Chapter 3: SEIJIN

"A cloud of dust while marching into battle"

1948- 1967

On December 13, 1948, just ten days before the House dissolution and the commencement of re-election season, Tanaka's seemingly endless string of luck ran out. He was summoned to the Tokyo District Public Prosecutor's Office, briefly questioned, arrested and sent to Kosuge Prison on suspicion of accepting one million yen ($128,000) in bribes from Kyushu-based coal mining companies.[1] The affair was dubbed the "Tankan Scandal." The actual chronology went as follows:

Tanaka's overzealous attempts to block passage of the nationalization bill through his involvement with the Doshi Club had made his motives suspect to the Prosecutor's Office. The Fukuoka District Prosecutors Office sent a team to investigate the books of Tanaka's Kyushu branch office. Finding several discrepancies in the ledger, the prosecutors put the screws to company caretaker and Tanaka lieutenant Kinichi Iriuchijima, who cracked and confessed to bribery. Tanaka, however, would confess to no such thing,[2] arguing that the money was only business related. The prosecutors were most unconvinced, so as campaign season rolled into full swing, Tanaka sat in prison waiting arraignment. It looked like Tanaka's political life had come to an end. In Niigata's Third District, political opponents were having a heyday at his expense. The DLP withdrew financial support for his re-election, though his secretary, Teruji Hikita, managed to salvage a party endorsement that allowed Tanaka's name to be officially listed as a candidate. The Yoshida Cabinet, embarrassed by Tanaka, expelled him from the post of Vice Minister of Justice. They also wanted him to resign from the Diet, which he refused to do. To make matters worse, Tanaka himself exacerbated the entire situation by publicly proclaiming that he would file a lawsuit against the Public Prosecutor General for intervention and interference in his reelection![3]

Unresigned to the last, Tanaka announced his official candidacy from behind the bars of Kosuge Prison.[4] After thirty-one days of incarceration and only ten days before the January 23 election, he secured bail. Rushing back to Niigata, where his secretary had set everything up for him, Tanaka made a feverish last ditch effort to save his political career. When the votes were tabulated, the combination of voter forgiveness, the power of incumbency and Tanaka's woodsy charm were just enough to get him re-elected. A favorable judgment by his constituency (In Japan, when a politician is under a dark cloud and wins an election, that election is is called a Misogi or a purification election. The fact that the Japanese have a special name for it, in itself tells us something about the system. The word originally meant "to wash and purify oneself in the river before engaging in a Shinto ritual to get rid of sin or defilement.") carried no weight with the Tokyo District Court or the Yoshida Cabinet. Tanaka still faced judgment from these two.

Tanaka's initial refusal to tender his resignation in November with the Cabinet gave his boss, Justice Minister Ueda, no choice but to raise the issue in a Cabinet conference. The Cabinet, without advance notice to Tanaka, expelled him. The closed door hearing was propitiously conducted on Saturday, November 28, which meant that official posting of that day's decision could be delayed until Monday morning. Only Tanaka was surprised by the Cabinet's vote he was out!

Hat in hand, Tanaka appealed to Chief Cabinet Secretary, Eisaku Sato, on that very day. It was a disgraceful situation for Tanaka and the Cabinet, that a Vice Minister of Justice should be on trial for corruption. Most Cabinet members were further upset that Tanaka hadn't saved them the embarrassment by voluntarily resigning. After the Cabinet's decision on the 28th, Tanaka had no options and Sato was quick to understand that. Sato offered to let Tanaka resign publicly that evening and to post-date the Cabinet's Saturday decision to Monday.[5] By altering the documents, the honor of both Tanaka and the Cabinet would be spared. A "Hobson's Choice" Tanaka agreed.
Sato saved Tanaka's career inside the DLP and from this point forward Tanaka became a loyal member of Sato's political team. This was an extremely significant event, in that the Yoshida Faction of the DLP later cultivated two great party bosses, one of whom was Eisaku Sato and the other Hayato Ikeda. Of the two, Sato became the preeminent political character of postwar Japanese history. Tanaka accidentally hitched his wagon to a rising star. His luck was slowly beginning to return, though his enormous wealth could also be sighted as a reason for the DLP's reluctance to cut him loose.

