Ex-Minister Yamaguchi’s Flight After Takahashi’s Arrest in Loan Scandal

What was FRIDAY reporting 10, 20, or 30 years ago? In this edition of “Playback FRIDAY,” we revisit a hot topic from the past. This time, we look back at the July 14, 1995 issue and its article:

“A Blow-by-Blow Account of a Friend’s Fall — Former Labor Minister Toshio Yamaguchi’s Escape Plan After the Arrest of Osamu Takahashi.”

Following the collapse of the economic bubble, Tokyo Kyowa Credit Union and Anzen Credit Union went bankrupt under the weight of massive bad loans. As investigations closed in on the dubious lending practices at both institutions, the arrest of Osamu Takahashi (then 49), former chairman of Tokyo Kyowa and president of the real estate firm I.I.E. Internationalism was imminent.

At the center of suspicion was then-House of Representatives member Toshio Yamaguchi (54 at the time), widely considered Takahashi’s close friend, and believed to have been deeply involved in the opaque loan deals. So, what was Yamaguchi doing on the day of reckoning — the so-called “X-Day”? (Excerpts in quotation marks 《》 are from the original article; all ages and titles are as of that time.)

The escape plan ended in vain

At 1:10 p.m. on June 27, 1995, Shinsuke Suzuki (47), former chairman of the defunct Anzen Credit Union, and at 1:23 p.m., Harunori Takahashi, former chairman of the defunct Tokyo Kyowa Credit Union, entered the gates of the Kosuge Tokyo Detention House one after the other.

Shortly afterward, at 1:30 p.m., a passenger car sped out of the apartment building in Sanbancho, Chiyoda Ward, where former Labor Minister Toshio Yamaguchi lived. The driver was Yamaguchi’s secretary. However, the car returned within five minutes. It appeared the secretary had acted as a decoy to distract the media. But the escape plan ended in vain. A few minutes later, Yamaguchi came down in the elevator, seemingly resigned. His expression was visibly haggard and downcast.

“With both Mr. Takahashi and Mr. Suzuki taken into custody, I am heartbroken as a friend,”

Yamaguchi said, leaving behind a typed comment, then got into the car, turned his face away, and drove off toward Nagatacho.

In fact, the day before, FRIDAY had witnessed Yamaguchi’s car visiting Takahashi’s company, I.I.E. International.

However, upon realizing that FRIDAY reporters were waiting, the car made a U-turn and disappeared. It seemed that Yamaguchi was desperately trying to secure funds, as a company headed by his younger brother had bounced a second check, threatening to expose the financial dealings of their family-run businesses. He was likely deeply shocked by the arrest of Takahashi, whom he had publicly called “Not just close friends, but like brothers-in-law.”

It does not constitute breach of trust

The two charges against Takahashi and others, who were arrested by the Tokyo District Public Prosecutors Office on charges of breach of trust, were as follows:

The first charge was that they lent about 23.8 billion yen to three companies that were developing golf courses in Oita Prefecture, causing damage to the safety credit union. Most of this loan was allegedly relended to a real estate company run by Suzuki, and then flowed back to the safety credit union as repayment for the company’s debts.

The second charge was that part of a 3.5 billion yen loan from the safety credit union to Takahashi’s paper company, “Akeno Ecotopia,” was used to cover Takahashi’s personal losses, such as the purchase of a vacation home in Australia. However, Takahashi strongly asserted, “This does not constitute breach of trust.”

(Takahashi reportedly said to close friends)

“I’ve been voluntarily questioned several times, but the prosecutors were all sympathetic toward me. They knew it was impossible to arrest me over the Tokyo Kyowa case, so they had to collect trivial matters to save face. The Akeno breach of trust—35 billion yen—I can pay that back easily and get out quickly. If I can do something for the prosecutors, it’s a cheap price to pay.”

He also showed concern for others, saying, “Shin-chan (former Chairman Suzuki) doesn’t have money. He’s already borrowed several tens of millions this year. I’ll have to raise 300 million to 500 million yen for his bail,” showing an unexpected sense of responsibility for others.

The next target of the Tokyo District Prosecutor’s Office was said to be Yamaguchi.

Even the man known as the “Young Ruler of Politics” couldn’t escape the hand of investigation

On December 6 of the same year, Yamaguchi was arrested by the Tokyo District Prosecutor’s Office on charges of breach of trust, embezzlement, and fraud. Although he was released on bail in 1996, he did not run in that year’s House of Representatives election, effectively retiring from politics. In 2006, he was sentenced to three years and six months in prison, which was confirmed, and he served time.

Takahashi consistently maintained his innocence, fighting all the way to the Supreme Court, but tragically passed away in July 2005 during the trial.

Yamaguchi was known for his sharp wit, skillfully gaining the trust of both ruling and opposition party leaders. While part of the Liberal Democratic Party, he strongly criticized money politics during the Lockheed scandal. He gained popularity among voters by founding the New Liberal Club alongside figures like Yohei Kono.

However, when the bubble economy arrived, he became involved in golf course development and expanded a family business involving his relatives. When the bubble burst, and his businesses faltered, he turned to the two credit unions under Takahashi’s influence for financial support.

Tokyo Kyowa Credit Union and Anzen Credit Union were absorbed by Tokyo Kyodo Bank (later the Resolution and Collection Corporation), and public funds were injected into the resolution of the bankrupt institutions. The “Two Credit Union Scandal” marked the beginning of what was called national policy investigation.

In order to gain public support for injecting public funds into the resolution of non-performing loans, the government requested the Special Investigation Division (SIT) to hold the executives of the collapsed financial institutions accountable, beginning a wave of national policy investigations. This movement continued with the savings and loan crisis, the falsification scandal at Nippon Credit Bank, and Long-Term Credit Bank.

The aftermath of the bubble was just beginning.