Tokyo Noir

1. Yakuza's Hidden Government Dictates Japan's Public Institutions

Japan has two governments—one is a functioning group of political factions that make up the public government. The other is a hidden government that gives directives to public institutions. That hidden government is mostly made up of the yakuza.

Shadow government. The yakuza, Japan's organized crime syndicates, wield significant influence, operating as a hidden government that directs public institutions. This influence permeates various sectors, from construction to entertainment, creating a complex web of power and corruption.

Takeshi Kitano's perspective. Award-winning film director Takeshi Kitano's statement underscores the yakuza's pervasive control, suggesting that their directives often supersede those of the elected government. This duality highlights the challenges in combating organized crime in Japan.

The author's journey. Jake Adelstein's experiences as an investigative journalist in Japan provide a firsthand account of the yakuza's power. His investigations into their activities reveal the extent to which they operate with impunity, often shielded by political connections and a culture of silence.

2. Due Diligence: Uncovering Truth Requires More Than Just Paperwork

Due diligence involves a lot of paperwork and sometimes more footwork than you could possibly imagine; hopefully you’ll find the process of getting the job done as fascinating as I do.

Beyond surface checks. True due diligence goes beyond basic background checks and requires in-depth investigations into a company's reputation, risks, and legitimacy. This involves extensive research, interviews, and on-site visits to uncover hidden connections and potential red flags.

Real-world puzzle-solving. The process of due diligence is akin to solving a complex puzzle, requiring investigators to ask the right questions and follow the trail of evidence. This often involves navigating a labyrinth of corporate records, real estate deeds, and underworld connections.

Importance of footwork. While paperwork provides a foundation, physical presence and observation are crucial for verifying information and uncovering hidden truths. This involves visiting company offices, interviewing employees, and assessing the surrounding environment to gain a comprehensive understanding.

3. Territory Incongruence: A Key Indicator of Illegitimacy

One thing you learn to look for when trying to determine the legitimacy of a company is what I like to call “territory incongruence”.

Spotting inconsistencies. "Territory incongruence" refers to the mismatch between a company's location and its purported business activities. This discrepancy can serve as a red flag, suggesting that the company may be a front for illicit activities.

Examples of incongruence:

• An investment consulting firm located in a rural residential area
• A high-end business operating out of a dilapidated building
• A company with a prestigious name but a shady address

Investigative tool. By identifying these inconsistencies, investigators can narrow their focus and prioritize resources, increasing the likelihood of uncovering fraudulent or criminal behavior. This approach emphasizes the importance of contextual awareness in due diligence investigations.

4. Luck is a Finite Resource: Knowing When to Quit

Well, here’s my theory. Luck is like a deck of cards. You only have so many. There are only so many good ones, and the longer you play the more you run out of your aces and your kings and your jacks, and even the cards get worn out.

Sasaki's theory. An old painter, Sasaki, shares his theory that luck is a finite resource, like a deck of cards. The longer you play, the more you run out of good cards, and the cards themselves get worn out.

Gambling analogy. Sasaki's theory is based on his own experience with gambling. He used to gamble a lot, but he got in over his head and lost a lot of money. He realized that he was running out of luck, so he quit gambling.

Application to life. Sasaki's theory can be applied to life in general. We all have a certain amount of luck, and we need to be careful how we use it. We should avoid wasting our luck on stupid things, like gambling. We should save our luck for important things, like our health and our relationships.

5. Kaishaya: The Underworld's Purveyors of Zombie Companies

They buy and sell mostly dormant companies. Kaisha means company, and ya is just a genetic suffix for a seller of something.

Dealers in dormant entities. Kaishaya are individuals or companies that specialize in buying and selling dormant or "zombie" companies. These companies, often with a long history but little current activity, can be repurposed for various illicit purposes.

Uses for zombie companies:

• Evading taxes
• Embezzling funds
• Improving sales figures
• Gaining special permissions or licenses
• Facilitating backdoor listings on the stock market

Underworld infrastructure. Kaishaya play a crucial role in the underworld economy, providing the tools and resources necessary for various fraudulent schemes. Their activities highlight the complex and interconnected nature of organized crime in Japan.

6. Occupational Hazards: Violence is Inherent in Yakuza Culture

If you lie down with dogs, you wake up with fleas. Reporting on the underworld means you will have to deal with brute force, and you may switch from being the observer and the chronicler of events to becoming a victim yourself.

Brute force. The yakuza's culture of violence is an ever-present threat to those who investigate or cross them. Even seemingly friendly contacts can turn violent without warning, making familiarity a dangerous illusion.