The Tokyo District Court, unlike the Cabinet, had no reason to show leniency. On April 11, 1950, they convicted Tanaka of bribery and sentenced him to six months in prison with a two-year stay of execution.[6] Tanaka appealed to the next court.

A convicted felon on appeal, stripped of his Cabinet post and having narrowly won re-election, Tanaka decided for economic and political reasons that the nature of the construction business with its constant pursuit of public contracts was a bit too dangerous, so he began to liquidate his company. Additionally, the Tanaka Civil Engineering and Construction Company was in economic trouble because the Korean War had driven the price of building materials through the roof. Over the next year Tanaka would see his company decline from around four hundred employees to just forty or fifty. He closed all the branch offices, leaving only his Tokyo headquarters. Tanaka also turned management over to two of his cousins, Hideo Tanaka and Nobuo Tanaka, as well as his brother-in-law, Koichi Oshimi.

Tanaka was looking for a new source of capital and a way to strengthen his constituency when the "Committee to Save the Nagaoka Railroad" came to his office offering him the presidency of the private Nagaoka Railroad company.
In the middle of 1949, the Santo area of Tanaka's Third District faced a crisis. The railway that linked them to the city of Nagaoka and hence to Tokyo was almost bankrupt. National inflation had made the cost of coal prohibitive and without coal they couldn't operate their steam train. Without the train, Santo farmers couldn't get their crops to market economically. If they couldn't profit from their crops, they couldn't purchase chemical fertilizers. If they couldn't get fertilizers, they couldn't farm, and if they couldn't farm, all of the Santo region faced ruin.
The mayors of Santo County together with the chairmen of local agricultural associations hurriedly organized in an effort to save the railroad. Inflation and the cost of coal were national problems far beyond the scope of their committee and so the only possible solution was to electrify the rail line. An electric train was ten times more cost efficient, but the retooling effort would be a multi-million dollar project and Santo was a very poor area. The committee needed federal funds, so they thought that by giving the company presidency to a Dietman, government money would naturally flow into the project. Based on this political cynicism, the committee dispatched a delegation to Tokyo hoping to get the Third District's congressional kingpin, Shiro Watari, (Watari would later become
Governor of Niigata. In the 1947 and 1949 elections, Watari was
the top vote getter in the Third District.) to take over the Nagaoka Railroad.[7] The Nagaoka Line had not turned a profit since it was first opened 1915, so Watari found the committee's proposition most unexciting. He turned them down flat.

Niigata's Third District, at this time, had five Dietmen. The Committee attempted to enlist each of them, and all but Tanaka turned them down. Because of the Tankan Scandal, Tanaka was the Committee's very last choice, but in the end he turned out to be their only choice. Tanaka assumed the presidency in November 1950, at great personal risk.[8] The project would be very time consuming and would force him to ignore his Tokyo responsibilities. Further, the Nagaoka-Santo area was outside his political base. His more southerly Third District constituents would not look kindly on attention diverted from them in favor of their northern neighbors. If Tanaka failed in this project, there was a good chance that his political life would end; however, the reward for success would be equally dramatic. If he succeeded, his political base would double and he would surpass Watari and become the most powerful figure in the Third District.

Tanaka began by getting all the towns and villages to contribute money and materials toward the construction of the new line. Labor agreed to work fourteen-hour days for next to nothing as long as it meant saving their jobs. Management agreed to do the same. For his part, Tanaka cleverly secured a loan of 128 million yen ($6.7 million) from the newly opened Japanese Development Bank, and having secured that loan he was able to maneuver loans of 65 million yen ($3.4 million) out of three other Tokyo-based banks.[9] The sudden occurrence of the Korean War made the price of materials very costly and Tanaka dangerously cut corners in the railroad line's design. Nonetheless, after only one year, Santo had a testable electric railroad. The grand opening was scheduled for December 1, 1951.
Six separate trains had been purchased, five of which were tested the night before the opening ceremony. All five developed pantograph problems and failed the test run. It was too late to call off the opening festivities.[10]
As Santo residents began to line the tracks in anticipation, Tanaka refused to turn back and gave the order to go for broke with the sixth and final train. The switch was pulled and the train slowly moved out as the crowds cheered. The cheering never stopped as the train made its way through the entire line. Tanaka was an instant hero with a political constituency that spanned the entire Third District.

