Japan’s powerful yakuza organised crime syndicates are mounting a widespread assault on the country’s financial markets that may have left hundreds of listed companies riddled with mob connections.

In a surprisingly stark admission, the National Police Agency (NPA) says that it is locked in a battle for the economic soul and international reputation of Japan.

Police investigations suggest that the yakuza have become voracious traders and manipulators of listed Japanese shares, and, via a network of about a thousand apparently legitimate front companies, occupy big positions on the shareholder registers of many companies that may not even be aware of the connection.

According to one veteran expert on the yakuza, the new activities of the nation’s largest crime syndicates have effectively turned the mob into the biggest private equity firm in Japan.

In a White Paper on the subject, the NPA gives warning that the yakuza’s switch from old-fashioned crime rackets such as drugs and prostitution to mainstream financial markets is “a disease that will shake the foundations of the economy”.

Japan’s Securities and Exchange Surveillance Commission has compiled a watch list of hundreds of companies suspected of direct or indirect links to mafia money. The list, which was drawn up in private but has been seen by The Times, includes more than 200 publicly traded companies, many of which are household names in Japan.

The issue has become so acute that the Osaka Stock Exchange has been forced to introduce an entirely new screening system to establish which companies have direct mob links or large quantities of yakuza money on their shareholder registers. Scores of companies, one exchange source said, faced the threat of being delisted.

As well as flagging the risks of a yakuza invasion of financial markets, the police’s report also sounds alarm bells over the property and construction sectors. The greatest risk, it says, is that the yakuza gangs match the operational strategies of mainstream global corporations and outsource much of their financial chicanery to “co-operative groups”.

Yet even as police and regulators rush to address soaring yakuza interference in the securities industry, close observers of the Japanese mafia believe that the problem now may be beyond control. The sophistication of the crime gangs has grown exponentially in recent months. Many have begun to hire newly unemployed traders, who have been laid off by large financial houses feeling the squeeze of the credit crunch.

According to one in-depth investigation by NHK, the state broadcaster, a few yakuza gangs even operate their own stock-dealing floors, where millions of dollars of shares are traded every day. A newly published book on the subject – Yakuza Money – claims that the presence of skilled former bankers, stockbrokers and accountants on the yakuza’s extended payroll has dramatically increased the mob’s income stream and made it virtually impossible to discern the difference between legal and illegal funds as they flow through the Japanese markets.

Joshua Adelstein, an author and consultant on the yakuza, says that one of the key recent developments has been the emergence of mob-backed auditing firms. It is by getting these auditing firms to sign-off false company accounts, he said, that the yakuza were able to manipulate both the apparent earnings and stock prices of numerous small listed companies.

Mr Adelstein said: “The police are worried, but they are understating the problem. Organised crime has made tremendous inroads into the Japanese financial sector. The bad guys now have everything in place to manipulate the stock market.”


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