A 'MOF-Tan' Casts Light on Japan's Murky Collusion
A bank executive tells how he courted finance ministry officials to get special favors.
Businessmen do it. Bureaucrats do it. Just about anybody Japanese does it. Offering a dinner out or sending a gift is as much a part of this culture as raw fish.
Now these practices are suddenly under scrutiny - and being relabeled a form of bribery that slows Japan's economy - as prosecutors investigate ties between bankers and the government officials who watch over them.
Yesterday an executive at one of Japan's largest banks sat in the sunlit lounge of a Tokyo hotel and explained the bankers' side of the story. He spent two years in the early 1990s as a "MOF-tan" - a bank executive responsible for courting officials at the Ministry of Finance (MOF) in search of precious information.
Speaking on the condition that neither he nor his bank be named, he was restless, almost sheepish. But he insisted MOF-tans are necessary in a nation where vague laws and regulations give bureaucrats broad powers.
Japan's MOF collects taxes, sets the budget, and regulates the financial industry - jobs that most countries divide among several agencies to avoid an overconcentration of power.
Another banker, also speaking on condition of anonymity, says his colleagues quip in frustration that MOF approval is needed "to buy a pencil."
"To do business in these circumstances we need information," says the former MOF-tan. "And to get the information we sometimes need settai - the wining and dining of officials, often at great expense, by business executives. The banker says he confined his settai to pricey restaurants, exclusive clubs, and the golf links, but he acknowledges that the practice has its underside. A weekly magazine is reporting, for example, that one bank employed a full-time prostitute for the benefit of government officials.
Eliminating the excesses of settai would mean changing the very system that orders the world's second-largest economy, he argues. "Please write that we need deregulation," he adds, with a weak smile. But despite many calls for radical change, it seems likely that reforms will be piecemeal and plodding, in the Japanese fashion. "We are bound to change - that's definite - but very slowly," says Toru Nakakita, a professor of economics at Tokyo's Toyo University.
One reason change may come slowly is that the Ministry of Finance is a powerful beast satisfied with the status quo. Another is that conveying things obliquely, relying on "feelings" rather than clearly spoken words, is part of what makes Japan Japanese.
Sumiko Iwao, a professor of social psychology at Keio University here, notes that gift- and entertainment-giving "is the core of Japanese communication."
"This has been a beautiful tradition in many respects, rather than saying things directly ... [although] I really think Japan needs to learn an international standard of communication."
The investigation burst into public view on Jan. 26, when prosecutors tramped through the front door of the ministry as television cameras recorded their entry. The raid alone astounded many people, since the ministry has long been seen as sacred territory where even the nation's law enforcers feared to tread.
Since then one MOF official has committed suicide, its highest-ranking bureaucrat and the finance minister have resigned, and two top bank inspectors are under arrest. Each day brings new revelations about the practice of settai and the coziness of officials and bankers.
Yesterday the prime minister apologized in parliament for the scandal and vowed to clean up the civil service. Ministry officials have responded with a mixture of silence, denials, and humble-sounding affirmations that "there is no excuse."
A society in gradual turmoil
Like many elements of Japanese public life, a drama is being played out. It surprises few Japanese to hear that bankers have been treating ministry officials to expensive evenings. But this is an era of gradual, low-intensity turmoil in Japan - the past three years alone have seen a terrible earthquake, a nerve-gas attack in Tokyo, and an economy in a long recession. Even the society's firmest foundations are up for criticism and investigation.
Institutions such as the MOF-tan and settai are not aberrations in the system - they are its integral elements. The former MOF-tan explains that he spent most of his time walking the halls of the ministry, trolling for information and trying to advance matters important to his bank.
MOF-tans are a privileged bunch - most are graduates of the elite Tokyo University, whose alumni fill the ministry - and their positions expose them at an early age to the most closely held plans and policies of their employers.
How a MOF-tan works
During his two years as a MOF-tan, the banker says his proudest moment was the ministry's approval of his bank's application to open a particular branch office. His work involved copiously checking various elements of the draft application with ministry officials and then recommending alterations to his colleagues. Because of his efforts, he believes, the process went "smoothly," reflecting well on his abilities.
The job also put him, at least once or twice a week, in some of the most elegant and refined of Tokyo's restaurants. The settai was an indispensable aspect of the work, he says. "We must 'know the face' of government officials to do business," he explains. "It's a Japanese custom." "Knowing the face" means making a personal connection, creating a good feeling, and showing some respect to the officials who sit at the pinnacle of Japan's government.
A typical evening would begin about 6:30, with three MOF-tans escorting three high-level ministry officials to an exclusive restaurant for dinner in a private room. Then they might go to a club for "Round 2."
The total cost for the evening could come to as much as $5,000, he says, depending on the rank of the officials.
Even when the bank had a particular item of business pending at the ministry, it might never be openly discussed by the officials and the MOF-tans. Instead, at the end of the evening, the bank executives would ask for the ministry's "consideration."
In an increasingly globalized economy, it seems obvious to many Japanese that this system has to change. Critics argue that clear-cut rules should govern industry, not bureaucrats empowered by open-ended regulations.
Professor Nakakita notes that bankers have spent millions of dollars entertaining officials - money they could have used to market new products and streamline notoriously inefficient institutions. The ministry has also let banks carry nearly $600 billion in bad loans, perhaps because close relationships prevent stern action.
Japan is in a period of enduring economic stagnation that Nakakita likens to the doldrums that gripped Britain in the 1970s: Everyone knew that change had to come, but no one knew quite how until Margaret Thatcher came to power.
The problem with this analysis is that Japan has no Margaret Thatcher at the moment, nor does it have a two-party political system that could empower a leader promising radical change. Japan's leaders are adverse to any path that would bring unemployment and bankruptcies because of the human and political costs.
"There is no reason for us to retain the old system of lifetime employment and lock-step promotions," Nakakita argues, highlighting the features that have ensured low unemployment and an even distribution of wealth.
In an interdependent global economy, where information and not manufacturing ability is paramount, he says, "the fundamentals are totally different."
* Staff writer Yoshiko Matsushita contributed to this report.