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More Eyes On Yakuza's Role In Japanese Economy

This article orginally appeared in Japan Economic Institute, May 8, 1992

Organized crime groups in Japan -- known loosely as the yakuza -- in recent years have proven to be far more than gangs of thugs that oversee extortion, gambling, prostitution and other "traditional" gangster activities. Developments during the past year have revealed that the yakuza, having bought up real estate and stocks in the late 1980s, are playing a bigger hand in the Japanese economy. While organized crime groups for much of the postwar period have enjoyed an unusual degree of tolerance by the Japanese public as well as the police, recent scandals involving billions of yen linked to yakuza-related firms or individuals have sounded alarms in Tokyo. There is increasing concern in some business and government quarters that the Japanese underworld is developing the sort of financial muscle that could threaten the economic order.

American law enforcement officials, too, have an interest. Alarmed by growing yakuza involvement in the United States, these officials have begun to work with their Japanese counterparts to crack down on the Japanese mob's alleged collaboration with ethnic crime groups involved in drug trafficking and other illegal activities here. Another goal is to uncover the yakuza's money laundering investments in this country.

Japanese law enforcement officials have been virtually powerless to prevent the yakuza's growing involvement in mainstream business and financial circles because there are no statutes in Japan that prohibit racketeering or money laundering. The National Policy Agency hopes that the Boryokudan Countermeasures Law, which went into effect March 1, as well as two narcotics-related bills enacted last October will give the police some legal weapons to curb organized crime activities. Some Japanese observers contend that the new laws are toothless and will have no impact on yakuza activities. Others see a change in attitude toward the yakuza by a Japanese public increasingly fed up with gang-related violence and apparent yakuza collusion with big business and politicians.

Yakuza in Japan: "Organized" Crime That Is Out in the Open

Organized crime groups in Japan over the years have been romanticized in movies and popular fiction as modern-day samurai. With their flashy suits, penchant for Western luxury cars, "punch-permed" hair, elaborate neck-to-knees tattoos and ritualistically mutilated fingers, these contemporary Japanese gangsters are painted with the panache of feudal warriors-cum-Al Capone. Today's gangs, in fact, are descendants of Tokugawa-era gamblers (bakuto) and street peddlers (tekiya). Gamblers used the term yakusa to denote a worthless outcome; according to legend, the word describes the worst possible score in a medieval card game -- 8-9-3 or, in Japanese, ya-ku-sa. The term later was applied to the gamblers themselves to mean they were useless to society. Over the years the word yakuza gained wide use among the Japanese public as a generic name for bakuto, tekiya or general crime groups in Japan.[1]

1. David E. Kaplan and Alec Dubro, Yakuza: The Explosive Account of Japan's Criminal Underworld (Reading, Massachusetts: Addison-Wesley Publishing Co., 1986), p. 24.

The exotic appearance of yakuza members and their peculiar samurai-type rituals (the top of a gang member's smallest digit is severed and presented to his leader as atonement for a grievous error) certainly distinguish the Japanese mob from underworld syndicates based in the United States and Europe. Like their Western brethren in crime, however, Japanese gangsters traditionally have derived most of their income from illicit businesses, such as gambling, trafficking in drugs and guns, prostitution and pornography. The yakuza in recent years have diversified this portfolio of illegal activities to include loan sharking, company racketeering and extortion-type intervention in civil disputes and real estate transactions.

The Japanese mob's involvement in this array of criminal activities does not surprise authorities on organized crime. What has intrigued non-Japanese law enforcement observers, however, is how groups devoted to theft writ large have been able to acquire the size, structure and aboveboard operating style that the yakuza enjoy today in Japan. The National Police Agency estimated membership in 1988 in the country's approximately 3,400 organized crime groups at roughly 100,000 people. The three largest groups are the Kobe-based Yamaguchi-gumi and the Sumiyoshi-Rengo-kai and the Inagawa-kai, both headquartered in Tokyo. NPA indicated that the Yamaguchi-gumi four years ago had 20,826 members and 737 affiliated groups, a figure that probably has not fluctuated much in the intervening period.[2] While the membership totals represent a significant drop from their mid-1960s high (approximately 180,000 members of all organized crime groups), the size of the yakuza is impressive when compared with the estimated 20,000 members of organized crime in the United States, which has nearly twice Japan's population, according to Department of Justice data.

