A RECORD 1,901 Japanese companies, or a majority of firms on the Tokyo Stock Exchange, held their annual shareholders' meeting Tuesday.
This peculiar collective action on one day may mark the beginning of the end for Japan's long recession, says business consultant Raisuke Miyawaki. With the meetings over, company executives feel freer from a silent but powerful influence on Japan's economy: the underground yakuza, or Japanese mafia, who often prey on these meetings as corporate racketeers.
A business recovery, which many Japanese economists say should have begun last year, may be on the way, says Mr. Miyawaki, who served as a top investigator of the yakuza during his 30 years with the National Police Agency. "The many businessmen throughout Japan who are scared by the shadow of the yakuza have been obliged to keep their businesses at a standstill," he says.
So many shareholders' meetings were held at once because companies, hit hard by the recession, are more afraid than ever of Japanese gangsters who threaten to expose their misdeeds at the meetings or just make embarrassing comments. Such blackmailers are called sokaiya, and almost all are tied to yakuza groups. National police estimate their number at about 1,200. This year, 7,264 national police were assigned to guard the meetings.
Calling themselves "grass-roots shareholders campaigners," the sokaiya can easily get access to a meeting by buying just a few shares of a company. To avoid embarrassment, many companies either pay off the sokaiya or dilute the potential for blackmail by holding the meetings on the same day. The problem was acutely spotlighted last year when three executives of a large retail firm, Ito-Yokado, were arrested for paying off sokaiya to avoid embarrassment at a shareholders' meeting.
Many company officials rehearse these meetings with lawyers months in advance to avoid being targeted by sokaiya. If no sokaiya show up, shareholders' meetings are usually little more than rituals, with minimal probing of management by shareholders. Most meetings end in about a half-hour. Sokaiya survive in part because companies in Japan are not required to use independent auditors.
IN 1992 and 1993, Miyawaki says, Japanese companies had a lot to hide. Many suffered huge losses after the bursting of Japan's economic "bubble" of the late 1980s and their mismanagement made them vulnerable as targets. During the bubble, many firms did business with yakuza, especially in the wildly speculative real estate and stock markets.
Many yakuza-run firms hooked up with respectable firms to do business in a boom economy that some thought would never end. Yakuza were able to push themselves from the underground to the surface of Japan's economy, and they shrewdly collected information on the inner workings of companies. "The real problem is that the yakuza groups ... now know everything about these firms' activities - which executives are responsible for the losses, how much was lost, and so forth," Miyawaki says.
Last year, the yakuza stood on the sidelines during shareholders' meetings as the firms tried to explain their losses. "The yakuza now know everything about how these firms `cooked' their books, and how these firms cheated in reporting their earnings and losses through `window dressing' settlements," Miyawaki says. Many executives have come to him for help and advice.
"Economists will tell you that there are two main factors in this recession. These are, they say, inventory adjustments and the enormous amount of bad loans in Japan. But these factors are not enough to explain this stubborn recession," he says.
Many economists are afraid to point a finger at the yakuza as a cause for the continuing slowdown because they fear for their personal safety, Miyawaki asserts. He tags the slowdown as the "yakuza recession."