SCMP Monday, July 31, 2000

New scandal blow for Japan premier

AGENCIES in Tokyo


Japan's top financial regulator resigned yesterday in a scandal over accepting fees and benefits, dealing another blow to Prime Minister Yoshiro Mori.

Kimitaka Kuze, head of the Financial Reconstruction Commission, was forced to step down amid allegations he received nearly 230 million yen (HK$16.4 million) from Mitsubishi Trust and Banking Corp in office rent, consultant fees and labour costs between 1989 and 1994.

"I apologise for disturbing the public," Mr Kuze said. "I decided myself to quit this job, which is my dishonour." He said he had done nothing wrong but decided to withdraw so as not to disturb a special parliamentary session starting tomorrow. Former Economic Planning Agency chief Hideyuki Aizawa, 81, was named to succeed Mr Kuze, 71.

Mr Mori apparently decided to accept the resignation after a fresh report surfaced on Saturday that Mr Kuze also received 100 million yen from the president of condominium company Daikyo Inc in 1991 to help him recruit new members to the ruling Liberal Democratic Party (LDP).

Mr Mori said last night that he wanted to apologise. "It is extremely unfortunate and regrettable and I strongly feel my responsibility as the person who appoints the cabinet."

The scandal erupted three weeks after Mr Mori picked a new cabinet following last month's general election, in which his ruling coalition managed to hang on to power despite rock-bottom popularity. It was likely to spell more trouble for his shaky administration, whose approval ratings hover around 20 per cent.

Opposition leaders accused Mr Mori of appointing Mr Kuze despite knowing that he had received favours. "[Mori] should be held responsible," said Yukio Hatoyama, leader of the main opposition Democratic Party.

Mr Kuze is the second chief of the powerful Financial Reconstruction Commission, set up to guide financial reform, to be forced to resign this year. In February, Michio Ochi stepped down over remarks he made that suggested he would be lenient in bank inspections. Mr Kuze's exit will again stall efforts to address the quagmire in Japan's financial industry, still struggling with massive bad debt following the burst of the "bubble economy" investment boom of the late 1980s.

The commission attracted criticism for its approval this month of a taxpayer-led bailout for Sogo. The Government retracted the bailout offer and the department store chain was left to collapse.

Opposition party leaders pledged to press the matter of Mr Mori's responsibility for appointing Mr Kuze when debate begins in the special session today. "Of course he [Mr Kuze] should be fired, but that is not the end of the matter," Yukio Hatoyama, leader of the main opposition Democratic Party, said. "It was the Prime Minister . . . who knew the situation when he made the appointment and thought it was okay. Naturally, he has responsibility for the appointment and the responsibility to explain it," Mr Hatoyama said.

Officials said on Friday that Mr Mori was informed of the link to Mitsubishi Trust before he appointed Mr Kuze to the key post when he reshuffled his cabinet early this month, but had judged the matter posed no problem.

Opposition parties seized on that admission and promised to press their attack against Mr Mori in Parliament. "We want to keep the focus on the Prime Minister's responsibility and follow that up," Mr Hatoyama said.

On Friday, Mr Kuze, a former home affairs bureaucrat, said there was nothing improper about his relations with Mitsubishi. But Japanese politicians are obliged to report costs covered by private companies as political donations.

The appointment of Mr Kuze and other ageing politicians in the post-election reshuffle reflected an LDP tradition of awarding posts to factions without consideration of expertise.

The Kuze incident surfaced just as Parliament began a session expected to see a flurry of finger-pointing by opposition and ruling parties over a controversial clause in a contract to sell failed Nippon Credit Bank to a consortium led by Internet investor Softbank Corp.