References to Japan PM Abe and wife removed - documents

Glen Norman
March 13, 2018

The yen weakened by 0.3 to 0.5 percent against other major currencies after Japan's ministry of finance said on Monday it altered documents related to a discounted sale of state-owned land to a school operator with ties to Abe's wife.

Japan's Prime Minister Shinzo Abe appears before journalists at his office in Tokyo on March 12, 2018.

The dollar eased versus the yen on Monday, as traders anxious that a suspected cronyism scandal in Japan involving the sale of state-owned land could dampen investors' risk appetites.

Mr Abe has repeatedly denied he or his wife did favours for school operator Moritomo Gakuen, which bought the land, and has said he would resign if evidence was found that they had.

Questions about the sale of land - sold at a huge discount that officials said was for clean-up costs - have dogged Abe since it became public a year ago.

The report also showed that Finance Ministry officials had removed the names of several Liberal Democratic lawmakers from the land sale documents.

A relief rally swept across Asian share markets on Monday after the latest USA jobs report managed to impress with its strength while also easing fears of inflation and faster rate hikes, a neat feat that whetted risk appetites globally.

Aso said the documents were doctored to be "coherent" with a speech made in parliament by the head of the tax agency Nobuhisa Sagawa, who stepped down on Friday over the scandal.

"It has become clear that there was a cover-up and falsification", opposition Democratic Party leader Yuichiro Tamaki told reporters.

A kindergarten run by Moritomo Gakuen taught a nationalist curriculum in line with views espoused by Nippon Kaigi.

The 77-year-old Aso, who doubles as deputy premier and whose backing is vital for Abe, apologized for his ministry's actions, but said that he had no intention of stepping down.

But the alterations do fuel suspicion of a cover-up, which could be more damaging to Abe and Aso than the original land sale itself.

"At the very least, it seems that Aso's chances of surviving as finance minister are diminishing rapidly", wrote Tobias Harris, vice-president of consultancy Teneo Intelligence, in an email. He said there was no "smoking gun" showing direct intervention by Abe or his wife.

But he added: "It now seems to be more a question of whether Mr Abe can manage an orderly exit at the end of his term in September or whether he'll resign hastily again - but I don't see how he can win a new mandate".

Sagawa was head of the finance ministry department that oversaw the land deal, before being promoted past year to tax agency chief.

Some LDP members said politicians should not pass the buck to bureaucrats.

But a poll released published Monday in the Yomiuri Shimbun showed his support dropping by six percentage points from last month to 48 percent, the first reading under 50 percent since he won re-election in October.

Market participants said the political developments in Japan helped temper gains in Japanese equities and lent some support to the yen, which tends to rise in times of economic uncertainty.

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