A former executive of defunct Yamaichi Securities Co. told the Diet in unsworn testimony Friday that in January 1992 the brokerage believed a senior Finance Ministry official had blessed Yamaichi's plan to illegally buy back "tobashi" losses.
Tobashi is a practice in which brokerages shift investment losses from one client to another to prevent a favored client from having to report losses. Although tobashi is not illegal, a Jan. 1, 1992, legal revision made it unlawful for a brokerage to buy back losses caused by tobashi trading.
Ryuji Shirai, former vice president of the failed brokerage, told the Upper House Budget Committee, that Atsuo Miki, then-Yamaichi vice president, visited the Finance Ministry to discuss the matter with Nobuhiko Matsuno, former chief of the ministry's Securities Bureau.
"I directly heard from Miki that the former bureau chief had agreed to it," Shirai said in reply to a question from Giichi Tsunoda, a committee member of Minyuren, the largest opposition force. When Tsunoda asked Shirai if consent from the high-ranking Finance Ministry official was a kind of "voice from heaven," Shirai replied, "Yes."
However, Matsuno, who was also summoned to the same committee session as an unsworn witness, repeatedly denied Shirai's statements, saying that he had never agreed to such unlawful dealing. "It is simply unthinkable that I, in the capacity of bureau chief, had agreed to it," Matsuno said.
Matsuno, 59, who held the top post in the securities bureau for two years from June 1990, was appearing in the Diet for the third time over allegations that he condoned window-dressing operations by Yamaichi when he was consulted by Miki.
Matsuno, currently vice chairman of the Regional Banks Association of Japan, also insisted that he never instructed Yamaichi to illegally move the losses off the books.
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