Japan's biggest mafia group is splitting up

Kenichi Shinoda, the boss of the Yamaguchi-gumi, in 2011.
JIJI PRESS | AFP | Getty Images

Japan's largest mafia group, also the world's wealthiest, is experiencing an internal rebellion that could potentially have wide-ranging implications for the world's third-largest economy.

The Yamaguchi-gumi, Japan's most prominent yakuza, i.e. organized crime group, saw hordes of its members leave to form a splinter group in recent days, according to local media reports. The new faction, called the Kobe Yamaguchi-gumi, announced its launch on Monday in an official release, The Japan Times reported.

The new group's head Kunio Inoue reportedly expressed his frustration with current Yamaguchi-gumi boss Shinobu Tsukasa—also known as Kenichi Shinoda—in the release, criticizing his "extreme egoism."

Monday's launch followed reports that the Yamaguchi-gumi expelled 13 leaders of associate groups last week, including Inoue who heads an affiliate called the Yamaken-gumi.

The internal dissent has reportedly seen 3,000 members leave the Yamaguchi-gumi overall. Before the split, the parent organization had more than 23,000 members, equaling 40 percent of all gang-affiliated people in the nation, according to widely circulated estimates.

As the dust settles on the new splinter group, the threat is whether current internal tensions could disrupt the Yamaguchi-gumi's income stream and in turn, impact Japan's broader corporate world given the organization's vast ownership and control over numerous businesses.

"The Yamaguchi-gumi is the transmission of the car that runs Japan Inc...An organization as large as them definitely has some kind of impact on Japan's overall economy," Eric Messersmith, lecturer at the Institute for Asian Studies at Florida International University, told CNBC.

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At this stage, he believes the internal dispute could pose a minor disruption to yakuza profits if the situation doesn't escalate.

"Major multinationals are traditionally insulated from gang activity, but it depends. Companies with international trade divisions, like Marubeni, are exposed since they're dealing with the front companies of yakuza, whether they know it or not," he explained.

With legitimate firms ranging from entertainment, finance, information technology and real-estate, the Yamaguchi-gumi's unofficial dominance in Japan is undisputed. Fortune magazine estimated its net revenues at $80 billion last year, the highest in the world for a criminal group and well above Naples' notorious Camorra syndicate and Mexico's Sinaloa Cartel.

"In fraud alone, Yamaguchi-gumi members are estimated to have made 10,000,000,000 yen last year, and that's a figure from a report in progress," Jake Adelstein, a Tokyo-based author and international expert on the yakuza, told CNBC.

"It's difficult to say how much money the Yamaguchi-gumi controls [overall]. It's very hard to find good stats," he added.

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To put it into perspective, Robert Alan Feldman, chief economist at Morgan Stanley MUFG Securities, once called the syndicate Japan's largest private equity group.

The group's split could also be dangerous for civilians, with Japanese police warning of potential gang violence last week.

The Yamaguchi-gumi's last internal rebellion in 1984 resulted in five straight years of gang warfare that killed and injured several civilians, according to media reports.

Adelstein believes that as long as gangs confine their conflict to other gangs, there's no real threat to the general public. "If the war isn't particularly bloody and the involved parties only kill each other, then business will continue as usual."

The tensions come at an inopportune time for Japanese Prime Minister Shinzo Abe, whose approval ratings have plummeted in recent months over new security bills that would end Japan's pacifist constitution. Last week, thousands of citizens took to Tokyo streets to engage in fresh protests against the bills, with similar rallies held nation-wide.

"The [current] split of the organization offers a good opportunity for police to tighten their crackdown on the syndicate to weaken its power. Police should swiftly gather related information and take all possible measures, including arresting senior members, to put the group out of business once and for all," The Asahi Shimbun said in a recent editorial.

Founded in 1915, the Yamaguchi-gumi marked its 100th year of operations this year. Like Japan's 20 other yakuza groups, the syndicate has a corporate logo, offices and business cards—a testament to the yakuza's well-publicized grip on the national economy.

The syndicate has also attempted an image makeover in recent years, with 73-year old boss Tsukasa enforcing a code of ethics following his release from prison in 2011 by banning members to use or sell drugs—a message published on the group's official website.

Correction: Japan is the world's third largest economy. An earlier version of this story misstated that it was Asia's.