Fri, Nov 16, 2012 - Page 9 News List

How debts and double-dealing sparked Japan-China islets row

The purchase of three disputed islands by Japan that has sent tensions with China soaring, started as nothing but a deal made by a property magnate with heavy debts

By Antoni Slodkowski  /  Reuters, OMIYA, Japan

Ishihara became internationally known in 1989 for his bestseller entitled The Japan That Can Say No, an argument to reduce Japan’s reliance on the protection of the US.

Kurihara described himself as an admirer of the governor and said he wanted to sell him the islands, Santo said. The two met at the Omiya compound in September last year and later in Tokyo’s fashionable Ginza district, where they reached a verbal deal.

“They shook hands and gave their word to each other as men, which in Japan is the strongest promise you can make,” Santo said.

In April, Ishihara announced a plan to buy the islands, raising US$17 million from private donors. His deputy, Tokyo Vice Governor Naoki Inose, also an author, estimated Kurihara’s net debt at about ¥1.5 billion (US$18.5 million).

“I’m not stupid. I checked his mortgages,” Inose said.

Records show Kurihara had a credit line of almost ¥4.04 billion by this year. The funding was provided by Bank of Tokyo-Mitsubishi UFJ, Japan’s largest lender, and the Saitama Shinkin Bank, a local bank.

The final offer from Ishihara’s team was a liitle more than ¥2 billion, two people close to the talks said.

However, Kurihara had also been talking to the government. Japanese Prime Minister Yoshihiko Noda saw a national bid as a way to head off a more damaging confrontation with China.

“He first approached us about the islands in 2006,” said Akihisa Kameda, the official responsible for negotiating the deal.

Kameda said Kurihara had earlier rejected proposed swaps for forests or fields elsewhere in Japan. With Ishihara offering cash, the government was forced into the bidding.

By late June, Kurihara had grown worried that the sale could be tied up in Tokyo’s local parliament or derailed by assessors, Santo said.

He broke off talks with Ishihara’s team with a curt message: “I decided to sell the islands to Japan.”

Government negotiators offered Kurihara the higher price, people involved said, and fast-tracked a deal that would have taken up to a year with a private-sector buyer.

Kameda offered few details on the price, saying that it reflected a calculation of what it would cost to “replace” the islands, without further explanation.

Officials declined requests to see documents related to the valuation and sale.

On Sept. 11, Japan announced it had nationalized three of the Senkaku Islands, generating outrage in China, where a Chinese Communist Party Congress opened last week to put in place new leaders, who are to face the challenge of re-engaging with Japan.

“Japan should have pressed more for China to accept that the Senkaku are Japanese islands,” said Kurihara’s brother, Hiroyuki.

Kazuko Kurihara, a younger sister, still holds the second-largest island, Kubajima, known as Huangwei Islet (黃尾嶼) in Taiwan, and in May renewed a 20-year lease to the Japanese Ministry of Defense. Huangwei Islet has been made available to the US as a bombing range, last used in 1978.

Ishihara has told aides he wants to fund building projects on the islands. That would strain ties with China further.

Santo said she understood Kurihara’s pursuit of the highest offer.

“For him, business considerations were the most important. After all, he is a real-estate broker,” she said.

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