Kawasaki Heavy’s Secret Funds Allegedly Used to Buy MSDF Members TVs, Beer Coupons; Shipbuilder Accused of Fictitious Transactions

The Yomiuri Shimbun
This aerial photo taken on Wednesday shows submarines moored at Kawasaki Heavy Industries Ltd.’s Kobe Shipyard.

Maritime Self-Defense Force members allegedly requested a list of goods from Kawasaki Heavy Industries Ltd. in connection with submarine repair contracts, and the shipbuilder provided them, a source told The Yomiuri Shimbun. These goods were allegedly bought using Kawasaki’s secret funds made through fictitious transactions.

The goods likely provided included beer coupons, which were used at social gatherings between MSDF and Kawasaki, as well as game consoles and home appliances.

According to Kawasaki, headquartered in Kobe, the company had been under investigation by the Osaka Regional Taxation Bureau since November 2023 over allegations that it has engaged in fictitious transactions amounting to more than ¥1 billion over six years through fiscal 2022. Including heavy additional penalties, Kawasaki owes an estimated ¥600 million in back-taxes. Its off-the-book funds amounted to over ¥100 million a year, and the practice was said to have also taken place prior to the period investigated by the tax bureau.

Submarine repair work is handled by Kawasaki’s repair department in Kobe Shipyard. During a several-month repair period, submarine crews stay at the company’s Kaiyukan accommodation facility near the shipyard and work together with Kawasaki repairmen.

Kawasaki admitted that secret funds made through fictitious transactions were pooled and used to purchase gift certificates, household goods and repair tools, and that these were suspected of being provided to MSDF members.

According to sources, the MSDF members compiled a list of requests for each submarine and handed them to Kawasaki.

Social gatherings of MSDF members and Kawasaki workers were organized frequently to enhance cooperation, and the expenses were allegedly paid by Kawasaki from the secret funds.

Items such as TV sets, refrigerators, microwave ovens and Nintendo Switch game consoles were suspected to have been used by MSDF members both at Kaiyukan and on the submarines.

Kawasaki is said to have used more than ¥100 million a year in off-the-book funds to entertain MSDF members, with some also being given to subcontractors as “commissions” for fictitious transactions.

The company said it has learned of the involvement in the creation of the secret fund of individuals up to the level of section chief in the repair department but denied the involvement of executive-level staff.

The Defense Ministry has decided to launch a special defense inspection conducted by former prosecutors and others. Kawasaki, meanwhile, is being probed by a special investigative panel commissioned by an external law firm.