Shinobu Tsukasa, also known as Kenichi Shinoda, the godfather of Japan's largest and deadliest yakuza syndicate, the Yamaguchi-gumi, gets into a car in Kobe, western Japan, on April 9, 2011, after his release from prison. Photo: AFP / JIJI PRESS

This is the third of a five-part series on the yakuza’s still wide reach in Japan. Part one is here; part 2, here.

Lacking such tools as a specific RICO statute (directed against “racketeer influenced and corrupt organizations”), prohibitions on wiretapping and – until recently – plea-bargaining, Japanese law enforcement is often said to be hamstrung in dealing with the yakuza.

But the truth is, even if yakuza organizations themselves are not on their face illegal, the country has always had plenty of laws available to take on gangsters and their activities.The fundamental problem is that there has been and is now little or no political support for a concerted, serious move against organized crime.

That could be seen with much hyped and tightly written yakuza exclusionary laws, enacted with National Police Agency backing around 2010-2012, which prohibited any financial or business dealings with organized crime. While those laws were lauded as placing a death-grip on the yakuza, this has proved not to be the case. They had some effect at the margins of yakuza society, but overall the yakuza have adapted.

Upon his release after a lengthy prison term in 2011, Shinobu Tsukasa, top boss of the largest underworld syndicate, the Yamaguchi-gumi, offered this comment on the new Japanese police and government efforts to crack down on the yakuza:“We will adjust.”

“We will adjust.” Kenichi Shinoda (C),, also known as Tsukasa Shinobu, the boss of Yamaguchi-gumi, walks at Tokyo’s Shinagawa station after he was released from a Tokyo prison, having served time since 2005. Photo: AFP / JIJI PRESS

Pro forma

And, it appears that at most, only a tiny number of companies have been cautioned – not punished, just cautioned – for violating the prohibitions. It might be argued that Japan’s enacting of anti-yakuza statutes without a concomitant effort to seriously enforce them reflects the preference for the pro forma that long-term observers of Japan have seen throughout many parts of the Japanese society.

Among several reasons, yakuza are a reliable source of political contributions and a reliable voting bloc – sort of like political action committees in the United States. They also provide “services” such as protection against blackmail or embarrassing rumors – while also being a source of exploitable information about political rivals.

In return, yakuza get public works projects and other considerations – including protection from forceful crackdowns. Indeed, prior to the Democratic Party of Japan’s successful campaign in the late 2000s to defeat the ruling Liberal Democratic Party, the DPJ reportedly reached a deal with the Yamaguchi-gumi: In exchange for yakuza support in the election, the DPJ promised that no RICO-type statutes would be enacted while it was in power.

Such quid pro quo is further compounded by the difficulties in establishing winnable legal cases, as well as the simple fact that it is embarrassing for Japanese officialdom to admit the full extent of yakuza involvement in all parts of society, and even more so in the highly regulated financial markets.

Indeed, in certain quarters within Japan’s political, social and business elite (collectively, the ruling class), yakuza are viewed as a necessary pillar stabilizing Japanese society – in much the same way as the mayor of a large city in the northeastern United States circa 1950 might have viewed the Sicilian Mafia.

Relationships extend to the very top. A photo of one former prime minister appeared showing him schmoozing with yakuza; he later admitted to attending a yakuza family wedding. He remains a major figure in Japanese politics. And in early 2018, a well-known politician who once admitted to receiving US$5m from a prominent Yamaguchi-gumi advisor was fawningly interviewed on Japanese TV. Indeed, after retiring from his former career and entering politics, he took on the persona and manner of a yakuza. His former career? National Police Agency official.

So it is almost impossible to uproot yakuza from society – even if the government wanted to. First there is the sheer embarrassment. Beyond that, given the extent of yakuza involvement in the legitimate economy, removing the yakuza from the Japanese economy will be disruptive and potentially leave a couple million people unemployed. This all tends to solidify and perpetuate the yakuza’s position within society.

Lots of police officers enter Yamaguchi-gumi headquarters to make a domiciliary call in Kobe City, Hyogo Prefecture ,on Feb. 26, 2018. Photo: AFP / The Yomiuri Shimbun )

Olympus scandal

In 2011, the famous camera maker Olympus was caught up in a scandal involving nearly a billion dollars’ worth of questionable payments to acquire several loss-making companies in businesses unrelated to Olympus’s normal operations.