2. National Police Agency, "Organized Crime Control Today and its Future Tasks," White Paper on Police 1989 (Tokyo: 1989), p. 4.

As indicated by Charts 1 and 2 [PLEASE CONTACT GATEWAY JAPAN FOR THESE CHARTS] yakuza gangs are highly organized entities that, in time-honored Japanese style, emphasize hierarchical ties and oyabun-kobun relations between superior and subordinates. Oyabun-kobun, which literally means parent-child, is a term developed by anthropologists to describe a dependent relationship between two people, in which the oyabun provides protection and guidance to the kobun, who reciprocates with loyalty and service. This has maintained a level of discipline and order within Japanese crime groups that some Western law enforcement officials contend they never have seen in the U.S. or the European underworld. Experts note, however, that the subgroups enjoy considerable autonomy, which, in turn, generates competition within the gang and occasionally breaks out into turf disputes that must be mediated by the oyabun.[3] In the final analysis, however, the aspirations of a particular subgroup or subgroup leader always are subordinated to the gang's overall interests and the oyabun's desires. A godfather in the U.S. mob, in contrast, has no guarantee that he will not fall victim to intergang rivalries given the comparatively weaker discipline and the different concept of loyalty in most American organized crime groups.

3. Robert Delfs, "Clash of Loyalties: Complex Structure Makes for Loose Control," Far Eastern Economic Review, November 21,1991, p. 34.


Chart 2: Explanation of Yakuza Terminology PLEASE CONTACT GATEWAY JAPAN FOR THIS CHART

In terms of operating style the yakuza are not back-alley outfits; they function like large corporations. Like any major business enterprise the crime groups maintain offices that prominently display each group's logo. Members sport lapel pins and carry business cards identifying their positions within the syndicate. Some gangs even publish their own magazines and internal telephone directories. The almost 9-to-5 normalcy of a typical yakuza member's day contrasts with that of American ethnic crime groups, which often conduct business in out-of-the-way places and at unusual hours.

Like their counterparts in the legitimate business world, Japanese crime groups appear to be highly profitable entities. While estimating income is difficult given the largely covert nature of yakuza activities, NPA speculated that in 1989 Japanese organized crime groups earned at least Y1.3 trillion ($9.6 billion at Y135=$1.00).[4] Of this total, Japanese police estimate that about one-third comes from the sale of drugs (primarily amphetamines), another third derives from gambling, extortion and intervention in civil affairs and the remainder comes from miscellaneous activities (see Chart 3).[PLEASE CONTACT GATEWAY JAPAN FOR THIS CHART]

4. National Police Agency, op. cit., p. 16.

One of the main reasons that the yakuza can operate "aboveground" is because the groups are not illegal. There are no statutes in Japan comparable to this country's Racketeer Influenced and Corrupt Organizations Act of 1970. RICO authorizes U.S. law enforcement officials to investigate and to ultimately arrest any individual, partnership, corporation, association or other legal entity as well as any union or group of individuals "associated in fact" for engaging in a pattern of criminal activities in furtherance of racketeering. Organized crime experts also note that weaknesses in Japan's criminal law also have made it difficult to prosecute the perpetrators of bribery, extortion, money laundering or other yakuza lines of business.

Public Acceptance - Until recently there has been an unusally high degree of tolerance by the Japanese public for the yakuza. As long as mobsters did not prove too disruptive, the police, in particular, stayed out of their way. Some analysts attribute this acceptance to the yakuza's skill at public relations and the fact that the public has come to rely on gangsters to satisfy certain economic, political, legal or societal needs that the government cannot, or will not, address.

For most of the postwar period Japanese gangsters have been able to play up their image as champions of the downtrodden and the outcast. This reputation, some Japanese might say, is well-deserved since Japanese crime groups historically have been havens for burakumin (a type of "untouchable caste" that in feudal times worked at jobs considered "unclean," such as leather tanning and undertaking). In modern times the yakuza also have provided a "home" for some Japanese residents of Korean descent and working-class dropouts and other youth unable to succeed in Japan's highly competitive precollegiate educational system.

