Japan Press Weekly

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2023 December 20 - 2024 January 9 [POLITICS]

LDP’s fundraising scandal highlights need for total ban on political donations from corporations and interest groups

As part of investigations into the unregistered fundraiser-income scandal involving major Liberal Democratic Party factions, the Tokyo District Public Prosecutors Office’s special investigation squad has raided the offices of the LDP’s Abe and Nikai factions. The LDP is tainted by money-power corruption as evidenced in two major bribery scandals, the 1976 Lockheed scandal and the 1988 Recruit scandal. The latest case has again posed a question on how political corruption related to money can be prevented.

The scandal came to the surface after an Akahata Sundy edition published a scoop. The exclusive scoop reported on the allegation that five major LDP factions, including the Abe faction, had failed to put into their political funds reports revenues amounting to more than 24 million yen from ticket sales for fundraising parties in the three years to 2020, which constitutes a violation of the Political Funds Control Act.

Clerical mistake?

Following the Akahata Sunday edition scoop, the five LDP factions made corrections of their political fund reports and took a “just a clerical error” attitude.

In order to create slush funds, the ultimate way is to fudge the income or expenditure data on a financial statement: stating less income or more expenditure than actual and putting the difference into a slush fund.

Falsification of political fund reports by underreporting incomes from fundraisers is a “gateway” act of generating off-the-book funds and thus should not be taken lightly.

To gloss over political fund records is a matter of national sovereignty. Article 1 of the Political Funds Control Act stipulates that the release of political fund reports aims to have political activities carried out under constant monitor and criticism from the general public, which secures openness and fairness of political activities and contributes to a sound development of democratic politics.

Media reports regarding prosecutors’ investigations into the scandal mainly focus on the Abe faction. However, it is necessary to thoroughly investigate missing funds created by all LDP factions, including the PM Kishida-led faction.

Increased ‘transparency’ is not enough

In reaction to the scandal, media outlets in their editorial call for “transparency” as a way to prevent a recurrence by saying that a “thorough transparency of political funds needed (Yomiuri Shimbun on December 15)” and that “political funds should be completely open with no loopholes (Asahi Shimbun on the same day).” The LDP Secretary General Motegi Toshimitsu, head of one of the five LDP factions, on December 18 expressed his intent to consider ways to secure transparency, including a revision of the political funds law.

When looking back at the law’s history, a law revision took place with the aim of improving transparency each time a political finance-related corruption scandal occurred.

A document of the former Ministry of Home Affairs (currently, the Ministry of Internal Affairs and Communications) described that at the time when the war ended, political corruption occurred one after another associated with mergers and break-ups of political parties. In June 1946, the Political Funds Control Act was enacted. However, it was a law full of loopholes from its very beginning, not prohibiting political donations from business entities and other interest groups.

For this reason, a series of money-for-favor scandals occurred. Each time, issues related to such donations became a focus of discussion. According to the clause-by-clause commentaries of the Political Funds Control Act, the 5th Election System Council in its proposal in April 1967 pointed out, “Funds comprised of individual donors and party membership dues are what political funds of political parties should be.” The Council called for a departure from dependence on political donations from companies and other organizations by recommending that roughly within five years, party management be financed by individual donations and party dues. However, a law revision as recommended by the Council was shelved.

In 1974, the then Prime Minister Tanaka Kakuei resigned after his dubious financial connections came to light. Miki Takeo succeeded Tanaka. In 1975, the law was finally revised under the Miki government. The revised law strengthened the disclosure of political funds reports in order to enhance “transparency” but imposed an extremely lax regulation on political donations from business enterprises and interest groups. The upper limit of donations was set depending on the size of donor corporations’ capital, ranging from 7.5 million yen to 100 million yen.

With an aim to extend the bases of political funds, PM Miki began holding LDP-hosted fundraising parties. A party ticket at that time was 60,000 yen. Fundraising events became common in the LDP during the Miki regime in contrast to his nickname “Clean Miki”. Dependence on political donations from business entities and other interest groups has been an indelible culture aspect of the LDP.

Repeated corruption scandals

In response to the Recruit Cosmos shares-for-influence scandal, the Political Funds Control Act was again revised in 1992, requiring political organizations to make public their assets in order to ensure “transparency”. The re-revised law, however, allowed one person to buy fundraiser tickets up to as much as 1.5-million-yen for one party.

From 1992 through 1993, a spike of scandals surfaced, including the large-scale tax evasion case involving then Vice LDP President Kanemaru Shin and corruption cases involving major general construction contractors. In 1994, the direction toward replacing donations from corporations and interest groups with donations from individuals in five years was put forth in exchange for the introduction of a system of government subsidies to political parties under the guise of “political reform”.

However, the 1999 amended law keeps intact pollical donations from corporations and special interest groups to political parties and political funds-management bodies.

Because of this, all Dietmembers, excluding Japanese Communist Party members, now receive both political donations and government subsidies through their party chapters, and funds-management organizations of individual politicians hold parties to raise funds. Regarding LDP factions, they are not political organizations as stipulated in the law. Therefore, they cannot directly receive donations from corporations and organizations. This has led each faction to a money-collecting method which is to sell party tickets to companies and interest groups and obtain income from the sales.

Looking back on the process of the repeated amendments to the Political Funds Control Act, it is found that “transparency” alone cannot eradicate money-for-favor politics. Political donations from business establishments and other interest groups are, in essence, bribery. This is the underlying cause of political corruption. Political donations from and purchases of political fundraiser tickets by all organizations should be banned.