Prime Minister Shinzo Abe told Parliament yesterday that original Finance Ministry records over a dubious land sale in Osaka would clear him and his wife Akie of any involvement in the deal.
"I would like to make it clear that neither I nor my wife, nor even my office, had anything to do with the land transaction," he said, adding that "a look at the documents in their pre-altered form" would show this was the case, and that he had "never ordered any alterations to be made to the documents".
The scandal is threatening to bring down Mr Abe's close ally, Finance Minister Taro Aso, who is also Deputy Prime Minister. Mr Aso is under fire after it emerged that Finance Ministry documents had been doctored before they were released to the public.
Mass protests calling for government accountability continued for a third day yesterday outside the Prime Minister's Office.
At the heart of the scandal which erupted in February last year is a 8,770 sq m plot in Osaka that was sold to ultra right-wing nationalist educator Moritomo Gakuen for only 134 million yen (S$1.65 million) - one-seventh of the appraised value of 956 million yen.
A new elementary school was to be built on the site, with Mrs Abe as its honorary principal.
The issue has returned to haunt Mr Abe after the Asahi Shimbun reported earlier this month on alterations made to the documents on the land sale before they were submitted to Parliament, or the Diet.
My wife was neither the person in charge of establishing the school, nor was she Kagoike's boss, and so naturally she would not have made such remarks.
MR SHINZO ABE referring to reports that former Moritomo director Yasunori Kagoike had been told by Mrs Abe to proceed with the land deal.
It led to the abrupt resignation last Friday of tax chief Nobuhisa Sagawa, who had presided over the Finance Ministry bureau that oversaw the deal. The same day, news broke that a bureau official had killed himself, with media reports on Tuesday saying that he had been forced to make the changes.
A total of 14 documents contained portions that had been scrubbed. In one omission, former Moritomo director Yasunori Kagoike - who had taken Mrs Abe on a tour of the premises and briefed her about the plan - was quoted as saying she had told him: "It's good land. Please proceed."
On this point, Mr Abe said yesterday: "I checked with my wife and she says that she had said no such thing. My wife was neither the person in charge of establishing the school, nor was she Kagoike's boss, and so naturally she would not have made such remarks."
Mr Abe told Parliament that he was "deeply sorry" for the scandal that has shaken public trust, and that he "feels responsible" as the head of the administration.
He also expressed confidence in the beleaguered Mr Aso who told reporters on Monday that responsibility for the alterations should lie with Mr Sagawa and his Finance Bureau colleagues. However, many continue to question whether Mr Aso, as Minister of Finance, should accept ultimate responsibility for the lapses in his ministry.
There have been voices of dissent even within the ruling Liberal Democratic Party (LDP), including from former defence minister Shigeru Ishiba and popular political princeling Shinjiro Koizumi. They said that bureaucrats should not be made the scapegoats.
Yesterday, the LDP acceded to calls by the opposition for Mr Sagawa to testify in Parliament in exchange for an end to their boycott of the ongoing hearings which has stymied discussions on policy matters, including the Budget for the next fiscal year.
About the scandal
Japan Correspondent Walter Sim takes a closer look at the land deal scandal in Japan that first erupted in February last year. It has now returned to haunt Prime Minister Shinzo Abe, following revelations that documents connected with the dubious deal were doctored by the Finance Ministry before they were submitted for the public record.
Q What were the documents about?
A Under intense questioning by the opposition in the Diet or Parliament last year, Mr Nobuhisa Sagawa, the director-general of the Finance Ministry's Financial Bureau at that time, said all documents on the sweetheart deal for ultra right-wing nationalist educator Moritomo Gakuen were "discarded".
Later on, the Finance Ministry said they "found" some documents, which were then released, but these had, in fact, been doctored, the Asahi Shimbun reported.
In total, 14 documents to do with the negotiations leading up to the sale had been altered or scrubbed. Among the omissions were descriptions of the circumstances behind the deal as being "exceptional" or "special", as well as suggestions that the deal was a "political matter".
The documents were tampered with so that they could be consistent with Mr Sagawa's testimony in Parliament, Finance Minister Taro Aso told reporters on Monday.
Q What is Moritomo Gakuen?
A Moritomo Gakuen, a school operator, is best known for the controversial move of making its pupils - some as young as three years old - bow to portraits of the Emperor. Former Moritomo director Yasunori Kagoike - who is facing unrelated fraud charges - has publicly boasted of his close ties with Mr Abe and his wife, both of whom have kept their distance ever since the scandal erupted.
Q What is the land deal?
A The deal involved an 8,770 sq m plot of public land in Osaka, which was sold for only 134 million yen (S$1.65 million) despite it being appraised at 956 million yen.
When the scandal first erupted, the government said that the discount was due to the fact that there was a need to clean up the heavily polluted land.
However, the national audit watchdog found late last year that there was "no basis" for the land to be sold at only one-seventh of its valuation.
Moritomo Gakuen had bought the land to build a new elementary school, which it wanted to name after Mr Abe. Mrs Abe was to be the school's "honorary principal".
Q What is the potential fallout?
A The ongoing scandal could well dent Mr Abe's bid for an unprecedented third consecutive three-year term as leader of the Liberal Democratic Party, which would put him on course to becoming Japan's longest-serving prime minister.
Also at stake is Mr Abe's long-cherished goal of revising the Constitution, as the ensuing intra-party factional chaos and a distrusting public might jeopardise this process.
The scandal could also complicate the government's passage of the Budget for the next fiscal year, among other policy matters.