Although most Japanese probably would say that they would not want mobsters as next-door neighbors, some observers have detected a tacit appreciation for the fact that the yakuza perform a type of social service. The crime groups, in effect, corral potentially disruptive societal elements and, through their emphasis on oyabun-kobun relations, help to discipline ruffians and minimize violent acts against ordinary people. Some observers even go so far as to credit the yakuza with helping to keep Japan's crime rate one of the lowest in the world, although other analysts believe that in Japan, as here, much crime goes unreported, particularly in areas such as bribery and extortion.[5]

5. Kaplan and Dubro, op. cit., p. 182.

Possibly buying into the yakuza's Robin Hood image, ordinary Japanese citizens at times turn not to lawyers and the courts but to mobsters to help them resolve civil disputes that would be extremely difficult, time-consuming and expensive to pursue through the Japanese legal system. These disputes primarily concern private and commercial debts and personal injuries, although organized crime experts also believe that the mob is involved in the settlement of most automobile accident cases. For example, gangsters might be retained by an injured party to affect timely compensation from a party seen to be at fault, using either tacit or overt harassment. While the yakuza in these instances may be regarded as filling a need created by the dearth of lawyers in Japan, gangsters -- being outside the law -- also have been known to initiate traffic accidents as one means of extorting money from people. The yakuza's motives rarely are above reproach. One could argue that gangsters, in fact, have learned how to exploit effectively the Japanese tendency to utilize personal relations, rather than legal measures, to resolve disputes.

Collaboration with Police - Some authorities on Japanese organized crime also have attributed the apparent hesitancy of Japanese police to crack down effectively on yakuza activities to the mob's ability to function as an alternative police force. Eric Von Hurst, a criminologist and long-time resident of Japan, says that Japanese police are terrified by "unorganized" crime. "... [T]here's so little street crime here [because] gangsters control the turf and they provide security," Mr. Von Hurst maintains. "If some hoods come around the neighborhood and start making trouble, chances are the yakuza will reach them first. Japanese police prefer the existence of organized crime to its absence."[6]

6. Kaplan and Dubro, op. cit., p. 163.

This is not to suggest that Japanese police completely look the other way when it comes to the mob. Over the years Japanese law enforcement officials, who have been admired the world over for their high standard of discipline, have staged numerous raids on various yakuza offices. These assaults have tended, however, to be more a show of police muscle than a genuine attempt to shut down gangster operations.[7] Relations between Japanese police and the yakuza are complex; each side evidently has something akin to respect for the other. Like certain elements of the civilian population, some Japanese police officers admire the yakuza's adherence to a feudal-era code of chivalry. Likewise, Japanese mobsters for whatever reason from time to time will turn in a member of a gang to help the police "solve" a case. In one expert's words, there exists a "symbiosis" between police and mobsters that has served to legitimize the position of the yakuza in Japanese society.[8]

7. Kaplan and Dubro, op. cit., p. 162.

8. Kaplan and Dubro, op. cit., p. 163.

Political Ties - Another symbiotic relationship that may help mobsters stay in business for years to come is that which reportedly exists between the yakuza and certain politicians. In Yakuza: The Explosive Account of Japan's Criminal Underworld David E. Kaplan and Alec Dubro provide one of the few historical accounts of the development of yakuza ties to the political world during the postwar years. According to the authors, ties between crime groups and ultranationalist politicians developed in the 1930s. These close relations continued after the war due, in part, to the decision by Occupation authorities to use rightists (and their yakuza allies) to help secure Japan against possible left-wing uprisings.[9]

9. Kaplan and Dubro, op. cit., p. 52.

Perhaps the best-known case of underworld involvement with political figures is the bribery scandal in the early 1970s involving Lockheed Corp.'s attempt to win All Nippon Airways Co., Ltd.'s business. A key figure in this affair was Yoshio Kodama, a liaison between politicians and underworld groups. Using money from Lockheed, Mr. Kodama, whose power and influence with gangsters as well as politicians remains unmatched even after his 1984 death, targeted payments to key government officials -- including former Prime Minister Kakuei Tanaka -- and employed the yakuza in a variety of capacities (disrupting ANA stockholder meetings, for example) to ensure that ANA selected Lockheed's TriStar L-1011 wide-bodied jet over the competition's planes.

The blowup of the Lockheed affair may have been Mr. Kodama's undoing, but his behind-the-scenes work appeared to establish some fairly enduring ties between gangsters and politicians. Messrs. Kaplan and Dubro, in fact, contend that use of organized crime members in Japanese politics, although not as blatant as during the 25 years following World War II, nevertheless persists. Today, they say, yakuza members often are employed as fund-raisers, bodyguards and campaign workers.[10] Like the police, some politicians simply regard the Japanese mob as performing a necessary service, an attitude that has allowed the yakuza to continue their operations "above- ground" and unfettered.

