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Scandal Plagues Well-Respected Japanese Company - 2002-07-05

A scandal plagues a well-respected Japanese company and two major Japanese insurers merge in the face of heavy rivalry.

A scandal at Mitsui, one of Japan's most prestigious trading companies, dominates the corporate headlines. Three Mitsui executives were arrested Wednesday. Prosecutors allege they were involved in a bid-rigging scheme. Two officials of the Japanese Foreign Ministry were also taken into custody.

Prosecutors believe that two years ago, the Mitsui officials received leaked information from the diplomats about government financing of a power project on one of the Kurile Islands. Russia controls the islands off northern Japan, but Japan claims them.

The Mitsui officials are accused of acting on the tip to win the construction contract for the project. Mitsui's executive vice president Jun Tashiro denied any wrongdoing, saying that an internal inquiry has found no evidence. He added it is regrettable that this scandal reached the point where people were arrested and apologizes for creating public confusion.

Trade and Industry Minister Takeo Hiranuma said Friday that Mitsui must take responsibility for the scandal and prevent a recurrence.

More consolidation is coming in Japan's insurance industry. Yasuda Fire and Marine Insurance and Nissan Fire and Marine Insurance have merged to form the nation's second largest non-life insurer. The combined company is called Sompo Japan Insurance. Its net premium revenue totals nearly $10 billion.

The move underscores severe competition due to recent deregulation. Hiroshi Hirano, Sompo Japan's president, told reporters that his company will expand to related businesses. He added that by doing so, it will create new synergies.

In the auto sector, a compact car made by Honda, called Fit, was the best selling car in Japan for the first half of this year.

According to the Japan Automobile Dealers Association, Honda has sold more than 117,000 of the vehicle. The Toyota Corolla came in second and Nissan's March subcompact car came in third place.