Association for Public Policy Analysis & Management

Japan’s prefectures have recently enacted ordinances to exclude organized crime syndicates, the yakuza, from society. The yakuza exclusion ordinances (YEO) are in nature third party policing that prohibits citizens and corporations from having a relationship with yakuza members. The YEO aim to cut off the flow of funding to the yakuza. Consequently, the yakuza’s activity appeared to decline after the YEO enactment. We expect, however, that former or current yakuza members struggle to find economic opportunities because of the YEO and that they are prone to commit lucrative crime. We also argue that the effects of the YEO are larger in prefectures where yakuza syndicates compete less intensively, because yakuza members are discouraged from resigning from their syndicate in more competitive areas for the sake of turf wars.

To test these ideas, we take a difference-in-differences approach by exploiting prefecture-level variations of enactment dates and the extent of competition among yakuza syndicates. We show that the YEO sharply reduce the yakuza membership and that this reduction effect is larger in prefectures with less yakuza competition. Subsequently, we find that the YEO increase total financial damage of bank transfer scams and that this effect is larger in prefectures with less yakuza competition. We lastly provide evidence that both former and current yakuza members engage in frauds, which is consistent with the idea that they struggle with their economic opportunities after the YEO and as a result commit lucrative crime. Our results survive a variety of robustness check. 

This study provides novel policy implications for promotion of the public safety. The YEO contribute to a decrease in the yakuza membership, but the effect is negatively correlated to the extent of competition of yakuza syndicates. This suggests that an effective crackdown is to regulate particular syndicates intensively rather than regulate many syndicates simultaneously. In other words, as yakuza conflicts exhibit strategic complementarity, if a syndicate reduces its membership (by an intensive crackdown) then others that compete with it should reduce their memberships. Along with the benefit of the YEO, the YEO lead to an increase in profitable crime. It suggests that the promotion of the public safety demands assistance for former yakuza members' rehabilitation to the society. The rehabilitation assistance discourages former yakuza members from committing profitable crime, and moreover it encourages current members to leave yakuza syndicates. Furthermore, our results suggest that the rehabilitation assistance would be effectively implemented in prefectures with less yakuza competition.