When Japanese Prime Minister Junichiro Koizumi meets Friday with President Bush at his Texas ranch, he is expected to pledge an intensified crackdown on the flow of money and equipment from Japan to North Korea. The steps come as the United States is looking to Japan, South Korea and China to put more pressure on North Korea to stop its nuclear weapons program.
Every year, Koreans living in Japan send hundreds of millions of dollars to relatives in North Korea. The exact amount is not known, but Japanese and U.S. sources put the total at $200-$800 million. In addition, every couple of weeks a ferry boat takes humanitarian supplies from Koreans in Japan to people in the impoverished communist country.
Analysts say the North Korean government has manipulated these two legal avenues to earn significant revenue and to smuggle into the North, equipment that it otherwise would not be able to obtain.
Much of the cash comes from Japan's popular pachinko gambling parlors - many of them owned by Korean-Japanese. Katsu Furukawa, a specialist on U.S.-Japanese relations at the Monterey Institute, says the Japanese government strictly monitors pachinko shops run by people with ties to North Korea.
"You pay a certain amount of money and you get a certain amount of balls," Mr. Furukawa explained. "And you insert the balls into the pachinko slot machine, and if you hit the right target, you get a large amount of balls, and if you get a significant amount of silver balls, you will get reimbursement from the pachinko company, as a gift. But if not, you just end up by spending a huge amount of money."
Much of the Pachinko earnings are channeled through banks and credit unions. Mr. Furukawa says in late 2001, the government cracked down on a credit union operated by members of Chosen Soren, the Association of Koreans in Japan, for violating laws on the management of foreign currency.
After that, Mr. Furukawa said, the amount of direct payments to North Korea declined, and Pyongyang turned to other methods to earn cash.
"You have seen recently more frequent appearance of North Korean spy ships in the Sea of Japan, or North Korean efforts to intensify its export of drug or counterfeiting - meaning forgery of money - to foreign countries," said Mr. Furukawa. "These kind of illegal activities have become more frequent after this police crackdown [on] remittances from Japan to North Korea."
Two North Korean defectors testified this week in Congress about North Korea's sources of revenue. One said the North grows opium poppies and produces heroin for export. The other said the North smuggles in Japanese components to build missiles and missile-related equipment for export to the Middle East.
A journalist who follows Asian issues expects Prime Minister Koizumi to pledge closer Japanese scrutiny of the goods transported to North Korea on the humanitarian ferry.
Chris Nelson, editor of the Nelson Report, which follows foreign policy and trade issues that affect Asia, said says Mr. Koizumi will likely promise stricter control over North Korean front companies operating in Japan, to prevent them from sending products with military application to the North.
"They actually have trading companies in Japan who try to buy what we would call dual use technology and other things which they then ship either directly to North Korea, sometimes legally, sometimes illegally," said Mr. Nelson. "They also transship it. They will ship it to Singapore or to some other port where it then gets shipped to North Korea, so it becomes a little more difficult."
Until recently, the Japanese government said it could not stop the cash remittances to North Korea without a U.N. resolution. But last week, the government reinterpreted its laws and now says Japan is authorized to crack down on the flow of money to the North.
Mr. Furukawa said Japan thinks quiet enforcement of existing laws against drug trafficking, counterfeiting and missile technology exports would have the same impact as UN sanctions - without the risks.
"North Korea clearly states that they consider economic sanctions as an act of war, which indicate that we may end up by escalating the military crisis in the Northeast Asian region, which no country wants to do if at all possible," said Mr. Furukawa. "On the other hand, if you strengthen policing activities against illegal trading of drugs or counterfeiting, this is a very legitimate activity, which can be conducted by the domestic legislation of each country in Asia even without a U.N. Security Council resolution."
Chris Nelson said Prime Minister Koizumi is prepared to take strong measures against North Korea mostly because of domestic political pressure. "The government, of course, is very, very concerned about the North Korean missiles and the strategic threat to Japan represented by North Korea, but the primary concern of the government of Japan is the domestic political problem that North Korea represents, and that brings us to the abductions, the kidnappings," he said.
Mr. Nelson says Japanese people are furious with their government for not preventing North Korea from kidnapping several Japanese citizens in the 1970s and 1980s and then for not dealing with it better. He says Prime Minister Koizumi must show the Japanese people that his government is doing something on its own regarding North Korea, without being forced to by the United States or the United Nations.