10. Kaplan and Dubro, op. cit., p. 116

The Japanese establishment feigned shock in the early 1970s at reports of a former prime minister and two other ruling Liberal Democratic Party politicians guaranteeing bail for a Yamaguchi-gumi boss convicted of murder. That case involved not only ex-Prime Minister Nobusuke Kishi but the then chairman of the lower house Court Indictment Committee, Umekichi Nakamura. Reports of such associations continue today. More recently the Japanese press reported that an ex-private secretary of Hiroshi Mitsuzuka, a former foreign minister and LDP faction leader, solicited the services three years ago of a high-ranking yakuza member to pressure a Tokyo publisher to suppress a book exposing corrupt practices at a high school in Mr. Mitsuzuka's district.

Although the gangster-politician link originally began on the far-right side of the political spectrum, that ideological pull apparently is not as strong anymore. A photograph published last summer by a popular magazine showed Keigo Ouchi, chairman of the Democratic Socialist Party, paying a courtesy call on a leader of a gang affiliated with the Inagawa-kai during the February 1990 lower house election campaign.

Business Relations - A relationship of mutual benefit also exists between the yakuza and legitimate business. The yakuza long have exercised control of sorts over the day labor market and stevedores. This control makes the yakuza a force that construction and shipping firms must recognize. As a result, Japanese gangsters have acquired considerable clout at least in the construction industry. In view of Japan's impending labor shortages, analysts say, construction companies probably will depend even more on the yakuza to find ways to get around the country's strict immigration laws so that Southeast Asian and other immigrants can be used on construction projects considered dirty, dangerous and low-status by many Japanese. Japanese mobsters also reportedly have been used by construction interests to monitor dango, the industry's practice of rigging bids for public works projects. The construction industry historically has been a strong financial supporter of the LDP, a situation that may or may not allow for indirect or direct linkages between politicians and the yakuza.

Real estate developers also have retained yakuza specialists known as jiageya (land-raising specialists) to induce stubborn owners or tenants to vacate land needed for new projects. "We needed jiage professionals because Japanese law favors the tenant," a senior officer at a major Japanese bank has been quoted as saying. "Although at times this involves some mental harassment, these activities are perfectly legal and legitimate," he said.[11] If one visit by a yakuza member is insufficient to scare an occupant into moving, the jiageya might then resort to late night telephone calls, threats or other harassing conduct. The use of these specialists has proven to be a double-edged sword for developers, however, as jiageya activities afforded Japanese mobsters the foot in the door they needed to become

11. Robert Delfs, "Feeding on the System: Gangsters Play Increasing Role in Business and Politics," Far Eastern Economic Review, November 21,1991, p. 28.

directly involved in the real estate market -- a development some observers maintain helped to fuel the property "bubble" of the late 1980s.

In the same vein a company's use of another kind of yakuza specialist, a sokaiya, can be a mixed blessing. Anyone known to frequent corporate stockholders' meetings might be considered a sokaiya, a designation that does not necessarily imply yakuza membership. The yakuza-related sokaiya specialists once extorted money from companies by threatening to disrupt their annual meetings. Moreover, companies that cooperated with the sokaiya sometimes relied on these individuals to block questions from legitimate stockholders on matters that the company considered embarrassing. When Japan's Commercial Code was revised in October 1981 and payments to sokaiya were deemed illegal, the yakuza reduced their focus on this no longer highly profitable line of business. This makes the results of a recent NPA survey all the more significant. The survey showed that nearly one-third of 2,000 respondents admitted that they still paid sokaiya as much as Y100 million ($740,700) annually.[12]

12. Ibid., p. 29.

In recent years a new kind of symbiosis also has developed between Japanese organized crime and financial lending organizations. Until the 1980s it was difficult for an individual to secure a loan from a bank. This created a prime market for yakuza sarakin or loan sharks. Again, ordinary Japanese were willing to deal with this kind of unsavory character because it satisfied a need unmet by the existing financial system. It should be noted, however, that even the threat of harassment or strong-arm tactics that sarakin were known to employ, combined with the importance that the Japanese place on "saving face," was enough to cause many debtors to commit suicide if they knew they would be unable to make their payments.