Akiyama's attack. Adelstein's own experience of being attacked by a former yakuza underboss, Fumio Akiyama, serves as a stark reminder of this danger. The incident highlights the potential consequences of even seemingly innocuous interactions with members of organized crime.

Calculated violence. The yakuza's violence is not random but calculated, with careful consideration given to the costs and benefits of each act. This includes assessing the potential legal repercussions and the impact on their overall operations.

7. Pachinko's Murky Waters: Gambling, Yakuza, and Korean Connections

Japan has always had a problem with perverts, aka hentai, who derive a particular glee from snapping photos of naked women or women’s panties.

Addiction and exploitation. Pachinko, a popular form of gambling in Japan, has a dark side, with millions of addicts and a history of exploitation by organized crime. The industry's legal gray area and its connections to Korean communities have further complicated its reputation.

Korean involvement. Korean Japanese have long been involved in the pachinko industry, often facing discrimination and limited opportunities elsewhere. This involvement has led to accusations of funneling money to North Korea, further fueling controversy.

Complex relationships. The pachinko industry's connections to both the yakuza and the Korean community highlight the complex and often fraught relationships between these groups. These connections have contributed to the industry's murky reputation and its vulnerability to exploitation.

8. The Kaishaya's Revelation: Piggy-Backing and Backdoor Listings

“Piggy-backing,” he explained, “is when you convince someone of your legitimacy by using a name that they are familiar with.

Kumagaya's insights. Akio Kumagaya, the kaishaya, provides valuable insights into the methods used by shady companies to deceive investors. These methods include piggy-backing, which involves using a familiar name to create a false sense of legitimacy.

Backdoor listings. Kumagaya also explains the process of backdoor listings, in which unlisted companies merge with listed companies to avoid scrutiny and gain access to capital. This technique can be used to perpetrate large-scale fraud.

The Nakatomi case. The Nakatomi Holdings case illustrates the use of these techniques, with the company falsely claiming a long history and using a familiar name to attract investors. The case highlights the importance of due diligence in uncovering these deceptive practices.

9. The Power of Piggy-Backing: Convincing Someone of Legitimacy

“Piggy-backing,” he explained, “is when you convince someone of your legitimacy by using a name that they are familiar with.

Exploiting familiarity. Piggy-backing is a deceptive tactic used to convince people of a company's legitimacy by associating it with a well-known name or brand. This creates a false sense of security and trust, making it easier to swindle unsuspecting investors.

Examples of piggy-backing:

• A dubious investment fund taking the name of Sumitomo, Fuji, or Mitsui
• A company using the name "Nakatomi" from the movie Die Hard
• A coffee importer calling itself "Blue Mountain" after the famous Jamaican coffee

Defense against piggy-backing. To protect against piggy-backing, it's crucial to conduct thorough due diligence and verify all claims made by a company, regardless of how familiar its name may seem. This includes checking company registrations, financial records, and media coverage.

10. The Exclusionary Clause: A Tool to Shunt Yakuza Out of Society

I decided that we should use contract law and create an organized crime exclusionary clause that could be inserted into any contract or any agreement in Japan that would give people leverage when dealing with yakuza.

Igari's innovation. Ex-prosecutor Toshiro Igari's creation of the organized crime exclusionary clause, or bōryokudan haijo joko, provides a legal mechanism for businesses to refuse service to yakuza members. This clause, inserted into contracts and agreements, allows businesses to avoid dealing with criminal elements.

Impact on yakuza activities. The exclusionary clause has the potential to significantly disrupt yakuza activities by limiting their access to essential services such as banking, hotels, and real estate. This can effectively shunt them out of Japanese society.

Widespread adoption. If widely adopted, the exclusionary clause could create a foundation for not only keeping yakuza out of hotels and golf courses, but also shunting them out of Japanese society. This would require a concerted effort by businesses and government to implement and enforce the clause.

11. The Aftermath: Personal and Professional Collide

Sometimes you love your job even when you know it might kill you.

The cost of truth. The pursuit of truth, especially when it involves organized crime, can come at a high personal cost. This includes threats to personal safety, strained relationships, and the constant awareness of potential danger.

Adelstein's reflections. Adelstein's experiences, including the attack by Akiyama and the death of Igari, highlight the sacrifices and risks involved in his work. These events force him to confront his own mortality and the impact of his choices on his personal life.

Finding meaning. Despite the challenges and dangers, Adelstein finds meaning in his work, believing that it is essential to stand up to injustice and protect the vulnerable. This sense of purpose drives him to continue his investigations, even in the face of adversity.

Last updated: April 17, 2025