Tanaka's second term ended ten months after the opening of the Nagaoka Railroad. In appreciation, the entire Nagaoka Railroad family turned out to campaign for him. In traditionally autocratic Japan, nobody had ever seen anything like it. Common people usually excluded from the normal course of backroom power-brokerage put together "Tanaka picnics," "Tanaka Cup baseball games," "Tanaka Cup fishing contests," and other grassroots fund-raising activities unique to the political landscape.[11] For Tanaka, the Nagaoka project was an eye-opening experience. He easily won re-election to his third term, placing first above all others, garnering support from farmers, teachers, labor and business.

Tanaka's entire attitude toward politics changed (Japan's entire attitude towards politics also changed when Yoshida signed the San Francisco Peace Treaty with the United States in September of 1951. For the first time in six years, Japan was once again a free and independent state.) after a successful gamble at Nagaoka. He liked being a hero and he experienced firsthand the untapped power of cultivating the sentiments of ordinary folks. It occurred to Tanaka and everyone else, no doubt for the first time, that his low birth was not a handicap in a democratic system, but indeed an awesome advantage. He was a person the little people could identify with, a person for whom rigid social forms were not impediments to communication. Tanaka was, after all, one of them.

Political advantage reaped, Tanaka still faced two problems: how to channel his new-found popularity and how to pay back the huge loans he had secured to electrify the railroad. Concerning the latter, Tanaka turned the Nagaoka Line over to his trusted retainer Toei Seki.[12] Seki, a clever administrator, planned to turn the company into a total transportation network by adding bus and taxi service. At this time, for reasons that became clear only later, Seki, under Tanaka's direction, also began a gravel division within the company. The city shareholders were a bit confused until they saw Tanaka using the proceeds of his old construction company to buy up shares of these three new facets of the Nagaoka Railroad Company.

For Tanaka, the move into transportation proved most important to his financial and political success in the future because it brought him into a working relationship with Kenji Osano.

Osano was from Yama village (now part of Katsunuma) in Yamanashi Prefecture. His parents were very poor tenant farmers. They had four sons and three daughters. Kenji, the oldest child was born on February 15, 1917, just fifteen months before Tanaka. He, like Tanaka, received his draft notice in 1938, and was thereafter sent to China. Both men won release for disability before the war turned sour.

Returning to Tokyo, Kenji set up a used car parts company in 1941, at age 24. Soon after, he became heavily involved in the affairs of the Occupation Forces military stores and Japan's thriving blackmarket underworld. This latter pursuit made him wealthy and he founded the Kokusai Kogyo Company as his corporate base. In 1949 Osano, like Tanaka found himself in prison, albeit a different prison in Yokohama. Osano had been caught embezzling gasoline by the Occupation forces. The Yokohama Kenpei Court sentenced him to a 75,000 yen fine ($9,600) and one year at hard labor, though he only served from September 22, 1948 to March 3, 1949. Following prison Osano made successful attempts at legitimacy by shifting from car parts and military stores to buses, tourist enterprises and finally to hotels and airplanes.

Osano became one of the wealthiest men in postwar Japan. His eventual fortune was estimated at close to two billion dollars. Osano, like Yoshio Kodama, derived the bulk of his power from shadowy enterprises. Politics, to these men, was a profitable business expense that allowed them a pivotal role in Japanese history as behind-the-scenes fixers.

Osano's climb to the top of Japan's underworld mirrored Tanaka's rise in politics. Both came from nothing. They shared a common set of social handicaps and it was natural that they would draw strength from each other.

• The Viscount Okochi gave Tanaka a future.
• Hana provided financial security and opportunity.
• Kazuya Hoshino handed Tanaka a sizable war profit.
• Machida's Shinpo-to (Japan Moderate Progressive Party) sold Tanaka a career in
  politics.
• Kijuro Shidehara invited Tanaka into the political club of elites.
• Shigeru Yoshida gave Tanaka respectability.
• Eisako Sato saved Tanaka's political life.
• The Mayors of Santo County provided Tanaka with political purpose.
• Kenji Osano offered Tanaka a stealth reserve of strength.

