From the Times Online: Yakuza stalk Japanese markets as organised crime opens new front

From The Times
August 28, 2008

By Leo Lewis, Asia Business Correspondent

Japan’s powerful yakuza organised crime syndicates are mounting a widespread assault on the country’s financial markets that may have left hundreds of listed companies riddled with mob connections.

In a surprisingly stark admission, the National Police Agency (NPA) says that it is locked in a battle for the economic soul and international reputation of Japan.

Police investigations suggest that the yakuza have become voracious traders and manipulators of listed Japanese shares, and, via a network of about a thousand apparently legitimate front companies, occupy big positions on the shareholder registers of many companies that may not even be aware of the connection.

According to one veteran expert on the yakuza, the new activities of the nation’s largest crime syndicates have effectively turned the mob into the biggest private equity firm in Japan.

In a White Paper on the subject, the NPA gives warning that the yakuza’s switch from old-fashioned crime rackets such as drugs and prostitution to mainstream financial markets is “a disease that will shake the foundations of the economy”.

Japan’s Securities and Exchange Surveillance Commission has compiled a watch list of hundreds of companies suspected of direct or indirect links to mafia money. The list, which was drawn up in private but has been seen by The Times, includes more than 200 publicly traded companies, many of which are household names in Japan.

The issue has become so acute that the Osaka Stock Exchange has been forced to introduce an entirely new screening system to establish which companies have direct mob links or large quantities of yakuza money on their shareholder registers. Scores of companies, one exchange source said, faced the threat of being delisted.

As well as flagging the risks of a yakuza invasion of financial markets, the police’s report also sounds alarm bells over the property and construction sectors. The greatest risk, it says, is that the yakuza gangs match the operational strategies of mainstream global corporations and outsource much of their financial chicanery to “co-operative groups”.

Yet even as police and regulators rush to address soaring yakuza interference in the securities industry, close observers of the Japanese mafia believe that the problem now may be beyond control. The sophistication of the crime gangs has grown exponentially in recent months. Many have begun to hire newly unemployed traders, who have been laid off by large financial houses feeling the squeeze of the credit crunch.

According to one in-depth investigation by NHK, the state broadcaster, a few yakuza gangs even operate their own stock-dealing floors, where millions of dollars of shares are traded every day. A newly published book on the subject – Yakuza Money – claims that the presence of skilled former bankers, stockbrokers and accountants on the yakuza’s extended payroll has dramatically increased the mob’s income stream and made it virtually impossible to discern the difference between legal and illegal funds as they flow through the Japanese markets.

Joshua Adelstein, an author and consultant on the yakuza, says that one of the key recent developments has been the emergence of mob-backed auditing firms. It is by getting these auditing firms to sign-off false company accounts, he said, that the yakuza were able to manipulate both the apparent earnings and stock prices of numerous small listed companies.

Mr Adelstein said: “The police are worried, but they are understating the problem. Organised crime has made tremendous inroads into the Japanese financial sector. The bad guys now have everything in place to manipulate the stock market.”

10 thoughts on “From the Times Online: Yakuza stalk Japanese markets as organised crime opens new front”

  1. Very interesting article, Mr. Adelstein, you are very courageous. I was wondering where can I find the book Yakuza Money, I am interested to read it. 日本語 大丈夫。
    Thank you very much

    Mary

  2. Mary Lu,
    Thanks for writing. You can find the book here:

    http://www.amazon.co.jp/ヤクザマネー-NHK「ヤクザマネー」取材班/dp/4062147785/ref=sr_1_1?ie=UTF8&s=books&qid=1224790782&sr=8-1

    If you can’t get Amazon to send you a copy, write back and I’ll find a way to get you a copy.

    PS. I’m not courageous–I’m just very stubborn and angry. Personally, there is at least one yakuza who scares the hell out of me. I just got tired of running.

  3. Hi Jake,

    Good looking out. I’m fascinated with angura Japan.

    Do you read Japanese? If so what do you think of the stories and articles in magaznines like Jitsuwa Knuckles and Jitsuwa Documento etc? Trash or not it’s pretty damned interesting, a similiar medium (i.e. Mafia recruiting) would be highly unlikely in the states, and I like to slog through the stories.

  4. Guy-san,
    Thanks. Yes, I read Japanese and I actually write articles in the language as well. I think Jitsuwa Knuckles should probably be taken with a grain of salt and Jitsuwa Document is probably fairly accurate.
    You should keep in mind that these magazines are essentially fan magazines and they are very careful not to criticize the yakuza.
    There are a number of journalists in Japan who make a living as “yakuza” writers. Suzuki Tomohiko and Mizoguchi Atsushi are probably the only two that dare to criticize the yakuza and write about how they really make their money and their influence.
    I suppose I could include myself there but I tend to write articles dealing with organized crime under a pen name (when I’m writing in Japanese). I have my reasons.
    Yakuza fan magazines are interesting things. In an anthropological sense as well.

  5. Thanks for your insights about the fan mags. Good stuff. Which do you prefer writing in, English or Japanese? Indeed, from an anthropological the mags are fascinating. My pile keeps getting higher. Yakuza fan magazines indulgent, mostly true or not are a window into Japan that’s considerably more stimulating than JNTO. But I guess it’s an acquired taste isn’t it, for the few non-Japanese that try to read them. The idea of an English language yakuza encyclopedia is very interesting. But what do you think is the market for this very narrow niche? I can imagine various law enforcement, scholars, writers, and Japan fans buying and reading it but aside from these examples what’s been your experience in terms of paying customers for this genre? Can you elaborate a bit about Suzuki-san and Mizoguchi-san’s “how they really make their money and their influence”? How deep do these writers dig? It’s pretty clear that Yakuza are Yakuza so perhaps it’s expose of their chummy katagi connections that piss them off?

  6. I like writing in Japanese because the language is so compact but English is my native language and sometimes personal things flow better that way.

    I think what pisses off the yakuza is when they talk about the back-room politics and the power struggles within the organizations. In some senses, the larger crime groups are like corporations–and corporations don’t like their internal conflicts aired before the public.

    Mizoguchi’s son was stabbed in 2006, when angry members of the Yamaken-gumi, unable to find the father, attacked his son instead.

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