Are Japan's crime clans going out of business? Tea with a yakuza.

Like many Japanese business leaders, Masatoshi Kumagai worries about the future. Industry conditions are changing and he must globalize. Finding capable people is difficult. Regulations are proliferating. The younger generation lacks that hungry spirit that rebuilt postwar Japan.

Yet as Mr. Kumagai eyes a security camera screen with an occasional intense, steely look, it becomes clear his is no typical corporate office.

Kumagai is in fact a yakuza crime boss, part of Japan's gang underworld. For decades, the yakuza have been seen in romantic terms for their strict codes and secret ties to business and finance, while occupying a semi-legal grey zone, mostly out of the reach of Japanese police and courts. 

But today, Kumagai says, the yakuza face “the biggest change in the postwar period" as public sentiment turns against them and anti-gang laws challenge their existence.

His office exudes a yakuza style: Rather than uniformed, demure young ladies, two smartly dressed, stocky young men whose every move bespeaks a ritual language serve the green tea and wagashi sweets. 

The emblems on the tea cups belong to the Inagawa-kai, the third-largest syndicate of crime clans, one that the US Treasury Department in 2013 designated a transnational criminal organization.

The Kumagai-gumi, with Kumagai at its head, is a member of that syndicate.

Yakuza members falling sharply

To the outsider, the yakuza appear to operate with a startling openness. They have offices, name cards, pay rent and mortgages, and sport well-known brand emblems.

But their numbers are dropping sharply, from a peak of 180,000 members in the 1960s to about 53,500 in 2014, according to the national police agency. 

The Inagawa-kai has nearly 3,000 members, and a similar number of associates. The group formed in 1949 in Atami, a coastal resort 60 miles southwest of Tokyo. That postwar period saw the yakuza transformed from street gangs into major enterprises with interests and influence that extend deep into business and politics. 

Membership of ninkyo dantai or “chivalrous organizations” – as they call themselves – is not illegal. They are protected by the freedom of association guaranteed in the Japanese constitution, and by a tacit public acceptance that crime, like almost everything in Japanese society, is better organized than disorganized.

But that tacit understanding has been breaking down.

One watershed came in 2007 with the murder of a public official, the mayor of Nagasaki, by a senior member of the largest syndicate, the Yamaguchi-gumi. (The Yamaguchi-gumi made headlines last month when it split into two factions.)

Since 2011, a series of laws at the prefecture level have exerted a slow but sharp squeeze on the yakuza that have begun to immobilize them through a variety of civil actions and law suits. Members are unable to open bank accounts, get life insurance or rent property, notes Kumagai.

One crucial change is that bosses are legally responsible for the actions of all of their underlings. Bosses have long been liable for violence perpetrated by gang members. But upper echelon bosses can now be found liable under civil law for financial damage suffered by victims.

Pushed back out of legitimate enterprises 

The first cases resulting from these legal reforms are already emerging.

In January, a restaurant manager in Nagoya sued Yamaguchi-gumi godfather Shinobu Tsukasa for the return of seven years of protection money and damages amounting to approximately $270,000. 

Last month the owner of two pachinko parlors – gambling halls that operate in a legal grey area – in the city of Kitakyushu filed suit against three bosses of local Yamguchi-gumi rival, the Kudo-kai, for the return of $330,000 in protection money paid over 15 years.

Back in the 1980s, syndicates expanded into real estate, the stock market, and other legitimate  enterprises. But they are being pushed out of these sectors, according to Kumagai.

"As the country and economy changes, so the underworld can't remain unchanged,” he says. “We've been through the bursting of the [economic] bubble, the Asian currency crisis [1997] and then the aftermath of the Lehman Brothers' collapse. Reading and responding to those changes is the job of bosses; those organizations that can't adapt will cease to exist.”  

Japan's post-1980s economic swoon hasn't been all bad. Yakuza made money from "cleaning up"  bad loans, distressed assets and bankrupt companies. "Dispute resolution" remains a core activity, partly due to Japan's notoriously slow and expensive legal system. "We can get things done quicker," says Kumagai. 

Kumagai's own entrance to the yakuza world came as a teenager, following what he calls a troubled upbringing. He had wanted to join the police force. But then he took revenge on two members of a gang from another area who had badly beaten an older friend. "I was scared but I went after them even though they were five years older than me and one was carrying a samurai sword," he says. 

He wounded two gang members, and served an 18-month sentence. Then a local senior yakuza decided to recruit him.

"Even after I refused a number of times, they kept on. They took me out to the kind of bars I had never been to. They dressed well, had beautiful women around and drove nice cars. They bought me new clothes because they saw I was always dressed in the same ones. Looking back now, I realize they were reeling me in like a fish on a hook."

Too late to start a new life

He joined in 1980 with the intent to quickly leave. “I thought if I left by 30, I could still start a new life."

By 28 he was head of the local clan, though his rising trajectory within the Inagawa-kai took a hit when he turned up on the wrong side of a succession dispute 10 years ago.

Despite the Inagawa-kai being designated an international organization, Mr. Kumagai believes Japan's crime clans remain too parochial.

"With the restrictions we are facing in Japan, we have to make connections with the underground economy in other countries. I tell my subordinates that they need to think more globally," says Kumagai, who now works to forge links with counterparts in Asia.

Like other yakuza, Kumagai defends his organization as helping to maintain order on Japan's famously safe streets by eschewing petty crime and imposing rules on the underworld. Should the authorities succeed in their clampdown and wipe them out, there will be consequences, he warns. 

"Other groups who do what we do would emerge, but without the rules and discipline we have. It's already happening with some of these foreign criminals and 'hangure' [street and motorcyle gangs, some of which have been designated as ‘semi-yakuza’]."

"Outlaws," he adds dismissively in English.

[Editor's note: The original photo credit misidentified the photographer's name.]