By age thirty-two, Tanaka had achieved three presidencies: Tanaka Civil Engineering and Construction Company, Riken Industry Company, Ltd., and the Nagaoka Railroad Company. He was on his second term as a member of the Japanese House of Representatives. He had served on three committees, the Committee to Research Unfair Property Transactions, the Committee of Construction and the Committee of Audit. In addition to all this, he had become Japan's youngest Vice Minister of Justice, and spent thirty-one days in prison for bribery.

From this point, the progress of Tanaka's career became a complex web of political appointments and private business maneuvers a seemingly random chronology of money and power. Between the years of 1951 and 1967, Tanaka achieved four important political posts:

• Minister of Posts and Telecommunications
• Chairman of the Policy Affairs Research Council
• Minister of Finance
• Secretary General of the Liberal Democratic Party

• The Tadami River Dam Project
• Highway 17
• The creation of Echigo Kotsu (transportation company)
• Toyano Lagoon
• Shinano Riverbed

Interspersed between these nine major events were numerous lesser political appointments, financial dealings, intrigues and brushes with the law, all interrelated. The one constant during this sixteen-year stretch of time (1951-1967) was Tanaka's seven straight victories at the voting pole.
The Seijin, and turning point that gives it all meaning, was Tanaka's creation of Etsuzankai, an organization through which he bonded politics and business, and began manufacturing his own luck.

In addition to his success at Nagaoka, Tanaka was able to clean the slate on the Tankan Scandal prior to the election. The high court, under mysterious circumstances, acquitted him of the bribery charges.
Another piece of old business that Tanaka remedied prior to the 1952 election was his insecurity about his lack of formal education. He maneuvered a self-sponsored bill to register architects through the Diet as a member of the parliamentary Committee for Construction. He registered himself as the nation's first architect,[14] thereby skipping the need for degrees from middle school, high school and college.
New business was the creation of Etsuzankai, a Tanaka conception designed to take advantage of his new-found popularity in the Third District. Exactly what Etsuzankai is, remains open to interpretation. "Etsuzan" is Tanaka's chosen pseudonym,[15] while the entire word means "to cross the mountains of Niigata to get to Tokyo." It represented Tanaka's political vision. After Nagaoka, Tanaka realized that he could use his position to right the millennial abuse suffered by his constituency at the hands of Omote leaders. It was a mammoth undertaking, but Tanaka began small by starting with his own district. Declaring a private civil war of sorts, Tanaka asked his old army buddy, Seiji Takano, along with Jiro Kikuta and the vice mayor of Kamo, Seihei Watanabe, to help transform the Kamo village Tanaka fan club and others into a Niigata development policy arm. The function of these policy groups was to screen the avalanche of petitions that was coming in from Third District town and village residents who were hopeful that Tanaka would do for them what he had done for Santo residents. Tanaka named this policy group Etsuzankai. It was officially launched on June 28, 1953 and the village of Kamo is considered its birthplace (see map on page 50). Tanaka gave Etsuzankai the additional tasks of organizing idea meetings and functioning as his pipeline to the people. In this fashion, Tanaka hoped to develop a populist movement focused on his persona.
Niigata's Third District was a very backward area and the requests for help were unending. Takano and team made sure that local officials who wished Tanaka's favor, understood that a local Etsuzankai chapter needed to be established before Tanaka could possibly consider their request. As a consequence of this precondition, Etsuzankai spread very quickly as groups rushed to curry favor.[16] Takano's group skillfully fostered competition between towns and kept others on the hook by pointing out Tanaka's busy schedule and the long waiting list for projects. The rapid sweep of Etsuzankai gave Tanaka a mystique vastly exceeding his abilities. Takano, Kikuta, Watanabe and others had done their job too well. To avoid collapse of the organization, Tanaka made the Nagaoka Railroad Company the foundation of Etsuzankai's by adding to the duties of his three principle Nagaoka lieutenants:

• Toei Seki was put in charge of the business needs of Etsuzankai. Seki came from a prestigious family in Ojiya. His father was a doctor. He was hired in 1951 and by 1953 was appointed the managing director of the Nagaoka Railroad Company His goal was to strategically match internal resources of various Etsuzankai members in order to complete more projects and thereby propagate the Tanaka myth. Seki was successful in accomplishing numerous barn-raising endeavors. He was ever-mindful of creating a political core in Etsuzankai and of giving it an intelligence function that would enable Tanaka to target construction favors in an effort to get maximum political mileage. Seki slowly managed to succeed on both counts. Whereas Takano and team were able to develop an ideological fan club of farmers, laborers and small business owners all sharing a sense of hope, Seki was successful in developing a more lethal network of civil authorities and business executives. Seki systemized Etsuzankai but was very careful to keep fan clubs intact.
  
