Japan Press Weekly

Tweet

2012 June 20 - 26 [POLITICS]

Deregulation behind AIJ fraud scandal

AIJ Investment Advisory Co. President Asakawa Kazuhiko was arrested on June 19 on suspicion of cheating employees’ pension funds out of 7 billion yen.

According to an announcement released by the Tokyo Metropolitan Police Department, AIJ allegedly swindled 7 billion yen last summer from an employees’ pension fund in the construction industry in Nagano Prefecture and a corporate pension fund in Tokyo’s Nerima Ward by selling them investment funds at an inflated price based on the company’s fabricated operational performance.

AIJ began its speculative investment of money entrusted by pension funds in May 2003. It has been in the red since March 2004 and went bankrupt in April 2009. The company has lost 122.1 billion yen out of 145.8 billion yen which it received in trust from numerous pension funds.

The advisory company is said to have made inroads into the pension fund market with the assistance of former officials of the Social Insurance Agency. Some 70% of ex-officials of the SIA have parachuted into positions dealing with employees’ pension funds. AIJ pushed itself onto potential customers by making use of these contacts.

In the background is the deregulation policy line easing regulations on the entry of investment advisory firms into the market which the government adopted at the request of both Japanese and U.S. business circles.

The Japanese Communist Party has been consistently opposed to the policy to relax regulations, arguing that entrusting all pension funds to investment advisory firms is “high-risk” because it entails the risk of losing the original principal, and that if the companies fail to manage the funds properly, pensioners would receive a severe blow.