Loopholes in political funds law

Farm minister Koya Nishikawa’s denial of illegal activity in a ¥1 million donation to a Liberal Democratic Party chapter he heads — from a company run by the sugar manufacturers’ association after it received ¥1.3 billion in government subsidies — appears to stand on mere technicality. He returned the money Tuesday morning after a newspaper report broke the story, but if the donation was legitimate, as Nishikawa insists, one wonders why he felt it necessary to return it.

The Political Funds Control Law bans political donations by companies and organizations within a year after they’ve received government subsidies. The ¥1 million donation to the Tochigi No. 2 constituency branch of the LDP was made in July 2013 — four months after the Japan Sugar Refiners’ Association was granted a farm ministry subsidy of ¥1.3 billion in a program to promote stable sugar cane production.

Nishikawa, who became farm minister last September, says the donation was legitimate because it was made by a Tokyo-based building management company run by the sugar industry association, not by the association itself. The association and the firm are in the same building, and the association chairman doubles as the company’s president.

While Prime Minister Shinzo Abe and other government leaders support Nishikawa’s position, the association and the minister will not escape blame that the donation was provided through a legal loophole and deviates from the legal principle of banning donations from recently subsidized entities.

At the time of the donation, Nishikawa, known as one of the LDP lawmakers with close ties to farm industry interests, was serving as chairman of an LDP panel on the Trans-Pacific Partnership free trade talks. The donation was made right before he visited Malaysia just as Japan joined the TPP negotiations at a session held in Malaysia. Sugar is one of five farm product categories for which Tokyo has been trying to retain tariffs in the TPP discussions. The industry association has been lobbying for protection of domestic growers of related products.

Nishikawa’s LDP branch also received ¥3 million in donations in 2012 from a local wood-processing company that about four months earlier had received a ¥700 million government subsidy to promote the forestry business.

Nishikawa said he “did not recognize” that donation as illegal, but returned the money anyway “given that it might be considered illegitimate.” At that time, he did not have a Diet seat, having lost it in the 2009 Lower House election. The subsidy in question was granted while the Democratic Party of Japan was in power.

Also, within a year after the subsidy, the same LDP branch received ¥1 million in donations from the president of the wood-processing firm, which purchased ¥1 million worth of tickets to a fundraising party organized by the branch.

Nishikawa says these donations are legitimate under the political funds law, which does not mention donations by individuals linked to entities receiving the subsidies.

The law restricts political donations by entities receiving government subsidies to avoid having the donations influence parties that are in a position to make decisions concerning the subsidies. Accordingly, Nishikawa’s case should challenge the government and the Diet to consider closing loopholes in the law to halt the suspicious flow of funds.