Tokyo Underworld

by Robert Whiting

  For example, Japanese police did not follow the practice, routine in North America and Europe, of carrying out ‘controlled deliveries’ – persuading drug couriers whom they have caught to carry on with delivery to the next person in the chain. Nor did they conduct ‘controlled buys’. They did not even purchase drugs on the street to gain an accurate idea of the supply available. Japan’s Criminal Code prohibited the authorities from participating in such activities and from conducting any other sting-type operations, including for most intents and purposes wiretapping (until a 1999 law eased restrictions on the latter). Undercover cops could observe and prevent. That was all. And then they were required by law to put perpetrators behind bars immediately, as one Nicola Koizumi was to discover.

  Upset because a member of his family had become ill from drug addiction and hepatitis (from an expedition to the Golden Triangle), he had decided to take action when the son of an ambassador from a Southeast Asian country approached him with three kilograms of white powder in search of a buyer. In a misguided effort to lay a trap, he took a plainclothesman to the dealer’s residence, introduced him to the dealer, and was promptly arrested. He spent three days in the Tokyo Detention House trying to convince police he was not an accomplice.

  The Japanese police believed that American-style undercover tactics would also upset the underworld wa – thereby lessening the chances for the poor misguided but redeemable criminal ever to be steered back onto the straight and narrow. Moreover, there was the implicit belief that a policy of self-regulation by organized crime, as much as was reasonably possible, had its uses in maintaining order and discipline in certain fields like the gang-run entertainment industry.

  Thus, the Japanese police naturally resented a US Drug Enforcement Agency sting conducted in 1984 on Osakan gangsters who had been selling amphetamines for guns in Honolulu. DEA agents had entered Japan without requesting the approval of Japanese authorities. Then, posing as promoters, they approached the Osaka mob bosses for help in financing a fictitious tour of the country by Michael Jackson. They were so successful in winning the mobsters’ trust that, several months later, eleven of the Osaka yakuza were indicted in Honolulu over a $350 million gun-and-drug smuggling deal. However, as a result, the Japanese police were slow to cooperate when, several years later, popular Japanese film actor Shintaro Katsu was arrested for bringing cocaine into Hawaii and DEA officials visited Japan to try to investigate his background.

  What further complicated the relationship was the fact that, even as international drug traffic increased, the Japanese police were reluctant to accept suggestions of the visiting DEA agents from America that Japanese gangsters, bound as they were by the unique yakuza code of honor, would be so vulgar as to deal in ‘hard drugs’ like cocaine and heroin, rather than their usual traditional trade in the less harmful amphetamines. The Japanese authorities preferred to blame the newly rising trade in such ‘bad’ drugs on the increased presence of foreigners attracted to Japan by its new economic wealth. It was all the fault of the quarter of a million illegal immigrant laborers in the country, or the Cali cartel, or whomever. Anybody but the proud descendants of the old bakuto and tekiya.

  In 1991, for example, Japanese authorities would insist that a shipload of cocaine in Yokohama Harbor had merely been in transit from the Golden Triangle to the United States. They were forced to admit otherwise only when they received a handwritten letter in Spanish threatening terrible retribution unless their investigations were called off. The letter was signed with the name of a South American drug cartel that nobody had ever heard of. The clincher was the fact that all the r’s and l’s in the letter were reversed – a mistake a Japanese would make, but not a Latin American.

  Chasing down dirty money posed another set of problems for the Americans. RICO – the Racketeer Influence and Corrupt Organizations Act – passed by the US Congress in 1970 was a new legal tool to deal with organized crime. It was designed to control a specific organization or family by focusing on a systematic pattern of criminal activity, like murder, extortion, loan sharking, illegal gambling, hijackings, narcotics trafficking. It made it a crime for someone to receive or invest in a legitimate enterprise, or otherwise utilize ill-gotten gains, even if not personally or directly involved in the related crime. RICO also allowed victims of organized crime to sue those responsible for punitive damages.

  Japan had a marked absence of such money-laundering laws, making it extremely difficult to crack financial crimes. The mob could invest drug and prostitution money in the real estate and financial markets and the police could not track it down. Money-laundering statutes for drug-related crimes were finally enacted in 1991, but even then Japanese privacy laws were such that relevant information could not be given to outside parties. In fact, Japanese attitudes and laws to protect privacy were so stringent that gang members actually sued the Japanese National Police for releasing information on them to other Japanese officials.

  It was a wonder anyone was ever arrested.

  7. The Great Transfer of Wealth

  The term ‘Japanese juggernaut’ began to make its appearance in the early 1980s, after Japan had captured the global market for cars, motorcycles, TV sets, semiconductors, and VCRs. Thanks to a disciplined workforce and the highly effective practice of selling products low abroad to capture market shares while keeping prices high at home, the country that had always seemed to be struggling to catch up with the United States was actually on the verge of passing it in a number of important categories: productivity, per capita income, current accounts surplus, and a host of other esoteric economic indicators. America itself, once responsible for half the world’s economic output during its golden era in the 1950s and 1960s, was fighting a reputation for being fat and lazy and making overpriced products that broke down. All around the world, people were talking breathlessly about the incredible East Asian export machine that was flooding the world with its products and wondering when, if ever, it would run down.

