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First arrest made in Japan loan scandal

TOKYO: Japanese authorities made the first arrest on Thursday in a loan scandal that has caused the government a major headache for months and will probably cost taxpayers hundreds of billions of yen to help resolve.

A spokesman for Osaka district police told Reuters that prosecutors arrested Kenichi Sueno, 52, head of real estate company Sueno Kosan, early in the morning on suspicion of making false statements on documents.

It was the first arrest connected to the failure of housing loan firms at the heart of a bad loan mess that has triggered worries about the health of Japan's entire financial system.

Sueno Kosan borrowed 236.7 billion yen ($2.19 billion) from five of the seven mortgage firms which the government wants to help wind up with a hefty -- and highly controversial -- injection of state money. All the loans to Sueno Kosan, which was raided last week by police looking for evidence of tax evasion, have become unrecoverable.-Reuter