Japan's PM apologises for bank scandal

Yoshiro Mori is looking increasingly embattled

By Charles Scanlon in Tokyo

The Japanese Prime Minister, Yoshiro Mori, has apologised to parliament following a scandal in which the chief banking regulator was forced to resign.

Kamitaka Kuze resigned from the cabinet on Sunday after it was shown he accepted at least $3m in contributions from a bank and a property company.

Opposition politicians and leading newspapers have strongly criticised the prime minister saying he should take responsibility for the scandal.

Mr Mori told parliament that he wanted to apologise to the people of Japan. He said he had intended to appoint the right people for the job of revitalising the country, and it was unfortunate that one had been forced to resign.

The apology will not satisfy the prime minister's critics. They want to know why he appointed Kamitaka Kuze as chief banking regulator when he already knew he had accepted around $2m dollars in contributions from a leading bank.

Mr Mori says he had been advised at the time that there was nothing illegal about Mr Kuze's activities.

Kamitaka Kuze: Accepted illegal donations

However, he ordered the minister to resign on Sunday when it was reported he had accepted another million dollars from a property company.

Leading newspapers said Mr Mori should be held accountable for the scandal.

One said it was time to start choosing cabinet ministers on the basis of their abilities rather than on their factional loyalties within the party.

Further blow

Mr Kuze is the second chairman of the financial reconstruction commission to be forced to resign this year.

It is a further blow to the credibility of the organisation, which is charged with overseeing the reform of Japan's heavily indebted banking sector.

He is being replaced by an 81-year-old former finance ministry bureaucrat, Hideyuki Aizawa.

Analysts say he is unlikely to be the right man to do away with the old practices that are preventing the emergence of a more transparent and profit-oriented financial sector.

The commission has come under attack in recent weeks for agreeing to a hugely expensive rescue package for the bankrupt Sogo department store.

The move was so unpopular that it was quickly abandoned by the government.

Pressure

It is also coming under pressure for what are seen as unduly generous terms for the sale of the nationalised Nippon Credit Bank to a consortium led by Japan's biggest internet investor, Softbank.

The scandal is also likely to further weaken the position of Mr Mori, who is unpopular in the country and is blamed by many in his own party for their poor showing in last month's general election.

Senior figures in the Liberal Democratic party have said they will continue to back the prime minister.

But he is increasingly seen as an interim leader who's extremely unlikely to lead the party into Upper House parliamentary elections next July.