Government leaders reiterated July 3 the need to toughen penalties on financial institutions due to racketeering scandals involving a leading city bank and Japan's major securities firms.

Prime Minister Ryutaro Hashimoto, in a written message to a convention of the Japan Federation of Bankers' Associations, said the illegal payoffs by Dai-Ichi Kangyo Bank and Nomura Securities Co. to a "sokaiya" corporate extortionist were "truly regrettable." His message was read by Deputy Chief Cabinet Secretary Teijiro Furukawa. "I think it is necessary to take steps, including strengthening penalties for violations of rules, to build up a fairer financial market," Hashimoto said in his message.

Finance Minister Hiroshi Mitsuzuka, who spoke as a guest at the convention, also touched on the payoff scandals at the beginning of his speech. He said he hopes the banking industry as a whole will waste no time in finding ways to strengthen legal compliance and eliminate ties with racketeers. He also said the ministry is aggressively working to toughen penalties for banks that attempt to evade official inspections and that make false reports to financial authorities.

In addition to the illegal payoffs to sokaiya Ryuichi Koike, who is already under arrest, it is suspected that DKB made false reports to the Finance Ministry in an attempt to cover up the dubious loans. Bank of Japan Gov. Yasuo Matsushita, another guest at the banking industry convention, also mentioned the scandal.