Japan Finance Firm, Ministry Tainted By Share Sale

Neither party had broken any laws in the share deal, but ministry officials have been asked to refrain from share transactions after recent scandals over senior bureaucrats close ties with the business world.

Finance minister Wataru Kubo apologised for the incident, which had bruised public confidence in the ministry.

He is a former official who left the ministry nearly 20 years ago, but it is very regrettable, finance minister Wataru Kubo said. He said he had dismissed the retired official from his post as a member of a ministry advisory panel.

Takefuji, which debuted on Japans over-the-counter market in August, said that in March 1994, it had offered 19,000 of its shares to the ex-official, who was working as a part-time auditor for the company at the time.

 

The company saw nothing amiss in the offer and said in a statement: We asked Hiromi Tokuda, our part-time auditor, to have our shares as we sought stable shareholders.

Takefuji said the former ministry official acquired the companys stock in the name of his daughter, whose husband is a ministry bureaucrat.

The ministry, long viewed as the pinnacle of Japans elite bureaucracy, has come under fierce public criticism for its poor handling of problems in the financial sector and a series of scandals involving senior ministry officials.

In September 1995, then-finance minister Masayoshi Takemura docked his own pay over a scandal in which a senior ministry official took improper payments from business contacts.

Politicians have stepped up pressure to streamline the ministrys functions in order to curb its authority. Investors in the personal loan firm were jarred by the news, and the firms share price dropped Y280 ($2) to Y8,480 ($76) by the end of Fridays trade after being knocked down by as much as Y450 ($4).

The share prices have fallen considerably and are now at a very attractive level for investors, said Shuji Kaminaka, an analyst at Okasan Economic Research Institute. But the firms image has fallen with it and that may keep investors away in the coming months, he added.

Takefuji shares were very popular ahead of their listing, due to the firms solid earnings and profit forecasts. In the year to March 31, 1997, the company expects to rake in a parent current profit of Y125.54 billion ($1.13 billion), up from 110.77 billion yen ($997 million) the previous year.

The rosy profit outlook for Takefuji and other consumer finance firms stems from Japans current record low interest rates.

But despite its solid financial foundations, the sector is having trouble in polishing up its somewhat negative image and that is forcing investors to back off, analysts said.

In the past these companies were viewed as loan sharks, often coming under fire for outrageously high lending rates and hard-nosed collecting tactics. Going public was one way they hoped would revamp that image.

The earnings are good and they should be encouraging the shares, but Takefujis image is so tarnished the share prices are falling, an analyst at a medium-sized brokerage said.

This single incident is not enough to send the company into the red, but if these image-bashing incidents continue, not only Takefuji but the whole sector will be harmed.