Japan’s Finance Chief Resigns After Two Senior Officials Arrested

Jolted by the arrests of two senior officials on bribery charges, Japan’s finance chief announced Tuesday that he will step down. Those arrested were allegedly entertained lavishly by banks in return for tip-offs about the ministry’s “surprise” inspections.

The accusations hit at the heart of mounting criticism of the Finance Ministry: that lax government oversight shares the blame for the decay of Japan’s debt-saddled financial institutions.

Finance Minister Hiroshi Mitsuzuka had come under intense pressure to resign after prosecutors raided his ministry Monday and opposition lawmakers vowed to block critical budget legislation until he quit.

“I deeply apologize for this disgrace,” Mitsuzuka said at a news conference. “I’m resigning because I intensely feel my responsibility as a manager.”

Prime Minister Ryutaro Hashimoto formally accepted Mitsuzuka’s resignation today. Though Mitsuzuka has not been directly implicated in the scandal, Japanese leaders often resign to take responsibility for the mistakes of those below them.

The scandal centers on allegations that Finance Ministry officials accepted pricey dinners, golf outings and other entertainment bribes from banks in exchange for alerting them about inspections.

News reports say officials were entertained extravagantly in restaurants featuring scantily clad waitresses. Dinners were said to cost about $250 per person; tips often ran an additional $80 per waitress.

The ministry - Japan’s most powerful agency - examines banks to judge their financial health and root out wrongdoing. The inspections are supposed to be a surprise so banks don’t have time to conceal evidence or hide losses.

While the scandal is a blow to Hashimoto’s government, Mitsuzuka’s departure cleared the way for Parliament to pass budget legislation, including a $15.9 billion tax cut, and measures to strengthen Japan’s financial system.

The resignation of a staunch defender of Hashimoto’s tight fiscal policy could also open the door for more stimulative spending to spur the sluggish economy.

The opposition will likely press for the resignation of Takeshi Komura, a vice minister and the top career official in the ministry, the Nihon Keizai newspaper reported. Komura is believed to be even more powerful than the finance minister, who is a political appointee.

The investigation of the Finance Ministry is part of a wider probe into chummy relations between government officials and the businesses they regulate.

On Monday, Tokyo prosecutors converged on the Finance Ministry, searched for evidence and arrested two top bureaucrats in the inspections division.

Koiichi Miyagawa, 52, and Toshimi Taniuchi, 48, were arrested for allegedly telling banks in advance about inspections in exchange for $40,000 in wining and dining over four years.

The arrests followed a similar move last week, when a former Finance Ministry bureaucrat working for Japan’s national highway corporation was arrested on charges of accepting entertainment in return for favors.

No bank officials have yet been charged in the latest case, but prosecutors searched the offices of DaiIchi Kangyo Bank, Sanwa Bank, Asahi Bank and Hokkaido Takushoku Bank on Tuesday afternoon.

An opposition group had called for Mitsuzuka’s resignation and boycotted a legislative committee meeting on the government budget and fiscal reform. The group’s absence Tuesday brought debate on bills there to a halt.

Mitsuzuka’s announcement that he would resign came hours after he vowed to weed out corruption in his ministry and work to regain public confidence.

“In order to make sure that this type of thing doesn’t happen again, we will push through Finance Ministry reforms,” he said earlier Tuesday.

The prime minister has not yet decided on a replacement for Mitsuzuka, a spokesman from Hashimoto’s Liberal Democratic Party said.