  In a memorable effort to temper the effects of Japan’s booming economic growth, representatives of the G-5 nations met at New York’s Plaza Hotel in 1985 and collectively agreed to orchestrate the yen’s rise against the dollar and the other major currencies of the world, so as to make Japanese exports more expensive and those of the United States, Canada and European countries cheaper. Over the next two years, the yen would double in value against the dollar (from its 1985 level of 240 yen, to 120 by 1987), but so would Japan’s trade surplus with the rest of the world. In the case of the United States, it rose from $25 billion to $60 billion.

  Japanese manufacturers used the high yen to their advantage, setting up factories overseas where costs were lower, importing materials more cheaply, and streamlining production at home. The Bank of Japan dramatically lowered interest rates to spur domestic demand, and with credit cheap and capital easy to obtain, people began to borrow money to invest in the stock and real estate markets, which, in turn, caused share and land prices to rise rapidly. Investors then borrowed against their newly appreciated holdings to buy even more. In the ensuing spiral of wealth, many people became millionaires overnight.

  The geometric progression of it all was staggering. At the peak of what became known as the Japanese economic bubble, Japan would possess nearly half of all the cash in the world. One economist would call what had happened ‘the greatest transfer of wealth in the history of mankind’.

  Tokyo began to reek of money and wretched excess: high-rise ‘intelligent’ buildings of glass and steel, huge state-of-the-art TV screens filling the night sky and BMWs clogging the streets; restaurants that dished up sushi flaked with gold dust, private nightclubs serving cocaine and Ecstasy in back rooms, and even twenty-four-hour vending machines that sold the used underwear of high school girls. In Roppongi, new yuppie eating and drinking establishments were spreading like wildfire in all directions along the strip, lining every available side street, stacked on top of each other in a blaze of neon signs, among them the Tokyo
Hard Rock Café, Spago’s, Tony Roma’s East, and half the city’s discos. According to one middle-of-the-decade count, there were more than 2,000 licensed purveyors of alcohol and food within a 200-yard radius of the Crossing, which represented the highest density of nightspots in the world.

  For the first time in Zappetti’s long memory, the Japanese around him were talking openly about the ultimate superiority of their system. Japan, they pointed out, also had the longest life span in the world, the highest literacy rate, and the highest universal level of education. The United States, by comparison, had a 20 percent functional illiteracy rate, a 30 percent high-school dropout rate, and a drug and crime problem of seemingly insurmountable proportions. The translated edition of The Rise and Fall of the Great Powers by Paul Kennedy, describing the end of the American century, was a huge best-seller in Japan.

  As the money moved from East to West with a sense of gloomy inevitability, North Americans and Europeans who assumed they were born to rule were, for the first time in modern history, being forced to come to terms with an Asian culture from a position of weakness.

  This largely unforeseen turn of events was the leading topic of discussion among expatriates who gathered around the red-checkered tables at Nicola’s, among whom the most disgruntled was, not surprisingly, the proprietor himself. He watched with growing dismay as rising real estate prices and the skyrocketing yen caused rents to double, then double again, and forced more and more US corporations to move their Asian base of operations out of Tokyo. Many of his patrons on dollar-based incomes found they could no longer afford to live in the city and pulled up stakes. By the end of the 1980s, Tom Blakemore’s client list had dropped by 75 percent and even US Embassy personnel in Tokyo were pinching pennies.

  Zappetti could not understand how America could allow itself to fall so low, how it could trash its currency as easily as it had in the Plaza Accord and permit the selling off of its proudest assets. He thought the US government should have blocked the sale of Rockefeller Center. It was an American symbol, he railed, in what was becoming a nightly tirade, an American institution.

  ‘When we came here in 1945, we came to help them,’ inveighed the man who made a fortune on the Tokyo black market. ‘We were generous to them. We paid for their goddamn defense. Now, they’re buying us out and making us second-class citizens. Shit.’

  One might forget that the speaker was himself now a Japanese citizen.

  It was ironic that most of the leading Japanese industrial movers and shakers who were seizing markets in the United States were the firms descended from the zaibatsu – Mitsubishi, Mitsui, Sumitomo, Yasuda, among others, who together accounted for a fifth of all Japan’s liquid assets – were those very people whom big American business had helped to depurge long ago in efforts to further its own parochial business interests in Japan.

  It was also an effect that was purely unintended by the liberators. As the American author John Roberts once put it,

  The people who helped the zaibatsu reunite were focused on their own narrow interests and didn’t think the Japanese had it in them to become an economic power. They were essentially racists. They didn’t think a country demolished by war and one with no oil, and no natural resources, could, in the span of a generation, achieve what Japan did. They had no idea that the economic ship of state they had helped launch into the harbor would go all the way across the Pacific Ocean and crash into the US. For Americans to cry foul after helping it all to happen was hypocritical.

