• Compiled From Kyodo, Staff Report

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Two reformist politicians widely considered free of scandal were forced Wednesday to answer allegations they received illegal contributions from a futures trading company via a dummy entity.

Caught up in the allegations were Finance Minister Kaoru Yosano, a Liberal Democratic Party bigwig at the forefront of the government’s fiscal reform efforts, and Yoshimi Watanabe, former administrative reform minister who bolted from the LDP in January after clashing with Prime Minister Taro Aso over the government’s slow progress on streamlining the bureaucracy.

According to sources, Tokyo-based H.S. Futures used a dummy political body to provide ¥55.3 million to Yosano and ¥35.4 million to Watanabe in campaign contributions over a period of more than 10 years through 2005. The firm, a commodities futures arm of H.S. Securities Co., was named Orient Trading until 2008.

If the allegations are true, it would be a violation of the Political Funds Control Law, which bans political donations under the name of a third party.

Yosano headed up the predecessor of the Ministry of Economy, Trade and Industry from 1998 to 1999. METI oversees the commodities futures trading industry.

At a Wednesday afternoon news conference, Yosano indicated he may return the donations but has no intention of resigning over the matter.

“If there are any problems, I would think about what I should do with the money but I’m not thinking about anything more than that,” Yosano said.

“I’m convinced that there is no wrongdoing someone could point out,” he said.

Yosano called Yukio Kato, the owner of Orient Trading, who also represents the political entity, “a goodwill supporter for more than 30 years” who has never asked anything of him.

Watanabe never held a Cabinet post before 2006, but he was one of the key LDP lawmakers involved in crafting financial regulatory reform in the late 1990s.

The company may have given money to other influential LDP lawmakers as well.

Watanabe told reporters he will return the money if the contributions were illegal.

The sources said the dummy entity was created as a policy study group also headed by Orient Trading owner Kato.

Yosano’s office recommended that the group be designated as an entity whose political contributions are tax-exempt, the sources alleged, adding Watanabe’s office made a similar recommendation.

Money for the political contributions came from the salaries of Orient Trading’s top and middle managers to the tune of several thousand yen a month in tax-deductible donations, the sources said.

Some former managers said they were coerced into accepting the automatic salary cuts but were never told where the money ended up.

“I was asked by my boss to accept the (deductions), so how could I refuse?” one former middle manager said, adding it never occurred to him that Kato’s group was a dummy organization.

Yosano defended himself when he was swarmed by reporters outside his Tokyo home Wednesday morning, saying the contributions were received in line with the law.

He also denied that the money constituted corporate payoffs camouflaged as political contributions.

Yosano said that Kato is an old friend and that he has no knowledge of the policy research body being a front.

Chief Cabinet Secretary Takeo Kawamura said during his regularly scheduled news conference that Yosano will deal with the allegations in an appropriate fashion.

Already this year Ichiro Ozawa was forced to resign as president of the Democratic Party of Japan over a scandal in which his top aide was arrested for taking allegedly illegal political donations from Nishimatsu Construction Co.

The Nishimatsu scandal has also spread to the LDP, with current trade minister Toshihiro Nikai linked to shady donations from the general contractor.

Yosano’s possible involvement in a similar case could have a big impact on political developments as Aso tries to determine the best timing to dissolve the Lower House and call the general election.

Officials of the LDP-New Komeito ruling bloc dodged reporters’ questions as to whether the latest scandal would eventually cost Yosano his neck — a worst-case scenario for the ruling bloc that could deal a fatal blow to the Aso Cabinet ahead of the general election.

LDP Secretary General Hiroyuki Hosoda told reporters the first thing the LDP should do is probe the matter and explain it clearly to the public.

Tadamori Oshima, the LDP Diet affairs chief, also stressed that fact-finding efforts must come before raising doubts about Yosano’s fund management.

Meanwhile, opposition forces in the Upper House agreed Wednesday they will take up the issue and grill Yosano during the chamber’s budget committee meeting this week.

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