Every day brings fresh allegations of illegal conduct by the Tokyo Kyowa and Anzen credit unions, now the subject of criminal investigations, and of deeper associations with some of Japan's most august institutions. Tokyo Kyowa lent 35 times the legal limit to one customer, a business group headed by a man who was also chairman of Tokyo Kyowa until last December, and, with Anzen, it allegedly offered under-the-table kickbacks of 5 per cent for high-interest new deposits in a desperate bid to conceal mounting bad loans.
It is also alleged by the Mainichi newspaper that the Long Term Credit Bank deliberately funnelled, through affiliated "non-bank institutions" deposits and equity of Y39.3bn (£254m) to Tokyo Kyowa to conceal a capital stake larger than the legal maximum.
In Japan it is inconceivable that the reckless practices of the two credit unions went unnoticed for years by the financial establishment, especially by the Bank of Japan and the powerful Ministry of Finance, which appoints the central bank governor.
One early victim of the scandal has been the reputation of Yasushi Mieno, the former Bank of Japan governor credited with pricking the economic bubble in Japan in the late 1980s.
He agreed to the rescue plan, shortly before his retirement and less than six weeks after publicly expressing support for allowing financial institutions to fail if there was no "systemic risk".
The case has already prompted outraged newspaper editorials and the Japanese parliament is demanding a list of depositors in the two credit unions, and may summon witnesses to testify.
Last week's swift resignation of Toshio Yamaguchi, a former cabinet minister, as deputy secretary-general of the main opposition New Frontier party, following reports that the two credit unions lent Y4.05bn to companies run by relatives, including two that manage golf courses, has only whetted the political thirst for vengeance.
In essence the scandal revolves around the flamboyant speculator Harunori Takahashi, a long-time associate of Mr Yamaguchi and other conservative politicians, who was known until a few years ago as "the most leveraged man in the world".
His EIE International group of companies appear to have further bled Tokyo Kyowa - of which he was former chairman - and Anzen, formerly chaired by a close friend, after the Ministry of Finance gave its blessing in 1993 to the cutting of further credit from his main bank, LTCB, and others including Mitsui Trust and Banking, Sumitomo Trust, Mitsubishi Trust, and Nippon Credit Bank.
While the bubble lasted, these banks had helped to fund EIE's break-neck expansion in hotels, resorts, and other property around the globe.
These include the sandstone Bond University on the Gold Coast of Australia developed with since-jailed tycoon partner Alan Bond, and a floating hotel moored at the port of Ho Chi Minh City in Vietnam.
This support continued even after Mr Takahashi had been investigated in Japan and Australia by securities regulators.
LTCB and Mitsui Trust had latterly placed their own executives on the board of EIE International in the hope of restoring financial discipline and recovering some of their investments, but gave up in 1993.
Japanese observers tend to find such disclaimers as unconvincing as the story of how, after leaving a job at Japan Air Lines, Mr Takahashi leveraged an electronics importing company he acquired in 1977, Electronics and Industrial Enterprises, into a multi-billion global property giant on the basis of personal "genius".
This month's issue of Tokyo Business Today magazine suggests LTCB's recent willingness to write off Y90bn it lent is due to EIE's long-reputed links to Japanese yakuza gangsters.
After property sales around the world to reduce its debt burden, not much appears left of the EIE empire. However, the Japanese taxpayer is being left with a large bill, some Y20bn from the Bank of Japan, with an equal amount from private banks it has "persuaded" to participate, to clean-up the mess at Tokyo Kyowa and Anzen caused by private irresponsibility, largely stemming from Y66.4bn lent without proper security to EIE.
"Why should public funds be spent salvaging minor credit unions that have failed because of licentious operations?" the Mainichi asked.
The paper demanded an investigation into rumoured relationships between Mr Takahashi and "certain influential politicians, senior bureaucrats and monetary officials".Reuse content