Abe School Scandal Gathers Steam as Tax Agency Chief Resigns

(Bloomberg) -- A scandal over a controversial sale of public land to a school with connections to Japanese Prime Minister Shinzo Abe is rapidly gathering momentum, with the nation’s tax chief resigning amid questions over his involvement in the deal.

Before moving to head the National Tax Agency in July, Nobuhisa Sagawa oversaw a division in the Finance Ministry involved in negotiating the land sale. Lawmakers and taxpayers had demanded the resignation of Sagawa, with Abe and Finance Minister Taro Aso being forced to repeatedly defend the appointment in parliament.

The resignation comes on the same day that it was reported an official at a regional finance ministry bureau in charge of the sale was found dead. The man left a note and police are investigating the matter as a suicide, Kyodo News said. Aso said he was aware of the situation, but his ministry declined to comment further.

Sagawa resigned to take responsibility for sowing “confusion,” Aso said at a news conference later on Friday.

The scandal has dogged Abe for more than a year, with questions being raised about whether his wife’s connection to the school meant its operator was able to buy government land cheaply. It’s come to the fore again after the Asahi newspaper reported last week that finance ministry documents relating to the sale were altered before being submitted to lawmakers for inspection.

Should documents be found to have altered, the prime minister and his cabinet would likely face questions about who ordered the cover up. The controversy is the latest setback for Abe, whose administration was forced to ditch plans for reforming the labor market after the discovery of hundreds of errors in data provided to support the legislation.

Aso said he instructed the ministry to investigate the fact surrounding the documents, and that the results should be known as soon as next week.

Tobias Harris, a Japan analyst at Teneo Intelligence, wrote in an emailed note that the scandal could now complicate the outlook for Abe’s bid to win a third term as leader of the ruling Liberal Democratic Party this autumn. The party’s majority in the lower house makes it certain that the holder of this position will be prime minister.

"For now, Abe is still likely to win: no rival within the LDP has been able to draw away his support from both the party’s rank-and-file supporters and parliamentarians," Harris said. "But the reemergence of an old scandal, a risky constitutional revision debate looming, and potential contenders laying the groundwork for challenging Abe make it possible that he could face a tougher re-election fight than anticipated."

Abe Denials

Chief Cabinet Secretary Yoshihide Suga said Friday that he wanted the finance ministry to quickly provide an explanation about the land sale. He declined to comment on whether Aso should take responsibility.

Abe has repeatedly denied any involvement on his part, or that of his wife Akie, in the sale of land to Moritomo Gakuen, an educational foundation that subsequently filed for bankruptcy. The foundation ran a kindergarten in Osaka known for espousing elements of the prewar nationalist curriculum, as well as for its explicit backing of Abe, and had planned to use the land for an elementary school.

There are signs the public remains concerned about the issue. A JNN poll on March 5 found Abe’s support fell below 50 percent for the first time in 5 months, and 80 percent of respondents said there needed to be more explanation of the land sale. The affair rocked Abe’s popularity last year, with his approval rating at points falling below the disapproval rating, before a series of North Korean missile tests was seen to unnerve the public.

Scandal Timeline

• February 9, 2017 -- The Asahi newspaper reports that Moritomo Gakuen bought land from the government for a fraction the price of comparable plots.
• March 16, 2017 -- The government denies that Abe made a donation to the operator of the school.
• March 23, 2017 -- The head of Moritomo Gakuen, Yasunori Kagoike, tells parliament that he received a donation of 1 million yen ($9,400) in cash from Abe via his wife Akie. The government reiterates its denial that this happened.
• March 24, 2017 -- Aso tells reporters that the sale of land to Moritomo was carried out with proper procedures and pricing.
• April 21, 2017 -- Moritomo Gakuen files for bankruptcy.
• July 31, 2017 -- Yasunori Kagoike and his wife Junko are arrested for fraud, according to reports.
• March 2, 2018 -- The Asahi newspaper re-opens debate on the issue, reporting that the finance ministry may have altered documents related to the land sale.
• March 9, 2018 -- National Tax Agency chief reported to resign

--With assistance from Connor Cislo Emi Nobuhiro and Emi Urabe

To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net.

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Kazunori Takada at ktakada17@bloomberg.net, Andy Sharp, Reed Stevenson

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