such subsidies. However, ambiguities in the law remain, and Abe’s ministers are fighting back against the opposition’s charges.

Under the Political Funds Control Law, it is not illegal for the politician to receive the money if they did not know that the money was illegal (i.e. were not aware that the company had received a state subsidy in the past year). It is also not illegal if the state subsidy was used for non-profit activities, such as experiments, research, and disaster relief, or if the subsidy is disbursed through a general incorporated association rather than directly through the state.

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Mochizuki and Kamikawa have denied that they knew Suzuyo and Co., which made donations to them in 2013, was receiving subsidies. Mochizuki’s electoral branch received 1.4 million yen ($13,000) from Suzuyo in 2013 within months after the company began receiving subsidies, but Mochizuki said he was not aware of those subsidies until contacted by media representatives on February 26. Kamikawa’s electoral branch also received donations from Suzuyo. Different sources provide different figures for these donations, with Yomiuri reporting 720,000 yen ($6,000) and Asahi reporting 600,000 yen ($5,000).

In Mochizuki’s case, the subsidies given to the company were routed through a general incorporated association, and thus, he argues, outside the purview of the regulations. The opposition DPJ, thus far, is not accepting this distinction.

Even Abe is coming under attack for 120,000 yen ($1,000) his electoral branch received from Tohzai Chemical Industry Co. in September 2012 as well as a 500,000 yen ($4,100) donation from Ube Industries Ltd. in December 2013. Abe’s defense rests on the ground that “the companies in question clearly told my office that the subsidies would not directly lead to any profits.” Therefore, in his reasoning, these companies should not be barred from giving any political contributions.

Shimomura faces accusations on different grounds. The Political Fund Control Law requires political groups – defined as “an organization that has as its primary objective endorsing or supporting a candidate for a specific public office” – to register. Donations by unregistered groups are in violation of the law. Critics are condemning Shimomura for receiving donations from groups not officially registered as political organizations. There are about six Hakuyukai (Organization of Friends of Hakubun Shimomura) groups outside Tokyo, connected to educational institutions and cram schools, which the Shukan Bunshun magazine accuses of donating membership fees to the electoral branch headed by Shimomura.

Shimomura maintains that these groups do not need to register, as any donations he received were individual contributions and Hakuyukai itself had no involvement in collecting donations. Had these groups registered, it would have easily resolved the legal questions surrounding the donations; however, it is not a politician’s place to tell a voluntary group whether to register as a political group or not.

What will be the long-term impact of this most recent series of high-profile money scandals?

So far, only one minister’s political situation has deteriorated so far that he has been forced to resign. After Nishikawa’s resignation on February 23, Abe immediately replaced him with Yoshimasa Hayashi, who was minister of agriculture from December 2012 to September last year. Abe emphasized that the government’s focus on successfully concluding Trans-Pacific Partnership negotiations and instituting agricultural cooperative reforms would continue unabated under Hayashi. In terms of policy, therefore, there has been little disruption.

One should, however, keep an eye on how these scandals could have an electoral impact – specifically, how Abe’s handling of these scandals could impact local unified elections in April. Of course, the rule of law ought to be upheld. And, perhaps, in this case, the laws themselves ought to be strengthened to address the ambiguities mentioned earlier, including the need for a more precise definition of “subsidies.” However, there is no doubt that this timing is a great political opportunity for opposition parties to create a big fuss. Opposition parties are aiming to gain electoral mileage by milking these scandals for all they can.

Yet it is too soon to tell whether the opposition’s strategy will pay off or backfire. Allegations have been raised against Katsuya Okada, head of Japan’s largest opposition party, the Democratic Party of Japan (DPJ), for accepting 240,000 yen ($2,000) in donations from Nisshin Seifun Group Inc. in 2011 and 2012. The party branch accepted the donation less than a year after Nisshin Flour Milling Inc. received a subsidy from the Ministry of Agriculture, Forestry, and Fisheries. Okada has defended the donations on the grounds that the two companies are separate bodies. While Okada will most likely survive this round, it also points to the possibility that allies of the LDP – and the media and general public – may start digging deeper into political contributions made to members of the opposition as well. That may limit the opposition’s ability to get real political mileage from the scandal.

Despite the haunting similarities to Abe’s first time in office, when money-related scandals led to plummeting popularity and his eventual resignation, Abe is not as vulnerable as he was back then. Even when two ministers resigned last October – Economy, Trade and Industry Minister Yuko Obuchi and Justice Minister Midori Matsushima – shortly after they were appointed in his September reshuffle, Abe led the LDP to victory in the December snap election. This round of scandals is a significant challenge for Abe, and hopefully one that will snap him out of his complacency (as Japan appears to readjust itself to long-term one-party rule), but it is too early to predict his demise.

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