The Japanese Mafia Banks on Abenomics

By Christoph Neidhart

This article first appeared in Suddeutsche Zeitung

Like Japan itself, the country's mafia - known as the yakuza - is still facing a long-term economic crisis. Its income has dwindled over the past two decades, and now the world of organized crime, just like the legal economy, is setting its hopes on Abenomics, Prime Minister Shinzo Abe's strategy to stimulate the economy by printing money without addressing the real problems.

Until recently, the yakuza and the Japanese economy followed almost parallel curves. When the economy was booming, organized crime flourished alongside it. But now the yakuza is facing a threat to its very existence, as recent years have seen successive prefectures introduce laws forbidding companies from doing business with yakuza members, most notably in the banking sector.

Before, yakuza members were often given preferential treatment, but the new law is forcing many companies to cut their longstanding ties with the organization. So far no sentence or fine has been imposed for violations, so companies are not motivated by fear of punishment. Instead, they want to protect their reputations, which would be severely damaged if their dealings with the yakuza were made public. Clients would flee as they did from the Mizuho bank, one of Japan's three largest, when its ties to the yakuza were revealed.

This indirect fight against organized crime is so important because in Japan it's not actually illegal to be in the yakuza. Many of the 63,000 yakuza members are known by name, and their leader is well connected in politics, even in Abe's Liberal Democratic Party. That's why any law criminalizing yakuza membership wouldn't stand a chance in parliament.

But Tokyo is taking action against "asocial groups" such as the yakuza, mainly because of pressure from abroad. President Barack Obama has characterized the yakuza a "transnational criminal organization," giving American authorities the right to confiscate yakuza property. Many bank accounts have already been frozen.

Protection money, drug smuggling and trafficking

The yakuza used to consist of market traders and illegal gambling organizations. Their main sources of income were extorting protection money, drug dealing, smuggling, pimping, trafficking and loan sharking. They are also suspected of money laundering and having sold fake money, fake branded cigarettes and drugs to North Korea. But yakuza members are also subject to a strict honor code: They are not allowed to steal or cause harm to ordinary citizens.

Since the first anti-yakuza law was introduced in 1991, all regional branches of the organization have increasingly expanded into legal industries. They own property and run temp agencies. They are involved in waste recycling and even in the clean-up project at Fukushima. They control large swathes of the entertainment industry and speculate on the stock exchange, where it is said they manipulate share prices. This is all public knowledge, and people in Japan turn a blind eye as long as no one names names.

But that all changed last September when one of the subsidiaries of Mizuho Bank was accused of granting yakuza members consumer credit to buy cars. At first the bank claimed the scandal was caused by carelessness on the part of low-level employees, but it was soon forced to admit that its president was aware of the company's dealings with mafia members.

The Financial Services Agency instructed the bank to cut all ties with its yakuza clients and is now conducting an investigation into Mizuho, along with Japan's other two major banks. But a former banker, who did not wish to be named, claims this is the wrong approach, as the yakuza prefer small banks.

That was certainly true in the case of the Mizuho subsidiary. The yakuza members only became clients of the large Mizuho Bank when it acquired the small Orient Bank three years ago. The banker claims it is likely that all small banks that give out consumer credit have ties to the yakuza. A spokesperson for Mizuho announced that the bank sees no alternative but to close all suspicious bank accounts and credit lines. It has been reported that other financial institutions have also told their gangster clients to withdraw their assets in cash.

When Shinsei Bank recently revealed that it had found "dozens of yakuza clients" on its books, Japanese Finance Minister Taro Aso praised the bank for its "openness." Economic newspaper Nikkei asked why the foreign press was writing about a yakuza scandal. It argued that it's difficult for a bank to determine who is a yakuza member and that banks were afraid their employees would be threatened if they refused credit to yakuza members.

As is often the case in Japan, when private enterprise is threatened, the state is quick to jump to its defense.

Reprinted with permission from Worldcrunch.

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