  Japan was actually the globe’s largest importer of American goods as well as the second largest market in the world overall. But that fact somehow always got lost in the ballooning trade surplus, which had captured everybody’s attention. The Americans and Europeans shrilly branded the Japanese as protectionist and made repeated demands for more access, ignoring Japanese claims that their allies were just not trying hard enough.

  In reality, both sides had valid arguments. Japanese companies had succeeded in America because they had learned English, had done their R&D, and had tailored their products, like gas-saving compact cars, to suit Western tastes. Far too many American executives in Tokyo, by contrast, could not be bothered to study the Japanese language or acquire the knowledge and vital contacts necessary to operate in the domestic market, preferring instead to spend their brief three-to-four-year tour of duty within the cozy confines of the American Club.

  Moreover, many of the US-made products simply did not fit the Japanese market. American washing machines, air conditioners and freezers were all too big for Japanese houses, American automobiles had the steering wheel on the wrong side, and the traditional sets of six American-made coffee cups, glasses, silverware and such were considered too many for the average Japanese family – in Japan it was impossible to sell even a set of six chopsticks. Procter and Gamble made a classic blunder when it tried to market All-Temperature Cheer, a product the advantages of which were not readily apparent in a society where people did all their washing in cold water, in a box that was too big to display on the smaller Japanese supermarket shelves. They compounded their error by promoting the product through confrontational ads, which the more genteel Japanese consumer – used to harmonious social relations in the marketplace, at least on the surface – found offensive. (P&G changed its approach and finally succeeded, after developing a special concentrated detergent, packaging it in a small plastic container, and running ‘friendly’ rather than comparative ads. McDonald’s saw sales rise when it came up with a burger slathered in teriyaki sauce, as did Kentucky Fried Chicken when it began serving fried rice balls.)

  It was also telling that compared to the few thousand American businessmen based in Tokyo, there were some 60,000 Japanese businessmen stationed in New York, and they were not just there eating sushi. An oft-told story involved the Mitsubishi executive in New York who ate three times a night: first he would dine from six to eight, then from eight to ten, entertaining two consecutive sets of foreign clients at expensive French restaurants. His last meal came at home in response to his wife’s insistence he have Japanese food. ‘Americans won’t go to those lengths to develop business contacts,’ the well-fed executive said. ‘They want to go home at 5.00 to their families.’ And that was why, in his opinion, America was the country with the trade deficit.

  But the Americans had an argument too. Because of government controls, restrictive bureaucratic regulations, red tape and other barriers, visible and invisible, there remained all sorts of salable American products that were kept out of Japan – a full two decades after capital liberalization and market-opening measures had begun under pressure from foreign governments. A US-made muffler was a quarter the price of an identical Japanese-made item, but you couldn’t find one in most supply shops because shop owners were pushing the wares of domestic automakers, with whom they had long-standing strategic ties. Can crushers, Peerless pumps and garbage disposals, which were ideal for a country like Japan with no space, sold for several multiples of their US retail cost because somebody was controlling the distribution rights. Through the 1980s, the era of ‘open Japan’, Motorola arguably had the best cellular phone in the world but was kept out of the lucrative Tokyo and Osaka markets by Japanese government restrictions until Japanese makers were in a position to face the competition.

  The fact of the matter was that there was just too much going on behind the scenes for an outsider to compete on an even keel – manufacturers and distributors in cozy relationships, corporations closing ranks through cross-shareholdings, powerful industry associations lobbying and scheming. No better example of this existed than in the construction industry, which was and is almost totally devoid of foreign participation.

  Perhaps the single most striking thing about Japan over the last half of the twentieth century was the sheer amount of construction that was constantly going on. Everywhere one looked there was a building in the process of being torn down or put up, a new subway being dug, a bridge being built, highway sound barriers bein
g put up. Construction investment had increased sixfold in the years since the great Olympic build-out, which itself represented a sixfold increase over what had come before. By the late 1980s, someone had estimated that the average life of a structure in the city was only seventeen years. And a national fondness for new architecture had little to do with it.

  Consider the following statistics. As this book is being written, there are approximately 500,000 construction companies operating in Japan, which employ some 6 million people, or roughly 10 percent of all the workers in the country. Construction investment annually accounts for 20 percent of the GNP, which means that Japan, as a country, spends thirty-two times as much as the United States does in the same sector of the economy, when the size difference of the two nations is factored in.

  Much of the construction is not even remotely essential. Great sections of the coastline are covered with unnecessary concrete and sea breaks, remote rural stretches dotted with paved hillsides and useless highways. Tokyo, which spends roughly half of its annual budget on public works and construction, has become a city in which almost all the green has been replaced by concrete and wire.

  What has caused it all is money. Construction companies have been among the largest of all political campaign contributors. They also have deep ties to organized crime, which controls work crews and supply companies and in some cases owns construction firms outright. The relationship between industry and the government represents what one analyst has called the ‘largest instance of official corruption in the advanced world’.