Sure Winners in 2020 Tokyo Olympics? Gangsters

 

As Japan bets on a big economic boost from the 2020 Olympics, it might be dismayed by what’s happening right now in Russia. Moody’s doubts the Sochi Games will be much of a plus for that economy.

Yet there is one sector of Japan’s economy sure to profit handsomely from Tokyo 2020: mobsters. Tokyo won’t spend anywhere near the $50 billion Vladimir Putin did turning a Black Sea town into a global tourist destination. More likely, preparations will involve around $4 billion or $5 billion of construction projects over the next six years. And where there are cement trucks, there are gangsters.

What worries yakuza expert Jake Adelstein isn’t the cash that organized-crime groups will be extorting below the radar screen. That’s a given in a nation in which gangsters operate legally, pass out business cards and enjoy lucrative relationships with government officials. Adelstein’s concern is how much of this dirty dealing will happen in relatively plain sight and on a very grand scale ahead of what he calls the “Yakuza Olympics.”

Writing in the Daily Beast, Adelstein details Japanese Olympic Committee Vice Chairman Hidetoshi Tanaka’s alleged yakuza ties. Adelstein, author of the 2010 memoir “Tokyo Vice,” also revisits allegations that former Prime Minister Yoshiro Mori, the man heading the Tokyo 2020 organizing committee, has traveled in similar circles in the past.

“The controversy doesn’t give the 2020 Tokyo Olympics quite the ‘clean and crime-free' image that Prime Minister Shinzo Abe promised when luring the event to Japan,” Adelstein argues.

Corruption in Japan has increased since 2011, when a record earthquake prompted one of modern history’s biggest reconstruction efforts. In 2011, Japan’s ranking out of 178 nations in Transparency International’s corruption perception index was 14 — just behind Germany. But in 2013, Japan was 18th, coming in behind Barbados and Hong Kong. Why? Blame a sudden return to “concrete economics” in a nation that has tried for years to shake a phenomenon that lends itself to large-scale graft.

Tokyo 2020 adds an entirely new dimension to the public-works boondoggle. A surge in yakuza activity will deaden any economic benefits Japan might have hoped to win from the games. Spending public funds unwisely limits the multiplier effect, whereby stimulus trickles down and helps households. The intersection of politicians, contractors and yakuza also is where economic reforms go to die. A possible leap in graft at the highest levels could further complicate “Abenomics,” taking the oomph out of games-related fiscal stimulus.

When the government has tried to sever the shadowy ties between organized crime and corporate Japan, the construction industry has always been the first target. As one Tokyo police source told Adelstein, the yakuza’s cut on construction projects is typically about 5 percent. But with friends in high places, insider information could raise that take exponentially as yakuza front companies bid on lucrative contracts and also scam any number of subcontracting deals that might allow for double billing.

Look, corruption is to the Olympics what Nike contracts are to athletes — there’s no way of avoiding either. But Japan could significantly raise the bar. “The nexus of massive construction projects, bureaucrats, politicians, businessmen and yakuza are as revealing about Japan as they are about Italy and Russia,” Jeff Kingston wrote in his 2010 book Contemporary Japan. Historically, he added, nothing enriches yakuza bosses like construction, “given that during the 1990s the public-works budget was on par with the U.S. Pentagon’s budget and remains quite high despite huge cutbacks.”

Well, happy days are here again for Japan’s goodfellas. Given how they’ve been squeezed from all angles — including the Barack Obama administration’s moves to freeze assets and impose sanctions — expect an all-guns-blazing effort to boost their construction take. Japan’s public debt is already twice the size of the economy, and the nation will be borrowing more to pay for 2020. Even if Tokyo doesn’t approach Sochi’s price tag, you can bet Abe’s government will pay far, far more than it now estimates.

In recent years, politicians pledged to break the construction-industrial complex that enriches gangsters more than Japanese families. Tokyo 2020 will test that commitment — and Japan’s reputation, too.

William Pesek is a Bloomberg View columnist.

© 2014, Bloomberg News.

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