Another Scandal Unsettles Corporate Japan

It is the second wild boardroom drama to shake up corporate Japan in days: the country’s leading tissue maker, Daio Paper, said on Friday that it would file a criminal complaint against its former chairman, accusing him of illicitly borrowing $140 million in company money and channeling some of it to a Las Vegas casino company.

The controversy provides yet another lens into the seemingly free-wheeling behavior — and disregard for corporate governance — still seen among top management at some of Japan’s leading companies.

Olympus, the medical imaging and digital camera maker, has lost half its stock market value this month since its ousted chief executive released internal documents that he said showed that the company made over $1 billion in improper payments over a series of acquisitions.

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Democratic Party of Japan Secretary General Ichiro Ozawa in Hot Water

Japanese Prime Minister Yukio Hatoyama said on Thursday he would keep Ichiro Ozawa on as the ruling party’s No.2, a day after prosecutors searched the office of Ozawa’s funding group over possible irregularities. Ozawa’s image had already been tarnished by the indictment of an aide for taking illegal corporate donations, prompting him to quit as party leader last May.

Democratic Party of Japan Secretary General Ichiro Ozawa vowed Saturday to fight on despite the new arrests of his key aides over a political funds scandal that could hurt voter support ahead of July’s Upper House election.

During the DPJ’s annual convention in Tokyo, Ozawa accused prosecutors of conducting an “unacceptable” investigation that has resulted in the arrests of three of his former aides for failing to declare in his political funds report ¥400 million that was used to buy a Tokyo land plot in 2004.

Prosecutors suspect that part of the money may have come from illegal donations from construction companies in return for favors in a dam construction project in Iwate Prefecture, Ozawa’s political base.

Ozawa, who had remained tight-lipped on the land deal, told the convention that he will fight and seek justice.

“There might have been miscalculations or errors on records, but typically such issues are let off after making revisions and corrections in most cases,” Ozawa said.

The DPJ kingpin explained that the ¥400 million purchase of the Tokyo plot was funded by his own hard-earned assets and not, as reported, by shady donations from construction companies.

“No one probably felt like they understood (Ozawa’s statements),” Kozo Watanabe, a 77-year-old Democratic lawmaker and a former party adviser, said on national broadcaster NHK.

“If Ozawa is innocent then I hope he will fulfill his responsibility to explain straightforwardly to the people.”

Analysts say support for the government and the party could fall if Ozawa, widely seen as the most influential figure in the Democratic Party, is forced to step down ahead of the election. But it remains to be seen how the investigation will play out.