How a Kindergarten Led to the Biggest Scandal to Hit Japan PM Abe

Abe is under fire for possible links to a school whose principal says Abe’s wife donated it 1 million yen.

Japanese Prime Minister Shinzo Abe is coming under fire for possible links to a nationalist school whose principal says Abe's wife donated 1 million yen, or about $9,000, in 2015. Here's a closer look at this emerging scandal and its implications.

What Brought the School to Attention?

Moritomo Gakuen runs a kindergarten that teaches students a curriculum reminiscent of pre-World War Two Japan, including devotion to the emperor and sacrifice for the country. The schools’ principal, Yasunori Kagoike, heads the Osaka branch of Nippon Kaigi (or Japan Conference), a nationalist lobby group with close ties to Abe.

Last month, it was forced to apologise for online comments described as possible hate speech against Koreans and the Chinese.

Abe was also grilled in parliament about possible ties to the school, including whether he knew his name had been used to solicit donations for a new elementary school.

What's at the Centre of the Scandal?

Moritomo Gakuen bought state-owned land for the school for just 14 percent of the appraisal price, raising questions. Officials say the discount was to account for ‘cleanup costs’.

Abe has said that neither he nor his wife intervened in the land deal or helped the school get accredited, and that he would resign if evidence to the contrary were found.

How Did Abe's Wife Akie Get Involved?

Akie was set to be the honorary principal of the elementary school and had visited it several times. She cut her ties with the school when the controversy erupted.

Kagoike told parliament on Thursday that in 2015 she gave him an envelope containing 1 million yen, saying, "Please, this is from Shinzo Abe." If it turns out he lied, he could face perjury charges. Akie denied this on social media, and her husband repeated the denial in parliament on Friday.

How Could it Affect Abe?

The controversy is the biggest crisis to face Abe since he returned to office in 2012 for a rare second term. It has eroded his support rating to some extent, although it remains above 50 percent, and could threaten his ambition to be the country's longest-serving premier.

For now, Abe looks likely to ride out the scandal, although his defence minister, Tomomi Inada, has links to the school, having appeared in court on the school's behalf years ago.

How is it Affecting the Markets?

Investors said concern about the controversy weighed on stocks on Thursday before Kagoike testified, sending the Nikkei stock index to a 1 1/2-month low. On Friday, the index gained as attention shifted to a weakening in the yen.

(Published in an arrangement with Reuters)