A hastily arranged investigation led by a former Japanese Supreme Court justice as well as subsequent inquiries by Japanese financial regulators determined this was simply run-of-the-mill accounting fraud to cover up financial losses. Yakuza were nowhere to be found.

Somehow, those elite officials overlooked the publicly available information regarding the improper “money flows” that included a Japanese company whose name had earlier appeared on a leaked NPA list of yakuza front companies. The yakuza were indeed deeply involved in the Olympus scandal and were the prime beneficiaries of the expenditures in question.

According to some sources, the Yamaguchi-gumi were the culprits – having used a senior executive’s gambling problem to establish a foothold inside Olympus and, then having systemically fleeced the company on the threat of blackmail. However, as one observer commented, it was too embarrassing to Japanese authorities and regulators to admit that a flagship Japanese company was up to its ears in yakuza. Moreover, an official admission to this effect would have required de-listing Olympus from the Tokyo Stock Exchange – and potentially risked its overseas listings as well.

The Olympus scandal only came to light because the company’s newly appointed president, an Englishman named Michael Woodford, was tipped off about the serious financial wrongdoing. Woodford went public – and also left Japan immediately. The initial response from Olympus’s top executives and even some of the Japanese press was that the “foreigner doesn’t understand Japan,” the foreigner “is paranoid” and the like.

Michael Woodford, ex-president of Japanese optical giant Olympus, is surrounded by reporters upon his arrival at the Olympus headquarters in Tokyo to attend the board meeting on November 25, 2011. Olympus’s ex-chairman and two other directors had quit the firm’s board in the wake of a loss cover-up scandal unveiled since the sacking of the firm’s British chief executive. Photo: AFP / JIJI PRESS STR

Olympus also attempted to smear and intimidate him. After a week or two, some of the truth came out, largely because of foreign press reporters chasing the story. Some observers note that Woodford was wise, if not lucky, to leave Japan when he did.

Ironically, a year earlier the Obama Administration had declared that the main yakuza group involved in the Olympus scandal, the Yamaguchi-gumi, was a threat to US national security and had issued an order freezing its assets. The Americans had jurisdiction in this case and could have hammered Olympus and gotten the point across about Japan coddling the Yakuza. Unfortunately, though perhaps not surprisingly, the Department of Justice did nothing of note.

Since then, the US government has blacklisted other yakuza groups and a handful of individual yakuza. Most recently, it sanctioned two Yamaguchi-gumi front companies and several yakuza bosses. The yakuza (and the Japanese government) regard these moves as irksome – and a little embarrassing – but beyond that it is hard to ascertain any concrete effect on yakuza activities.

Moreover, the absence of real investigative journalists and the unwillingness of Japan’s mainstream press and media to expose organized crime activities – for fear of retribution and even lost advertising revenue – works to yakuza advantage.

Japan still awaits its own version of Rudy Giuliani who successfully challenged the Sicilian Mafia in New York City. Ten years ago, an energetic Japanese prosecutor did appear in Tokyo and showed signs of aggressively taking on the yakuza, critics be damned. In short order, he was banished to the hinterlands.

Even the unusually aggressive crackdown on the Yakuza around 2009-2012 by then-NPA head Takaharu Ando was more of a crackdown on the Yamaguchi-gumi’s Kodo-kai sub-group – which had overreached by targeting police officers and their families, a serious breach of decorum in the longstanding police-yakuza .

The Yamaguchi-gumi split

In 2015, the Yamaguchi-gumi, the largest and most powerful yakuza group, split into two parts. This was due to frictions and rivalries that had existed for many years and, finally, broke the group in two. It had less to do with the new Yakuza exclusionary regulations.

Importantly, the breakup does not indicate a lessening in organized crime’s power and influence in Japan and is best viewed as rearranging the furniture. Despite breathlessly reported fears of a gang-war, the Yamaguchi-gumi split has resulted in only a handful of incidents, of the sort that would be unremarkable on a typical Chicago weekend.

Grant Newsham, a retired US Marine Corps officer, former US diplomat and former Tokyo security chief for a major global investment bank, currently is a senior research fellow at the Japan Forum for Strategic Studies and the Center for Security PolicyHere we are republishing as a five-part series a paper of his that originally appeared in the Journal of Financial Crime.