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Thu 24 Nov 2011 01:07 PM

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Buffett may be no match for mobsters with tattoos

The Sage of Omaha could be Japan’s salvation – if the crime-lords don’t put him off

Buffett may be no match for mobsters with tattoos
Warren Buffett has said he is mulling investment opportunities in Japan

that Warren Buffett is looking for opportunities in Japan is as good as it gets
for a nation that has had an awful year.

Japan needs to do is convince the most famous value investor that it’s
deserving of his money. Yet a curious juxtaposition involved in Buffett’s
first-ever Japan visit showed why that’s easier said than done.

was touring a tool plant in Fukushima prefecture, where a nuclear-power plant
damaged by the tsunami in March has contaminated the surrounding area. There,
he was asked about another calamity putting Japan in a harsh and negative
spotlight: the Olympus scandal. The Berkshire Hathaway chairman said: “The fact
that Olympus happens here or Enron happens in the US doesn’t affect our
attitudes at all.”

about it, though. The most-watched market guru is standing near one crisis
caused by political corruption and being queried about another involving
corporate malfeasance. At the heart of both storylines are growth-killing
dynamics that have long given Buffett and his ilk pause. While different in
their details and magnitude they show how Japan may be too wedded to the past
to thrive in a world of intensifying competition.

as venerable a name as there is in Japan, demonstrates the point. Investigators
want to know what happened to at least $4.9bn they say is unaccounted for at
the camera maker. Of all the bizarre questions surrounding this sordid tale,
the role of organized crime groups, or yakuza, is the most tantalizing. Police
are looking into how much of the missing cash went into the pockets of these

one can be sure what will be found until the digging is done,” says Jake Adelstein,
author of the 2009 book ‘Tokyo Vice’ and a well-known crime reporter in Japan.

their full-body tattoos and amputated fingers, the yakuza have long held a
unique place in the public imagination. Unfortunately, that goes for Japan’s
economy, too. Adelstein calls the yakuza “Goldman Sachs with guns” because of
the prowess with which their groups’ roughly 80,000 members infiltrate
companies through extortion and intimidation.

is the latest reminder of the extent to which the yakuza is intertwined with
the corporate culture, and it’s hardly the only household name to get ensnared.
In 2009, Fujitsu ousted its president for alleged ties to “antisocial forces,”
a euphemism in Japan for organized crime. The question is this: If Olympus was
mixed up with such sinister forces, which other Nikkei 225 Stock Average
companies are?

Minister Yoshihiko Noda is worried that Olympus will sully Japan’s reputation
as a well-regulated market economy. Michael Woodford’s travel schedule shows
why it may be too late. The former Olympus chief executive-turned-whistleblower
forwarded to the whole Olympus board some letters detailing his concerns about
mysterious payoffs before he was fired last month. Then Woodford left Japan,
fearing for his safety. This week, he will be under police protection as he
returns for the first time to meet with investigators.

Article continues on
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In a Group of Seven nation? Yes, these things can still happen in Japan thanks
to a corporate and political aversion to digging to weed out nefarious
interests. A compliant media can only make that worse.

similar conclusion can be drawn from events in Fukushima more than eight months
after a record earthquake. It was incestuous ties between government
bureaucrats and the power industry that left high-tech Japan so vulnerable to
the low-tech ways of Tokyo Electric Power Co., the owner of the damaged
Fukushima reactor.


we think of the mob, we don’t tend to think of publicly traded utilities like
Tepco. But how can anyone look at the ways politicians enabled Tepco and its
shocking safety lapses over the years and not call it organized corruption? How
can the government, knowing what it does now, rally around the nuclear

soul mate in politics, former Prime Minister Naoto Kan, was shown the door in
August for asking hard questions. Kan wanted to hold Tepco accountable for the
radiation leaking into Tokyo’s food supply. Noda quietly let matters return to
the status quo ante for the nuclear-industrial complex that Tepco represents.
The losers are the Japanese people who worry about another Chernobyl when the
next giant earthquake hits.

this shows how Japan is shunning the change needed to compete in an age when
China sets the pace. Just as illustrative is the ability of rice farmers to
imperil passage of international-trade deals. And then there’s corporate Japan
with its poison pills, takeover defenses and protection of inefficiencies.

isn’t the only investor searching for bargains in Japan, but he’s by far the
most important. Japan’s markets have been beaten down since the earthquake that
forced Buffett to delay his Japan trip. And there are great companies in Japan.

problem is that too little is taking place in the halls of power to clean up an
economic system that has lost its way. The shenanigans at Olympus and Tepco show
how much the opacity of the past is constraining what should be a bright
future. That won’t be lost on savvy investors like Buffett.

(William Pesek is a Bloomberg
View columnist. The opinions expressed are his own.)

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