Leaders of Japan's political opposition are demanding Prime Minister Junichiro Koizumi fire a central bank governor who owns shares in a fund run by a shareholder activist who has been arrested. The issue is the latest shot in a battle that has pitted a new breed of investors against the country's traditional business elite.
Bank of Japan Governor Toshihiko Fukui admitted in parliament Tuesday that he invested in a fund started by Yoshiaki Murakami. The maverick fund manager was arrested last week for breaking stock trading laws.
Leaders of Japan's opposition immediately called for Fukui's resignation. But Prime Minister Junichiro Koizumi told reporters he does not see the investment, made in 1999 before Fukui joined the bank, as an ethical lapse.
Murakami and another young entrepreneur, Takafumi Horie, tried to jostle Japan's business world by engaging in hostile takeovers and demanding greater returns for shareholders.
Horie also faces criminal charges stemming from his investment activities as head of the Livedoor conglomerate, for allegedly conspiring with Murakami to take over a broadcast company.
Chief Cabinet Secretary Shinzo Abe says the arrests should be a warning to overly aggressive Japanese capitalists.
Abe says managers should not only seek profits but also consider morals and ethics.
The arrests have unnerved some investors and have contributed to a stock market slowdown. The main Nikkei stock index has sunk almost 20 percent since hitting a six-year high a few months ago.
Some market experts believe Horie and Murakami were targeted because their manners, as much as their methods, offended Japan's business elite.
Ira Hata is an affiliate partner in Tokyo at the
Swiss-Taiwanese investment firm Eurasco Capital. He says Horie, who dreamed out loud of rocketing into space and becoming prime minister, was the proverbial nail sticking up ready to be hammered - a Japanese saying about those who break from traditional social rules.
"His big problem was that he wanted to be in the limelight, which is a big no-no by Japanese culture," Hata says. "Had he kept his head low and quietly made his millions or billions then I'm sure he wouldn't have been made an example of. When it comes to Murakami he definitely broke the law and manipulated the market. I think his big mistake was becoming greedy."
Foreign Minister Taro Aso says Murakami's ability to make money was not the problem.
Aso says Murakami was not hated because he made profits but rather because of the way he made them.
Eurasco Capital's Hata says there are many others who desire to emulate Murakami.
"Putting Murakami's head on a stick sends a signal to all those wannabes to re-assess their approach to the market," Hata says. "In that sense I do believe it does have a chilling effect. On the other hand I think that it's very beneficial for the real financial institutions to re-assess their approach in Japan. That means you'll have to do business the proper way here."
The arrests of Horie and Murakami may signal that Japan is getting serious about cracking down on illegal trading by company executives. But many business people say that Japan, despite touting reform and desiring greater foreign direct investment, will not tolerate those who want to push market rules and demand that Japanese companies become more friendly to shareholders.