Although Japanese banks considerably expanded their commercial and consumer lending in the 1980s, many institutions evidently lacked the tools and the resources to conduct proper credit risk analyses. The result was an accumulation of nonperforming loans. Rather than write off these loans, some banks sold their bad debts to the yakuza packaged with new loans that were several times larger than the size of the bad debts.[13]

13. Delfs, "Feeding on the System," op. cit.

"Bubble Economy" Allows Yakuza to Make a Move on Legitimate Business

Given the Japanese public's apparent acceptance of the underworld and the general awareness of the breadth of the yakuza's relations with the establishment, people were not necessarily alarmed at revelations last summer that Nomura Securities Co., Ltd. and Nikko Securities Co., Ltd. had done business with Susumu Ishii, the late boss of the Inagawa-kai. Similarly, the mid-February 1992 news that Tokyo Sagawa Kyubin Co., Ltd. had ties to a golf course developer affiliated with Mr. Ishii's groups was not stunning. What flabbergasted many in Japan and elsewhere, however, was the magnitude of the money involved in both deals.

Appearing before the Diet last July to answer legislators' questions concerning the securities firms' practice of compensating clients for trading losses, Setsuya Tabuchi, then chairman of Nomura Securities, revealed that his firm and Nikko Securities loaned Mr. Ishii a total of Y36.2 billion ($268.1 million) via subsidiaries and then executed some stock trades on his behalf aimed at reaping windfall profits by promoting shares of Tokyu Corp. (see JEI Report No. 29B, August 2, 1991). Although Mr. Tabuchi resigned to accept responsibility for his company's behavior -- which was not ruled to be the more serious charge of stock manipulation (see JEI Report No. 40B, October 25, 1991), this gesture did little to soothe worries rippling through the business community and the government. A major component of these concerns was that the yakuza had acquired the financial muscle to interfere with the operation of Japan's stock markets. As one authority on Japanese organized crime remarked, "[T]his is an extraordinary amount of money to make available to the underworld ... it's like Citicorp or Merrill Lynch providing financing to New York's Gambino crime family ..."[14]

14. David E. Kaplan, "International Mob Money: Japanese Organized Crime Moves into High Finance," The Journal, October 1991, p. 52.

In the same vein crime experts stress that the really disturbing aspect of the Tokyo Sagawa Kyubin case is that the company extended loans and loan guarantees of more than Y30 billion ($222.2 million) to an underworld entity. The ability of four individuals associated with the company to allegedly line their own pockets in a major way was minor in comparison (see JEI Report No. 7B, February 21, 1992). In Mr. Kaplan's words, "this would be like Federal Express Corp. giving a $1 billion loan to the Lucchese family.... How would we feel about that?!"[15]

15. Telephone interview with David E. Kaplan, April 22,1992.

Some observers point out, however, that the yakuza's move into legitimate business has been building over time. NPA's 1989 white paper noted that the ratio of legal sources of revenue to gangs' total income -- about 20 percent three years ago (see Chart 3)PLEASE CONTACT GATEWAY JAPAN FOR THIS CHART -- has been rising gradually since the mid-1980s, "suggesting that gangsters are penetrating society."[16] To take advantage of the boom in real estate prices in the late 1980s, for example, gangsters established numerous paper companies that, while perfectly legal corporate entities, nevertheless served as fronts for yakuza efforts either to maximize income through profitable investments (like most savvy investors) or to launder money from illicit ventures, or both.

16. National Police Agency, op. cit., p. 20.

Mr. Kaplan has suggested that people often overlook the fact that Japanese crime groups, like their legitimate business counterparts, reaped a windfall due to Japan's bubble economy. He has likened this situation to the American mob's instant wealth in the 1930s. "Flush with cash after prohibition, the Mafia began expanding nationwide and investing in legitimate businesses in a big way," Mr. Kaplan has said.[17] This appears to be precisely what the yakuza did in the late 1980s.

17. Kaplan (interview), op. cit.

The mob also found it expedient and profitable to hide their ill-gotten and legal loot in stocks by trading through dummy entities. The Japanese business community received a wake-up call two years ago when one of the Yamaguchi-gumi dummy companies became the second-largest shareholder in a major textile company. By October 1990 Tensho Enterprises, which operates from the apartment of Yamaguchi sobs Yoshio Asuma, quietly had accumulated some Y20.5 billion ($151.9 million) worth of stock in Kurabo Industries, Ltd. Prior to the Nomura/Nikko revelations Japanese authorities regarded this as the largest known case of gangster activity in companies listed on the Tokyo Stock Exchange. However, since there was no evidence of unlawful conduct -- Tensho purchased the Kurabo stock just as any other investor would -- authorities could do nothing to contest the transaction.

