Social Science Japan Journal #6.1 – HILL
Heisei Yakuza: Burst Bubble and Bôtaihô
Peter HILL
Peter HILL is a British Academy Postdoctoral Fellow in the Department of Sociology at the University of Oxford. His current research interests include organised crime, policing in Japan and the wartime special attack corps (tokubetsu kōgeki-tai). Publications include The Japanese Mafia: Yakuza, Law and the State (Oxford University Press forthcoming 2003). He can be contacted at the Department of Sociology, Littlegate House, St Ebbes, Oxford, OX1 1PT, UK, or by email at
Abstract: This paper explores developments in the business activities of the yakuza/bôryokudan (Japan’s organised crime syndicates) following the end of the Shôwa period in 1989. Since then, the yakuza have had to contend with two events which have had profound effects on their economic environment: the collapse of Japan’s bubble economy right at the beginning of the new era and the introduction of the bôryokudan countermeasures law (Bôtaihô) in 1992. Whilst post-bubble economic stagnation has deprived the yakuza of many lucrative opportunities, it has compensated them with others. The Bôtaihô, by imposing new restrictions on formerly legal yakuza activities, made these sources of income more costly and thereby similarly forced gang-members to develop new sources of income. In particular, amphetamine dealing and organised theft rings have grown in response to the ‘double punch’ of the bubble and the Bôtaihô. The paper concludes by suggesting that the continuing economic hardship faced by the yakuza is weakening the intra- and inter-organisational mechanisms by which they have tried to stabilise their world.
1.Introduction
During the early years of the new imperial era two events had a massive impact on the economic, legal and political environment of Japan's underworld gangs known as yakuza:[1]thecollapse of Japan’s speculative real-estate and stock-market bubbles in 1989-90 and the passage of new anti-yakuza legislation in 1991. This paper explores these changes and the effects they wrought on the yakuza over the following decade, asking what this tells us about the relationship between the authorities and yakuza.
My interest in yakuza was initially sparked during the late 1980s when, as a karate student in the northeast of Japan, I spent an extraordinary evening drinking with the prefecture’s most prominent gang-leader. As a naïve student I was struck by the apparent paradox of a large and visible set of organised criminals amidst a harmonious and peaceful host community. The fascination continues. The research on which this paper is based took place ten years later in Tokyo and Osaka, supplemented with more recent material drawn largely from the monthly ‘trade magazines’ of the yakuza such as Jitsuwa Jidai and Jitsuwa Dokyumento[2]. I focus principally on the big three syndicates -- the Yamaguchi-gumi, the Inagawa-kai and the Sumiyoshi-kai -- who collectively comprise over two-thirds of the total yakuza population.
At the beginning of the Heisei period in 1989 the yakuza apparently enjoyed a position of wealth, security and acceptance inconceivable for organised crime groups in other advanced industrial democracies. Even in Italy, long seen as the exemplar of state-mafia symbiosis, the activities of determined prosecutors such as Giovanni Falcone and Paolo Borsellino had critically undermined the validity of this paradigm. No such trend seemed apparent in Japan; as the Shōwa emperor was lying on his deathbed, LDP supremo Kanemaru Shin was entertaining, and flattering, the head of one of Japan’s largest criminal syndicates. Similarly, police officers the length of the land were dropping in at gang-offices, clearly identifiable with large nameplates, to share coffee and cigarettes whilst chatting about what was happening on their beat.
Whilst this seemed to constitute conclusive evidence of systematic state-yakuza symbiosis, as stressed by much of the popular English-language literature (e.g. Kaplan and Dubro 1986, van Wolferen 1989), the reality was slightly more complex. Since the mid 1960s, police countermeasures had consistently been one of the two most significant factors driving the diversification of the yakuza into new business activities[3].
As of December 1988, the yakuza comprised a total membership of 86,552 men[4] (including both fully initiated members (kôsei'in) and trainees (jun-kôsei'in) making up 3,197 groups. Of these groups, 1,397 (34,492 men) were attached to one or other of the three big national syndicates, the Yamaguchi-gumi, the Sumiyoshi-kai and the Inagawa-kai (Keisatsu Hakusho 1989: 13). These syndicates were organised on a pyramidal, quasi-feudal, hierarchy in which the formal organisational structure was reinforced by a parallel social structure based on fictive father-son and brother-brother links forged through ritual exchanges of sake. Within these syndicateswere strings of sub-groups and sub-groups led by syndicate members of decreasing seniority.
In reaction to nationally concerted police arrests of senior gang bosses during the mid-1960s, in the early 1970s the large syndicates adopted a system of monthly tribute, (jônôkin[5]), paid by sub-groups to their parent gang. This guarantees an income for senior bosses, while insulating them from any direct criminal involvement. In the case of the Yamaguchi-gumi, by the early 1990s the bosses directlylinked to the first-level organisation(chokkei kumi-chô), were expected to pay ¥1.34 million per month, giving headquarters a guaranteed annual income of ¥21.26 billion (Mizoguchi 1997: 54-58). Not all this money went to the gang boss, since leading a syndicate is an expensive business. Costs include running the headquarters; legal fees; maintenance for families of incarcerated members; and gifts of money at funerals, jail-release, succession and other yakuza ceremonies (as well as mainstream year-end and summer gifts).
