Stock scandal taints Japan's ruling party

These days in Tokyo, inquiring minds want to know one thing - ``Who bought?'' The items in question are shares in a real estate company, offered in advance at low prices to a select list of Japan's power elite, who then sold them for enormous profits when the stock went public.

There are 76 names on the list, according to the mass-circulation newspaper, Asahi Shimbun, which broke the story. Among them are secretaries and relatives - acting as proxies, the Asahi implies - of top leaders of Japan's ruling party, including the current prime minister, his predecessor, and several would-be successors.

The list also includes leading lights of the mass media. On Wednesday, Ko Morita, president of Nihon Keizai Shimbun, Japan's version of the Wall Street Journal, resigned after being confronted with evidence he bought and sold the shares. The paper forbids employees from engaging in stock transactions.

The scandal promises to complicate the next session of parliament, where the ruling party faces a tough tax-reform battle.

Despite the uproar, no one is accused of doing anything illegal. The transactions let investors reap profits when a stock is offered to the public, and are legal and not unusual.

``It's legal, but it's immoral,'' says Toshishige Namai, editor of an economic weekly. The issue is one of the impropriety of politicians making big money, especially when they are about to increase some constituents' taxes. (Currently, capital gains on stock transactions are not taxed, an exemption tax reform would remove.)

There is also the hint that the company involved, Recruit Cosmos, and its parent firm, were seeking favors from its select investors. Recruit officials say they offered stocks for sale to avert losses by the real estate firm, and the profits were the accidental result of a boom in land prices. But experts say such public offerings always bring profits to those who buy in ahead at book values.

Certainly the reported profits are in the category of obscene. Former Education Minister Yoshiro Mori reportedly made 100 million yen ($750,000) on the deal. Newspaperman Morita, the Asahi says, earned $600,000. Investors bought the shares in 1984 for 1,200 yen each, and sold them for over 5,000 yen in 1986.

Almost all the politicians involved deny direct involvement in or knowledge of the deals. The purchases were reportedly made by their aides or family members. Current or former aides of Prime Minister Noboru Takeshita, former Premier Yasuhiro Nakasone, Finance Minister Kiichi Miyazawa, and ruling party official Shintaro Abe have admitted purchases.