Some Japanese brokers now estimate that as much as Y486 billion ($3.6 billion) in yakuza money is invested in stocks.[18] Organized crime experts suggest a much higher figure, given the proliferation of dummy companies that can be two or three stages removed from the parent group. The intricate web, in turn, makes it virtually impossible to calculate with any precision the extent of yakuza wealth tied up in legitimate investment instruments.

18. Karen Lowry Miller, "Goodfellas, Japanese Style: Well-Connected and Twenty Percent Legit," Business Week, August 26,1991, p. 44.

Mitsuo Goto, president of Nomura Wasserstein Perella, a joint venture between Japan's largest securities firm and Wasserstein, Perella & Co., the Wall Street mergers and acquisitions specialist, recently confirmed that yakuza-related investment groups have continued to pursue the Kurabo strategy. Before this year's TSE plunge mob dummy groups had been buying large stakes in some companies, then demanding to be bought out at a higher-than-market price, he said. According to Mr. Goto, mob-related financial groups may hold investments like these in as many as 150 companies -- stock they are anxious to sell given falling TSE prices.[19]

19. James Sterngold, "Japan's Rigged Casino," The New York Times Magazine, April 26,1992.

Japan's stagnant economy and bearish stock markets as well as the Ministry of Finance's more intense scrutiny of the mob's legitimate business activities as a result of the Nomura/Nikko scandals may crimp the yakuza's style. If crime groups really want to stash their cash in Japan's now-lower priced stock markets, they risk revealing the dummy corporation connection if they resort to yakuza-style harassment in an effort to unload their devalued stocks.

Yakuza Stretch Tentacles Overseas

Like most growth-oriented enterprises, the yakuza have not confined their illegal -- and legal -- business activities to Japan. In the late 1960s the Japanese mob took advantage of the sharp rise in Japanese tourism and began organizing "sex tours~ to various countries in Southeast Asia. The yakuza also began to recruit -- or, more probably, to coerce -- women from the Philippines, Taiwan, South Korea and other Southeast Asian countries to work as "hostesses" in mob-controlled brothels in Japan. The overseas push proved similarly lucrative for drug trading -- primarily of Korean, Taiwanese and other sources of methamphetamine (known as speed on U.S. streets). Gunrunning also evolved into a profitable activity since the sale of guns is controlled so strictly in Japan that the black market price for handguns can be as much as Y675,000 to Y945,000 ($5,000 to $7,000). Gangsters typically have bought the guns abroad, mostly from criminal elements in China, Taiwan, Hong Kong, the Philippines and the United States, and sold them for exorbitant prices on the black market back home.

American law enforcement officials maintain that until 1974 yakuza activities in the United States were relatively limited, both in nature and scope. Not surprisingly, given its geographic proximity and brisk tourist industry, Hawaii initially attracted Japanese gangsters. Their focus there was on fleecing their own countrymen on yakuza-organized tours that included patronizing yakuza-run bars, restaurants, brothels and other entertainment. As the yakuza's economic power has grown, however, they have focused greater attention on picking other fruits from the U.S. market. In this regard, mobsters found that, partly due to its heavy tourist traffic, the fiftieth state was a prime market for selling Asian-made methamphetamine (usually at a cut-rate price compared to U.S.-made speed) and/or trading these drugs for handguns.

From its Hawaiian beachhead the Japanese mob has moved on to the mainland, stopping first in southern California but continuing its reach up the coast to such cities as San Francisco, Portland, and Seattle. As the yakuza have cultivated ties with other organized crime groups operating in the United States, American law enforcement officials have observed the Japanese mob in gambling centers, such as Las Vegas and Atlantic City, as well as in Newark, New Jersey, New York City and Boston.

While the primary focus of the yakuza's dealings with other organized crime groups still appears to be the trafficking in drugs and handguns, U.S. officials, aware of the Japanese mob's expanded activity in the "above-ground" business world in Japan, have become increasingly worried about the extent to which the yakuza have been able to commingle their illicit profits with legitimate Japanese investment in the United States. About 10 years ago American and Japanese law enforcement officials instituted regular annual meetings, in which they consider ways of coping with the expansion overseas of the Japanese syndicates. An early March meeting in Hawaii, in fact, considered how both sides might step up their efforts to crack down on the yakuza's trafficking in drugs and handguns as well as the suspected upswing in the mob's money laundering activities in the United States.