Where did this money come from? Estimates of total yakuza income can never be made with any degree of confidence. In 1989 the National Police Agency (hereafter NPA) published a widely reproduced pie chart showing their assessment of annual yakuza income (Keisatsu Hakusho1989). According to this estimate, at the end of the Shôwa period, the yakuza collectively made ¥1.3 trillion per year.
This total was broken down as in table 1.
Table 1. Police estimate of yakuza sources of income, 1989.
Source of income / Percentage of incomeAmphetamine dealing / 34.8%
Gambling and bookmaking / 16.9%
Traditional protection / 8.7%
Civil intervention (minbô) / 7.3%
Corporate extortion (sôkaiya) / 3.4%
Other illegal activities (fraud, theft, etc) / 9.2%
Legitimate business management / 9.9%
Legitimate employment / 9.8%
Source: Keisatsu Hakusho, 1989.
In an interview (Tokyo, March 1998), I discussed these figures with a senior research officer at the National Research Institute for Police Science (NRIPS) who had been involved in devising the methodology underpinning this estimate. This officer suggested that significant sources of yakuza income were excluded from this estimate for political reasons: senior NPA officers considered it politically embarrassing to have to admit the extent to which criminal organisations were taking money from large and supposedly respectable businesses in exchange for nebulous services.
Perhaps the most significant source of funds of this type was Japan’s construction industry. In 1990, total investment in construction in Japan stood at over ¥81 trillion (18.5% of GDP) (Asahi Shinbun 1999: 166, 81). If we assume that yakuza protection extends to one-third of this total[6] and that the standard rate is 3% (as suggested by interview data) then this industry yields the yakuza ¥810 billion per year. Yakuza dependence on construction is not unique to them; as Kerr (2001) so trenchantly reminds us, this industry is the drug to which politicians, bureaucrats, and vast swathes of the population are addicted.
The much-cited figure of ¥1.3 trillion should therefore be seen as a serious underestimate of total yakuza earnings. Mizoguchi Atsushi[7] (1986: 182) suggested a figure of ¥7 trillion for annual yakuza turnover for the mid-1980s, with profits being somewhere in the region of three-quarters of this.
There were two crucial (and frequently interrelated) developments in yakuza business practices over the 1980s. The first of these was their increased involvement in the speculative real-estate and stock-market bubbles. Many yakuza were initially drawn into this sphere by real-estate developers who hired yakuza to conduct jiage operations – forcing owners of small adjacent properties to sell their land and provide a large, developable site. Japanese property law provides many obstacles to doing this quickly and cheaply and the yakuza provide an expedient short cut.The commission earned on such operations was typically 3% of the land’s ridiculously inflated value. By the late 1980s, jiage was considered to be the biggest single source of income for yakuza in the Kantô and Kansai regions (Mizoguchi 1997: 66). Ambitious yakuza moved into real-estate development, and then investment in the soaring stock market, in their own right. In their enthusiastic participation in these markets, yakuza were by no means unique.
The second key development over this period was the growth in minbô. Minbô, more formally minji kainyû bôryoku, ‘violent intervention in civil affairs.’This comprises activities in which bôryokudan members or associates make use of the implied threat of their gang-affiliation in order to intervene in the everyday lives of the general public, or by taking the form of rightful or interested parties and taking advantage of areas in which legal procedures do not function adequately, intervene in economic transactions. Strictly speaking, sub-classifications ofminbô include incidents related to: debt-collection; sôkaiya activities; finance; promissory notes; bankruptcy management; real estate (especially jiage); out of court settlement of traffic disputes; other disputes. In general parlance however, minbō typically refers to traffic dispute and other types of pretext racketeering. This latter sense is adopted here.
The big growth in minbōfollowed the 1982 reform of the commercial code, making which made sôkaiya-type racketeering harder, especially at the lower end of the business. Yakuza displaced from the sôkaiya business developed other fundraising activities. This development was significant for two reasons. Firstly, unlike the traditional ‘victim-less’ yakuza businesses such as gambling and protecting bars, much minbôactivity directly impinges on the lives of ordinary members of the public. The authorities’ tolerance of organised crime is highly influenced by public perceptions of victimisation. Secondly, prior to 1992, minbô occupied a legal greyzone. Although it rests on the threat of violence to achieve its ends, this threat is implicit; the threatened party identifies the signs of bôryokudan membership, and their semiotic significance, displayed by the party making the threat. In most cases there is no need for the actual use of violence or its explicit threat, both of which are legally actionable.
Let us now look at how developments over the last decade have changed the yakuza world.
- The Bursting of the Bubble and its Impact on Yakuza Business
The bursting of the bubble economy, with the spectacular collapse of land and stock prices, had profound implications for the yakuza. These were not purely negative; the yakuza economy is far more dynamic than that of the upper world and smart yakuza were sometimes able to exploit the economic misfortunes of others to their own advantage. Let us look at the losses and gains in turn.
