Investigations into corruption involving Japan's military procurements are focusing on the purchase of GE Aviation's engines, with prosecutors alleging that a former top bureaucrat unfairly favoured the company after receiving bribes from its local agent.
Takemasa Moriya, who as vice-minister for defence was the second highest official at the ministry for four years before his retirement in August, was arrested last week in the growing scandal.
Prosecutors allege that he accepted a dozen free golf trips worth ¥3.9 million ($36,000) from 2003 to 2006 and $1,845 in cash as a birthday gift from Motonobu Miyazaki, who has worked for companies representing GE over the last few years.
In return, the Tokyo district prosecutor's office says that he allegedly favoured Miyazaki's companies when contracts were issued.
Miyazaki was employed by Yamada Yoko, GE's agent when the company won a contract in 2004-5 to supply five CF6-80C2 engines for the Kawasaki Heavy Industries C-X aircraft.
He later left to form Nihon Mirise, which then became GE's agent in Japan, and sealed a deal for a sixth engine with the ministry. He has been arrested and charged with document forgery and embezzlement.
During recent parliamentary testimony, Moriya said that all he received from Miyazaki were gifts, not bribes. But the ministry forbids its officials from playing golf with defence contractors, and Moriya admitted recently that he and his wife took false names and paid golf fees that were lower than normal to Miyazaki.
The ministry says that the planned purchase of the sixth engine through Nihon Mirise has been suspended. "We still plan to buy an engine, but we have not decided if it will be through another agent or directly from GE." GE's contract with Mirise has been suspended as a result of the scandal, it adds.
GE's Japan office referred calls to the company's head office in Cincinnati, Ohio, but calls to the USA were not answered.
"It's extremely regrettable that the arrest may cause the public to lose trust in Japan's defences," says Prime Minister Yasuo Fukuda, whose government has been rocked by the scandal. "We must promote reform of the defence ministry so this will never happen again."
The ministry says that a review panel headed by defence minister Shigeru Ishiba will investigate all procurements involving Yamada Yoko and Nihon Mirise. It will also look into other purchases over the last four years, but adds that forthcoming purchases are unlikely to be affected.
Japan is developing the C-X aircraft to replace its aging Kawasaki C-1s and Lockheed Martin C-130s. The prototype made its first flight earlier this year and commercial production is expected to begin in 2010. Tokyo plans to buy around 50 aircraft, with a lucrative engine deal likely to follow.