Over the years American law enforcement officials apparently have expressed frustration to their Japanese counterparts that differences in the two countries' criminal statutes are allowing the yakuza to pull off their capers without much of a hitch. Specifically, strict Japanese privacy laws have prevented NPA from confirming whether or not "Japanese investor X" is associated in any way with the Japanese mob.

Moreover, even if Japanese authorities were able to provide identification, the proliferation of dummy companies set up by the yakuza makes it extremely difficult, if not impossible, for U.S. authorities to trace the flow and the source of investment funds. Creating further complications and confusion as to who can seize what from whom, under Japan's current criminal statutes it is not illegal for a gangster to take his gambling or extortion proceeds and invest in real estate or any other legitimate business venture. (As will be discussed below, this no longer is the case for drug money.)

Japanese organized crime experts stress that the only way to crack down on yakuza activities in the United States, both illicit and legitimate, is to continue to pressure Tokyo to develop laws that are more in accordance with anticrime statutes in this country. But, as much as NPA may agree and want to cooperate, this push may hit a brick wall at home. The apparent ties between and among the yakuza, Japanese business and some politicians, these same analysts emphasize, in effect permits the institutionalization of the yakuza overseas. Mr. Kaplan, who is in the midst of writing a sequel to his first book on the yakuza, recently remarked that within the last two years not a week goes by without his receiving a call from some American business person who is concerned about a "suspicious-looking Japanese investor."[20] Just as the yakuza have acquired the financial clout to affect manipulation of stock prices in Japan, more and more Americans are worried that Japanese gangsters, through their investment activities in the United States, eventually may be able to influence market operations in this country and elsewhere.

20. Telephone interview with David E. Kaplan, April 27,1992.

Anticrime Bill Represents First Step Toward Yakuza Crackdown

There are signs that the yakuza's tacit compact with various segments of Japanese society may be breaking down. Law enforcement experts have observed among the public a growing disillusionment with organized crime groups. The harassment employed by the jiageya and by mobsters intervening in civil disputes apparently has begun to take its toll on the ordinary citizen. Recurring scandals involving mob associations with, or payoffs to, members of the political elite also have caused many people to be fed up with the corruption. In addition, the Japanese have taken pride in the fact that their country appears to have one of the lowest crime rates in the world. NPA data comparing trends in reported cases in all categories of crime for Japan and other countries showed that Japan's rate actually decreased in the 1976-85 period (2,111 reported cases of murder in 1976, for example, versus 1,780 reported cases nine years later), while the U.S. rate rose (18,780 reported murder cases in 1976 and 18,976 in 1985).[21] For this reason, the dramatic increase during the past 20 years of handgun-related violence--due primarily to the mob's inroads in gunrunning operations--has been deeply disturbing to a nation of people that takes pride in its apparent low level of violent crimes. According to NPA, the number of intergang clashes involving the use of handguns skyrocketed from 69 cases in 1979 to 249 in 1988.[22]

21. National Police Agency, White Paper on Police 1987 (Summary) (Tokyo: 1987), p. 2.

22. National Police Agency (1989 White Paper), op. cit., p. 6.

Partly as a result of the breakdown in public tolerance for the mob as well as because of Washington's urgings for Japan to get tough with its underworld elements, the Diet last year enacted legislation aimed at bringing the criminal code closer to the RICO model. Two bills, which passed the Diet last October, focus on drug trafficking. For the first time in Japan's postwar history police now are able to confiscate property or assets that were purchased or financed from drug money. Although the legislation does not allow confiscation relating to other kinds of illegal income, American law enforcement officials nevertheless are encouraged by this change. They regard it as an important step in curbing the spread of organized crime activities in Japan, with added benefits for the United States.

Under another new law, the Boryokudan Countermeasures Law, police can designate certain organizations as organized crime groups based partly on the proportion of convicted criminals among their membership. (Boryokudan, which means "violent ones," is the term preferred by NPA when referring to Japanese mobsters.) For example, a gang of 50 to 54 people, of which 12 percent have criminal records, officially can be designated as a yakuza group. Designated groups will be warned not to engage in extortion or other harassing conduct. Citizens' reports of such attempts can lead to formal cease-and-desist orders and enable the police to arrest the offenders. The law still does not make yakuza gangs illegal; nor does it provide the police with sufficient authority to go after dummy companies.