2.1Bubble Trouble
After the bubble burst, there was of course far less money floating around the economy for yakuza to siphon off. Companies that had formerly found it easier to pay yakuza to go away than confront them could no longer afford this luxury. Similarly, economic hardship reduced the amount spent in Japan’s bars, restaurants and commercial sex establishments (though in international terms, the sum remains huge), reducingprotection payments (mikajimeryô) to yakuza. The other yakuza staple, the construction industry, held up better due to massive investment in public works. Yamada Hitoshi, head of the Japan Bar Association’s anti-bôryokudan committee, suggests that ‘probably 30% to 50% of public works projects in Japan now (1999) involve payoffs to gangs, and these vary from about 2% to 5% of the total construction cost’ (Forbes 8February1999). The main loss to the yakuza has been in the financial and real estate markets and it is on those that we shall concentrate here.
Following the crash, revenue from jiage dried up; investors no longer saw large profits to be made from large developments. This was a heavy blow. Moreover, many jiage-ya had diversified into speculation on their own account. Like many other investors, they had financed their speculation by borrowing, using land as collateral. The collapse in land prices destroyed the investments, slashed the value of the collateral, and made debt-recovery a problem. Whilst this problem was not specific to the yakuza, collecting debts from such individuals presented creditors with particular problems.
In 1993, Koyama Toyosaburô, vice president of Hanwa Bank, was shot dead. Koyama’s duties had included recovering debts and it was widely assumed that hiskiller was a yakuza. Koyama had approved a ¥590 million loan to a yakuza front-company. The loan had been granted because the gang had silenced a political magazine that had been exposing various scandals associated with the bank. Mizoguchi (1998: 192) reveals that competing factions within the bank made use of political organisations and bôryokudan to thwart their rivals. In 1996, when the Ministry of Finance (MOF)ordered Hanwa to stop trading, a list of the bank’s ‘special investments’, comprising debts owed by yakuza and right-wing political groups, was discovered.
Also in 1993, a spate of attacks on Sumitomo Bank branches and executives’ homes were recorded. Then in September 1994, Hatanaka Kazufumi, manager of Sumitomo’s Nagoya branch, was shot dead as he opened his front door to a caller. Police investigating this murder, convinced that the bank was withholding information, took the unusual step of impounding Hatanaka’s desk and filing cabinets. An NPA official, writing in Tokyo Business Today (December1994), attributes the bank’s reticence to the links Sumitomo had forged with yakuza figures during their highly aggressive business activities in the years of the bubble economy.
Yamada Hitoshi sees a further dimension to the Hatanaka killing:
Sumitomo had a policy of collecting collateral no matter what and they started using crime syndicates to collect on loans connected to other crime syndicates. Sumitomo’s loan collection efforts drove the head of the Aizu-Kotetsu gang into suicide in Kyoto and then another gang leader killed himself in Tokyo. At this point, gangsters started to realise they could be next so they murdered the Nagoya branch manager who had been most aggressive at trying to collect on such loans. (South China Morning Post 31 May 1998)
This attack prompted MOF to grant Sumitomo Bank permission to write off ¥500 billion worth of yakuza-related debts. The other major banks were also allowed to write off ‘hard-to-repay’ loans (ibid.). In total, by 1997, 21 major financial institutions had been allowed to write off ¥20.5 trillion of their most problematic loans(Konishi 1997: 101).
The problem of yakuza-related bad debt became particularly acute with the collapse of the jûsen[8] which, due to their exclusion from 1990 MOF-imposed restrictions on loans to real-estate speculators and their lack of regulation, became the main source of funds to companies that failed to meet the banking industry’s criteria of creditworthiness:
All seven top jûsen commonly made loans against collateral with a value lower than that of the loan itself. They made loans to borrowers whom they knew to be using false names. They loaned for speculative stock buying, for pachinko parlours … and for sex hotels. Many loans were made to companies associated with politicians. Most of the jûsen loans made after the 1990 restriction were paid to the companies of criminal syndicates (Hartcher 1998: 128).
By January of 1996 the total scale of the bad debt held by the seven jûsen companies was estimated at ¥6.4 trillion. In addition these companies had a further ¥2.1 trillion of non-performing but salvageable loans (Australian Financial Review 23 January1996).
How much of this was yakuza-related remains unclear. One sample of 93 loans made by the Sōjo Jûkin Company contained 40 that had been made to yakuza (National Business Review 15 March 1996), or 43% of the total. While such a small sample is merely suggestive,43% is around the mid-range of journalistic estimates (generally between one third and a half) as to the yakuza portion of the problem. MOF sources cited by the South China Morning Post (31 May 1998) admitted that ‘yakuza gangs and their front companies borrowed at least five trillion yen’ from the jûsen.
Whilst the jûsen debacle was the most spectacular manifestation of Japan’s bad debt problem, it was just one aspect of it. Although Japanese accounting practices allowed banks and companies to conceal much of their debt,[9] by 2002, the official figure for bad debts held by Japan’s banks and non-bank financial institutions, was put by the new Financial Supervisory Agency at ¥42 trillion (Financial Times15October2002)[10].An alternative, non-governmental, estimate by Goldman Sachs gives a figure of ¥237 trillion (Bloomberg News4 April 2002).