Powerful incentives led to Finance Ministry document tampering

TOKYO — The ongoing document-tampering scandal at Japan’s Ministry of Finance has taken a new turn. The ministry has admitted that its staff members altered 14 documents related to the controversial sale of state-owned land to a nationalist school operator, but it has denied they acted on instructions from Prime Minister Shinzo Abe.

Now attention is shifting to whether ministry officials were prompted to tamper with the documents out of “consideration” for the prime minister and his government. Such doubts arise largely from the nature of the ministry’s activities, which are exposed to political influence.

The ministry’s Financial Bureau, whose staffers committed the wrongdoing, manages state-owned assets and deals with individual transactions. The bureau is also in charge of policy-making and planning of government debt issuance, as well as investing and lending the money raised.

About 370 personnel work at the bureau, which is the largest section within the ministry. However, its activities are less publicly known than the budget and tax bureaus.

Mitsuru Ota, who heads the Financial Bureau, is an elite official and is considered a candidate for administrative vice minister, one of highest positions at the ministry. But like his predecessors under Abe’s government, including Nobuhisa Sagawa, who testified before the Diet last week, Ota could be named chief of the National Tax Agency, an independent unit at the ministry.

Individual sales of state-owned land often involve political interests. A Finance Ministry source said many of the petitions submitted by lawmakers to the ministry are related to state-owned land. That aspect is behind the growing skepticism of the ministry’s claims that the officials involved were not trying to favor the Abe government, despite not being asked to do so. 

As of the end of March 2017, the amount of state-owned assets came to 106 trillion yen ($989 billion), of which 70% consisted of stakes in partially privatized corporations and incorporated administrative agencies. The government, for example, controls more than 30% of outstanding shares of Japan Tobacco, worth 2.4 trillion yen, and nearly 60% of Japan Post Holdings.

The Treasury Division of the Financial Bureau at the Ministry of Finance in Tokyo. (Photo by Wataru Ito)

Of the 106 trillion yen, land accounts for 18 trillion yen, or 17% of the total, which includes the Imperial Palace and Shinjuku Gyoen national garden in Tokyo, as well as U.S. military bases located across the country. Unused land totaled 915 billion yen worth in 2003, but this has been more than halved to 400 billion yen at present, largely due to the Finance Ministry’s efforts to sell it off.

However, the process of selling state-owned land has been opaque.

Sales of state-owned land are typically handled by regional finance bureaus, with only a few career staff transferred from headquarters in Tokyo, including the bureau chief. Communications between the local offices and headquarters are mostly conducted at the non-career level, and the Tokyo bureau rarely gets involved.

The Finance Ministry began overseeing state-owned land during the postwar period, when Japan was placed under the U.S.-led Allied Occupation. A total of 2,700 sq. kilometers of land that had been owned by the Japanese military was transferred to the Ministry of Finance after the war, and mainly allocated for use as farmland.

Remainders of this land still exist in locations around the country, including the portion associated with Moritomo Gakuen, the school operator.

In his testimony before both houses of the Diet in late March, Sagawa repeatedly declined to provide answers, citing concerns about possible criminal charges. By leaving many questions unresolved, such as how and why the Financial Bureau’s officials were motivated to doctor the documents, the testimony only increased skepticism among lawmakers and citizens in the country over the ministry and the entire administration.

To regain trust, it is crucial to make all uncertainties clear. But the land sale procedure is not the only example of misty decision-making at the bureau.

The bureau’s investment and lending program is from time to time dubbed, sarcastically, uchide-no-kozuchi, a “miracle mallet” with which one can “tap out” anything one wishes. While the national budget uses tax revenues and therefore faces a number of constraints, the Finance Ministry has the power to allocate the money it raises from the government bonds for investing in, or providing loans at low interest rates to, projects and businesses beneficial to the country’s economy and society.

Recent loan decisions under the scheme include 3 trillion yen for developing maglev trains between Tokyo and Osaka, and 1.5 trillion yen to speed up completion of highway construction in the Tokyo metropolitan area.

The Finance Ministry-managed investment once shrank in the 2000s, under the leadership of then- Prime Minister Junichiro Koizumi to push shifting from public to private. But with Japan’s budget deficit falling to a worst level among industrialized economies, the Finance Ministry’s investment capacity seems attractive for many organizations and politicians.

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