Aso fights for political survival as cronyism scandal threatens to divide ruling party

Finance Minister Taro Aso was fighting for his political survival Tuesday as a growing cronyism scandal that has paralyzed the Diet threatened to divide the ruling party and deal a potentially devastating blow to the Abe administration.

Prime Minister Shinzo Abe and Aso, his close ally, are under pressure over the Finance Ministry’s admission that it had made dozens of deletions to 14 documents related to the shady 2016 sale of state land to nationalist school operator Moritomo Gakuen, which has ties to Abe’s wife, Akie, between late February 2017 and April the same year, weeks after the heavily discounted sale was first reported.

The suspicion of a cover-up has rocked the ruling Liberal Democratic Party and could dash Abe’s hopes of winning a third term as party leader in a September vote. Losing the party leadership would ruin Abe’s chances of becoming the country’s longest-serving prime minister. Opposition lawmakers are calling for Aso to step down to take responsibility, and some analysts believe his resignation could be inevitable.

On Tuesday, Aso vowed to look into why documents related to the controversial sale of state-owned land were doctored, as unconvinced opposition parties ratcheted up their criticism against the government.

“My job as finance minister is to identify why it happened and prevent a similar incident in the future,” he told reporters.

Aso was also preparing to skip a Group of 20 finance leaders’ gathering in Buenos Aires next week, officials said Tuesday. When asked whether he may skip the March 19-20 G-20, Aso told reporters that the decision will depend on the “present parliamentary situation.”

“It is important to fully cooperate with the ongoing investigation. To prevent a recurrence, we’ll continue to look into the matter and do the utmost to regain (public) confidence,” Aso said, signaling his intention to ride out the storm.

An LDP lawmaker, speaking on condition of anonymity, said “it will probably be difficult” for Aso to travel overseas “at this time.”

Other government and ruling party officials also said Aso was likely to stay home, and let Masatsugu Asakawa, Japan’s top financial diplomat, attend the G-20 meeting in his place.

The scandal has already caused a stalemate in the Diet, with opposition parties threatening to boycott a debate on next fiscal year’s budget, potentially delaying reforms to boost long-term economic growth.

Their criticism deepened further Tuesday, as the Yomiuri Shimbun daily reported that a Finance Ministry official who committed a suicide earlier this month had left a note, saying the ministry had forced him to alter the documents.

Also Tuesday, LDP Diet affairs head Hiroshi Moriyama denied the opposition parties’ demand to summon to the Diet Akie Abe and National Tax Agency chief Nobuhisa Sagawa, who oversaw the Finance Bureau, after talking with the main opposition Constitutional Democratic Party of Japan’s parliamentary affairs chief Kiyomi Tsujimoto.

The logjam in the Diet could also leave two Bank of Japan deputy governor posts vacant when the incumbents’ terms end on March 19, as the appointments require lawmakers’ approval.

“The firestorm surrounding the cover-up and the land sale will continue to inhibit the administration’s ability to move its agenda through the Diet,” said Tobias Harris, vice president at Teneo Intelligence, a global advisory firm.

With global fears of a potential trade war set to be discussed at the G-20 in Buenos Aires, Aso’s absence would be further evidence of the hindrance the scandal has become for Abe’s government.

On Monday, Aso blamed bureaucrats for the suspected cover-up. But in a rare move, several ruling party heavyweights have openly criticized Abe over the scandal and warned that politicians — not just bureaucrats — must take ultimate responsibility.

A survey by the Sankei Shimbun daily showed 71 percent of respondents said Aso should resign, while support for Abe’s administration slid 6 percentage points from February to 45 percent.

“Aso said he would not … resign to take responsibility for the cover-up. But this approach is unlikely to work for long,” said Harris.

Aso leads a powerful faction within the LDP, and if he is forced to resign and feels betrayed it could erode Abe’s chances of winning another term, analysts say.

While few analysts at this point are predicting the scandal could lead to Abe’s downfall, some say it could impair the prime minister’s focus on the pro-growth, reflationist economic policies known as Abenomics that have become a hallmark of his government. Japan’s economy is enjoying its longest run of growth in 28 years, thanks to robust global demand and capital expenditure.

The scandal has also weighed on markets, though the Nikkei share average managed to rise 0.66 percent on Tuesday. The held firm against the dollar, as the scandal raised doubts about Abe’s ability to pursue economic policies that have kept the yen weak.

“If Aso resigns, that would give Aso’s political faction a freehand, making the LDP leadership race in September extremely fluid. In the worst case, Abe may not make it for the third term,” said Hidenori Suezawa, an analyst at SMBC Nikko Securities. “If Abe goes, Abenomics will go back to square one.”