Japan watchdog says 'no basis' for 86 per cent discount in land sale in Moritomo scandal

Yasunori Kagoike, operator of a nationalistic school, gives a sworn testimony during a session of parliament in Tokyo on March 23, 2017.
Yasunori Kagoike, operator of a nationalistic school, gives a sworn testimony during a session of parliament in Tokyo on March 23, 2017.PHOTO: AFP

TOKYO - Japan's audit watchdog has found, despite the government's insistence otherwise, that there was "no basis" for the hefty discount given to an ultranationalist education institute, Moritomo Gakuen, for a plot of public land in Osaka.

It also questioned the Finance Ministry's shredding of all documents relating to the sale as "extremely unusual", although it stopped short of insinuating any government collusion.

Embroiled in a swirling scandal following revelations of the land sale, the institute's former director Yasunori Kagoike, 64, positioned himself close to Prime Minister Shinzo Abe and his wife Akie. Mrs Abe had previously praised the operator's stridently right-wing ideology, which included making its pupils bow to portraits of the Emperor and recite pre-war edicts during morning assembly.

Both Mr and Mrs Abe have denied any involvement in the land sale or assert any pressure on government bureaucrats to push for the deal.

The questionable transaction was the first of two successive education-related cronyism scandals that implicated Mr Abe this year, with the other involving allegations that he wanted a new veterinary school to be awarded to an entity run by a close friend.

The Prime Minister survived unscathed from both scandals and is freshly ensconced in power after winning a resounding mandate in last month's snap election.

But his tenure as the leader of the ruling Liberal Democratic Party (LDP) - and hence Prime Minister - will still be put to an internal party vote in September next year, and lacklustre support ratings could provide a boost to key rivals to challenge him.


Parliament will next week grill Mr Abe on the Board of Audit's report - tabled Wednesday (Nov 22) - which highlighted accounting irregularities in the suspicious transaction.

The sweetheart deal involved a plot of 8,770 sq metres of public land in Osaka which was sold for only 134 million yen (S$1.61m) despite a valuation by the Finance Ministry of 956 million yen.

The Finance Ministry has insisted that it gave the whopping 86 per cent discount after taking into account the fact that 820 million yen had to be spent to remove an estimated 19,520 tonnes of industrial waste buried underground on the plot.

But the Board of Audit questioned this assertion, saying that the discount was based on "faulty data". Its probe suggested the amount of waste was likely to be far less than the ministry's estimate, ranging between 6,196 and 13,927 tonnes.

While independent civilian real estate appraisers typically estimate such costs, the Finance Ministry said it could not engage these consultants because of the tight deadline set by Moritomo Gakuen to open the school.

The Board of Audit has also called on the government to relook into how it manages important documentation because of the "extremely unusual" circumstance that all relevant documents pertaining to the land sale had been shredded.

The Finance Ministry has repeatedly insisted that its discarding of documents followed official government protocol, in the face of opposition accusations that it was trying to destroy evidence of impropriety.

Wednesday's report did not answer the question of whether any favours were granted by officials close to the Prime Minister, something Kagoike, who now faces charges for fraud, insisted occured.

Moritomo Gakuen's plan for the new elementary school has been thwarted by the scandal, with prosecutors also probing the Finance Ministry's Kinki Treasury Bureau - which covers Osaka - for criminal breach of trust.

The opposition has, in the meantime, continued to latch onto the scandal.

Mr Yuichiro Tamaki, leader of the Kibo no To (Party of Hope), demanded "honest answers" when he spoke to reporters after the report was tabled Wednesday.

He said: "It has been revealed that the basis of government calculations into the land value was sloppy. The case also involves grave issues such as document-keeping and whether the retention period was observed."