Japan A Scandal That Will Not Die

By William R. Doerner

He licked his lips. He sipped water. His ashen face looked aged. The strain was evident as Prime Minister Noboru Takeshita faced his challengers in the Diet. The embattled Japanese leader made a series of extraordinary admissions to a special session of the Diet budget committee. Last October Takeshita flatly denied any connection to the burgeoning scandal that has linked dozens of Japanese politicians and bureaucrats to a money-and-favor game played by the Recruit Co., a $3.25 billion information-and-real-estate conglomerate. But last week Takeshita conceded that over the years he and others close to him received nearly $1 million from Recruit. Referring to his October disclaimer, Takeshita pleaded a faulty memory: "I probably did not have a clear recollection of the matter then."

In the wake of the Prime Minister's latest disclosures, opposition members intensified their demands that he step down. "Your hands are dirty," charged Socialist Diet member Kanji Kawasaki. Takeshita, 65, refused to do so, vowing instead to reform the system. To his critics, Takeshita declared, "I have no intention of taking a quick way out of this crisis."

Though Takeshita appeared determined to grit through the crisis, the spreading scandal -- the country's most pervasive in modern times -- may yet topple his Liberal Democratic Party government, much as a series of financial misdeeds brought down Prime Minister Kakuei Tanaka in 1974. Since Recruit's involvement in influence peddling among the political bigwigs first came to | light in the press last June, 20 people have been forced to resign, including three members of Takeshita's Cabinet. The list of those implicated, numbering 155, includes not only L.D.P. and opposition politicians but also prominent members of Japan's powerful government bureaucracy, businessmen, academics and newspaper executives. If Takeshita should survive the scandal, the main reason will be that all the L.D.P. leaders are similarly tainted.

Ethics and politics -- can the two go together? It sometimes seems not. In an eerie parallel to the trials of U.S. House Speaker Jim Wright, Japan's leading politicians are under fire for misunderstanding -- or missing -- the connection. In both countries, the lines are often hard to draw, as changing standards of morality are applied to the fuzzy world of campaign financing.

For Japan, the Recruit scandal is raising profound questions about kinken- seiji, or money politics, and the way Japan conducts its public business. On one level the issue is simple bribery. Recruit's mercurial founder, Hiromasa Ezoe, 52, nine other businessmen and three officials of the Labor and Education ministries have been arrested for alleged bribery or violation of securities law (so far no charges have been filed against any elected politician). But on another level the question is whether Japanese politics is so blatantly suffused with the passing of cash that it is practically impossible for officeholders to avoid the appearance, if not the actual commission, of impropriety. Said Takako Doi, chairwoman of the Japan Socialist Party: "The Diet as well as politicians have lost the trust and confidence of the public."

The constant stream of fresh disclosures, overshadowed only briefly by the death and funeral of Emperor Hirohito, has proved costly for Takeshita. Last week the popularity rating of the Takeshita Cabinet hovered around 10%, a postwar low. The Prime Minister's fall from public grace comes only partly from outrage over Recruit. The Japanese also bitterly resent a new 3% national consumption tax, part of a reform package that will eventually reduce taxes. In several recent local elections, these issues have badly hurt the L.D.P., which has been in power continuously since the party's formation in 1955. No less partisan an observer than Shintaro Ishihara, a senior member of the party's right wing, admits that if elections were held now, "it would be suicide for the L.D.P."

Recruit was founded as an advertising-sales agency by Ezoe in 1960 with an investment of $2,000. Acting in accordance with his favorite slogan, "Money Comes First in This World," Ezoe built the three-man shop into a corporate behemoth, branching into real estate, supercomputers and restaurant and hotel management as well as a variety of information services. Stock in the expanding conglomerate was closely held until October 1986, when shares in its real estate subsidiary, Recruit Cosmos, were publicly listed on Tokyo's over- the-counter market. Those shares became a new and virtually cost-free vehicle for peddling influence.

For nearly two years before going public, Ezoe and other Recruit officials commonly offered stock shares at about $20 to selected individuals, many of them in the Diet and the bureaucracy. Once the stock started trading on the open market and soared in value, many of the recipients sold their shares, reaping hefty profits. Frequently, the transactions were recorded in the names of aides or relatives.

Aides and relatives of Takeshita and his predecessor, former Prime Minister Yasuhiro Nakasone, are known to have purchased shares of Recruit Cosmos -- 12,000 and 29,000 respectively. Both men deny personal involvement. Those transactions, Takeshita declared last week, were "their personal dealings, not mine."

What's wrong in all this? In Japan distributing stock before a firm goes public is not illegal; in fact, many newly formed companies routinely ask banks and other firms to purchase a portion of their unlisted stock before the public sale to prevent market volatility once it is trading. But prosecutors in the Recruit case intend to prove that the offers in many cases constituted bribes in exchange for anticipated political and business favors. If the prosecutors find evidence of a political quid pro quo, recipients could be charged with accepting bribes.

While Takeshita maintains that he did not profit from stock deals, he did finally acknowledge receiving from Recruit sizable gifts in other forms. The Prime Minister conceded that in 1986 and 1987 the company donated $259,000 to his political organizations. He also admitted that Recruit bought more than $570,000 worth of tickets to two fund-raisers held for him in Tokyo and Iwate prefecture in May 1987. Such contributions are not illegal, but these may have exceeded legal limits imposed after the Tanaka scandal.

Japan is no different from other industrialized countries in permitting individual and corporate contributions to politicians, parties and causes. But the amounts allowed in Japanese politics are large by any measure, and the system has long tentacles. Takeshita, like other L.D.P. faction leaders, used the huge sums he raised to aid the political careers of lower-ranking members in his faction.

Diet members of all ranks, moreover, are routinely expected to ante up for their constituents at weddings, funerals and other rites of passage. A survey of 89 Diet members by the daily Asahi Shimbun showed that each spent about $4,200 a month on an average of seven weddings and 27 funerals. Thus, despite the call by Takeshita and others for campaign-financing reform, University of Tokyo political scientist Takashi Inoguchi remains pessimistic. Says he: "How can we carry out reforms when even the voters are getting money?"

Reforming the system could take a very long time. More immediately, Takeshita is eager just to get the Recruit scandal behind him. For one thing, the Diet's opposition forces are holding hostage the nation's budget, which should have been in place April 1. They refuse to debate it until the L.D.P. agrees to allow Nakasone to testify under oath about his role in the Recruit affair. For another, Takeshita must set a date for elections to the Diet's upper house by Aug. 13, and in the poisonous atmosphere created by Recruit, the L.D.P.'s chances of winning the 54 seats it needs to retain a majority are less than certain. Finally, Takeshita's own lease on party and government office comes due in October, and he wants to reclaim it for another two-year term. Should he fail to do so, the Recruit fiasco could be the reason. April may yet prove the cruelest month for Noboru Takeshita.

CHART: NOT AVAILABLE

CREDIT: TIME Chart by Joe Lertola

CAPTION: THE ECONOMICS OF JAPANESE POLITICS

These practices do not necessarily violate Japanese law. But Recruit may have overstepped legal limits -- and certainly drew attention to the pervasive role of money in Japanese politics.

With reporting by Barry Hillenbrand and Kumiko Makihara/Tokyo