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Fukushiro Nukaga was forced to resign Tuesday as minister for economic and fiscal policy over allegations that he received 15 million yen from the mutual-aid organization KSD in return for favors. Nukaga denied accepting the money himself but admitted that one of his secretaries had received it. He said he was stepping down to prevent the scandal from affecting the budget debate that will take place in the ordinary Diet session scheduled to open Jan. 31.

Nukaga’s resignation has several political implications: First, he is the third member of Prime Minister Yoshiro Mori’s Cabinet to resign over a scandal since it was launched last April following Prime Minister Keizo Obuchi’s fatal stroke. His resignation has dealt a staggering blow to the Mori administration, which is plagued by abysmally low public-approval ratings. It has also raised concerns in the Liberal Democratic Party, New Komeito and the New Conservative Party over the ruling coalition’s prospects in the July Upper House election under Mori’s leadership.

Second, the departure of Nukaga, who was in charge of the government’s Economic and Fiscal Advisory Council, undermined the Mori administration’s plan to promote political leadership in national affairs. The council was the centerpiece of the powerful advisory groups that were set up when Cabinet functions were strengthened in the government reorganization that took place this month.

Third, the KSD scandal affected not only the Cabinet but also the leadership of the Liberal Democratic Party. Former Labor Minister Masakuni Murakami, who was closely linked to KSD, resigned as chairman of the LDP members’ general assembly in the Upper House Jan. 15. He departed the day before Upper House member Takao Koyama, a former aid to Murakami, was arrested by the Tokyo District Public Prosecutor’s Office on suspicion of taking 20 million yen in KSD bribes in return for asking questions in the Diet that would benefit KSD.

Koyama’s arrest, Murakami’s resignation and Nukaga’s departure exposed a LDP structural problem stemming from the collusion of politicians, bureaucrats and business executives.

One of Nukaga’s secretaries allegedly accepted 5 million yen in November 1999 from former KSD President Tadao Koga — who has been indicted for embezzlement and breach of trust — but didn’t give it to the lawmaker. The late Prime Minister Obuchi, in a policy speech he delivered in January 2000, mentioned KSD’s project to establish a private college of technologists. Nukaga, then deputy chief Cabinet secretary, was in a position to draft the speech, though he denies having played any such role.

In April 2000, the same secretary purportedly accepted 10 million yen more from Koga, keeping it for Nukaga again. Nukaga said that after he learned of the money the following month he instructed the secretary to return it to Koga.

Nukaga said he resigned to take political responsibility for his failure to supervise the secretary. However, he did not provide full account of the affair. He should testify before the Diet if he really wants, as he says, to take political responsibility.

In resigning as an LDP leader in the Upper House, Murakami expressed regret that KSD, which actively supported him, caused a public uproar. It is hard to believe that Murakami quit his post for the reason he gave considering he was only one step away from the Upper House presidency.

KSD, a mutual-aid organization for small businesses under the supervision of the Labor Ministry, provides compensation for disaster damage and funds for employee welfare. It has provided funds to many politicians, including opposition-party members. KSD has also accepted many retired Labor Ministry officials as executives of its affiliates.

KSD also allegedly made up a false roster of LDP members from a list of its members and paid LDP membership fees for them. This was intended to place Murakami and Koyama high on the LDP’s proportional-representation roster for an Upper House election and assure their victories.

Koyama, in his first quest for a Diet seat, was No. 12 among the 15 LDP candidates who won in the proportional-representation section of the 1995 Upper House election. Murakami, in winning re-election in the proportional-representation section of the 1998 Upper House election, was No. 2 among the 14 successful LDP candidates.

The whole affair is reminiscent of a scandal involving former Financial Reconstruction Commission Chairman Kimitaka Kuze, who was forced to resign in July 2000. In these scandals, companies and organizations have paid money and collected votes for candidates of their choice in the proportional representation section of the Upper House polls.

In an effort to prevent corruption, beginning from this June’s Upper House election people will be able to vote for individual candidates in addition to political parties. Critics say that the new system will reveal the effects of industrial and religious groups’ campaigns and that candidates’ dependence on organizational support will increase.

The KSD affair is the first major political scandal since former Construction Minister Eiichi Nakao was arrested last June for taking 30 million yen in bribes from a construction company. It threatens to become the worst political scandal since the Recruit stocks-for-favor scandal was exposed more than 10 years ago.

The LDP, Mori and the Diet bear a heavy responsibility: They must reveal the truth about the KSD scandal. At the foundation of the scandal is politics based on collusion among LDP politicians, business executives and bureaucrats and driven by special-interest groups. If the LDP tries to escape probes by forcing those implicated to resign, it will only exacerbate public criticism.

Mori will be held responsible for appointing Nukaga to the Cabinet post last month despite his knowledge of the latter’s links to KSD. Mori allegedly agreed to the appointment under pressure from an LDP faction headed by former Prime Minister Ryutaro Hashimoto.

Obuchi mentioned a KSD project in a Diet policy speech, and Murakami and Koyama also asked questions regarding KSD in the Diet. Yukio Hatoyama, chief of the opposition Democratic Party of Japan, says he will ask the Diet to summon those involved for testimony and will hold Mori accountable for Nukaga’s ministerial appointment. It is incumbent upon the Diet to get to the bottom of the KSD scandal.

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