Japanese law enforcement officials concede that effective implementation of the law depends heavily on cooperation from the public and the business community. In view of the yakuza's long history of intimidating conduct -- often simply flashing a gang's business card is enough to frighten a victim into paying up -- NPA realized a pressing need to launch a grass-roots educational campaign to rally the citizenry behind the law. Although passed by the Diet in May 1991, the law did not go into effect until this past March. Soon after that, local antigang organizations began operations in 17 prefectures. Similar groups expect to be operating by October in Japan's remaining 30 prefectures.

Funded by local governments and citizens' groups, the antigang organizations focus on providing interest-free loans to cover court expenses in trials against mobsters or other compensation to victims of the yakuza. Similarly, Japanese law enforcement officials have attempted to recruit private-sector interests to cooperate with them in implementing the law. Since March 1 banks, for example, have agreed to screen more rigorously new, large deposits for signs of mob connections. It is questionable, however, whether this scrutiny will be effective in tracking the activities of yakuza-established dummy operations.

The three major gangs reportedly were warned by police well in advance of March 1 that they would be targeted for designation as crime groups. In a dramatic show of its commitment to rein in the yakuza the Osaka prefectural police raided the Yamaguchi-gumi headquarters in Kobe that day and searched more than 100 locations in the Osaka area. Armed with search and arrest warrants, about 2,500 investigators seized 1,700 pieces of evidence, including handguns, drugs and lists of gang members. They caught only one suspect, however. A boss of one of the smaller gangs affiliated with the Yamaguchi-gumi was arrested for violating the security service law.

The yakuza have reacted to the Boryokudan Countermeasures Law in a number of ways. The Yamaguchi-gumi has taken the high road. At an early March hearing in Kobe before members of the Hyogo prefectural police, Masaru Takumi, the largest gang's second-in-command, declared that his organization has nothing to do with violent groups. "Our spirit is to help the weak and to fight evil," he told the police panel. "We sent donations to victims of the volcanic activities of Mount Unzen and received letters of thanks from children." Mr. Takumi informed the police that the Yamaguchi-gumi will challenge the constitutionality of the antigang law since, in the organization's view, it violates a person's freedom of association and choice of profession. Law enforcement officials indicated that the gang's objections would have virtually no effect on its designations of crime groups.

Rather than following the Yamaguchi-gumi lead, several other yakuza groups simply have removed their heretofore prominently displayed signs and adopted a lower profile. Some smaller groups reportedly have registered with the government as corporations, naming the oyabun as chairman and listing any number of things to describe the purpose of the enterprise (for example, jewelry dealing or security services). One Tokyo gang converted itself into a right-wing group and held a party to inaugurate the new political association. Another suspected crime group even declared itself born again as a new religious sect.


Although the yakuza's growing involvement in legitimate business clearly concerns many Japanese, it remains to be seen how willing various societal elements are to end what for many has been a somewhat mutually beneficial relationship. Numerous observers of Japanese business and politics have remarked that it is incomprehensible that senior officials of two of Japan's largest securities companies were completely unaware that they were providing not-insignificant amounts of money to a leading figure in organized crime. These analysts are pessimistic that the business community, despite occasional harassment from various sokaiya, really wants to completely sever its ties to the underworld. As one Japanese broker was quoted as saying, "Now with the markets slumping, how strict can securities companies afford to get [in checking out prospective clients]?"[23] The same thing might be said for Japanese politicians, who, until the nation's election laws are changed, evidently feel they need yakuza money and muscle to wage their exorbitantly expensive election campaigns.

23. Paul Eckert, "Anti-Mob Law Takes Effect," Nikkei Weekly, March 14,1992, p. 2.

The yakuza's response to the new antigang law also concerns criminal experts. If the gangs try to evade the law by conducting their affairs in an even more covert manner, monitoring them could become more difficult; control would be even less likely. Moreover, the gangs probably will be much less willing to cooperate with the police in containing street crime and informing on each other.

This places the burden of successful implementation on Japan's citizenry. Whether the Japanese people can force the government to enact laws that would be effective in ending corruption and allowing justice to prevail remains to be seen.

For further information, contact Barbara Wanner.

The views expressed in this report are those of the author and do not necessarily represent those of the Japan Economic Institute.

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