• Koichi Honma was transfered from the Tanaka Construction to the Nagaoka Railroad company in 1951. Honma acted as Tanaka's proxy in Niigata. He was in charge of all Etsuzankai election issues as a kind of campaign director.
• Jinmatsu Kataoka was Tanaka's superior in the army. After the war he worked as a timber dealer in his hometown of Kamo. He was not very successful in that career. In 1953 Kataoka was hired by the Nagaoka Railroad Company as its Chief of the Materials Division. His Uncle Jiro Kikuta was working with Takano on Etsuzankai fan club issues in Kamo. Kataoka would later become the President of Niigata Etsuzankai.

The Etsuzankai fan clubs sponsored picnics, sing-a-longs, fishing contests and speeches to raise money for political causes, while the administrative core acted like a legal mafia using its vast network of contacts and connections to raise enormous amounts of money for the express purpose of promoting its political candidates, eliminating its opponents and bringing a higher standard of living into the Third District.

The nucleus of Etsuzankai had four distinct tentacles: the first was external, that is to say it consisted of financial and organizational resources that were provided by Tanaka's Tokyo-based business and political acquaintances. Kenji Osano, for example, who had no reason other than his friendship with Tanaka, donated 24 million yen ($213,000) a year to the organization.[17] Others wishing to enlist Tanaka's vote in the Diet on issues other than those related to Niigata, also found it a legal and convenient way to demonstrate their good will toward him. As a second tentacle, Etsuzankai's propensity for initiating construction projects naturally attracted a variety of related firms all wishing to be the recipients of construction bids. The tremendous interest in Etsuzankai displayed by local construction firms allowed Tanaka, as his political power grew, to form a virtual business cartel in the Third District. It was said that after 1965, Tanka himself could command up to .02% or .03% of an entire construction project as "thank-you money." Etsuzankai was not a charity and those who wanted to get, also had to be willing to give. The third tentacle was the organization's ability to manipulate the outer-ring fan club through giri (the debit-credit system of relationships). In Japan, one must give money for the birth, marriage, illness and death of family and friends. Each person must keep a list of all gifts received and repay the givers in equal amounts at a future time. It is a burdensome social obligation for both givers and receivers, but the Japanese take the custom seriously. For money-laden Etsuzankai, this practice was a marvelously subtle form of coercion by which it could inspire, control, silence and project its will in Niigata Prefecture. For fan club members it was a sense of obligation that motivated them to give up their free time to work on campaigns that Etsuzankai deemed important. The final tentacle was political; Etsuzankai's connections, money and inexhaustible supply of campaign workers allowed the organization to put up a formidable showing in local elections at all levels of appointment.

Etsuzankai filled a real need as evidenced by its almost overnight growth. At first it encountered some resistance as it spilled over into rival Dietmen's areas and several Etsuzankai members were arrested for bribery,[18] but in the end all would succumb to its power. Curiously for Tanaka, his home area of Kashiwazaki-Kariwa was the last to fall. Residents there felt that Tanaka's membership in a national political party made his Etsuzankai a redundant support group. Nonetheless, Etsuzankai, at its pinnacle, reached a membership of 98,000, comprised of 317 local chapters situated in all of the thirty-three municipalities throughout the Third District, and came to control most of Niigata. For all its power and size, the organization was phenomenally linear[19], in that nothing moved without Tanaka's direct approval.

During the early growth of Etsuzankai, Tanaka found his next great project and in 1952 he passed more than five self-sponsored legislations: three road use laws, a gasoline tax law, a toll road law and a law to promote the development of power resources.[20] The project was the development of the Tadami River and its scope vastly exceeded that of the Nagaoka Railroad, but it was well suited to Tanaka's new position as Third District political kingpin.

Niigata and Fukushima Prefectures assembled promotion teams and headed for Tokyo. Fukushima got the upper hand by winning the support of the Yoshida Faction in the Liberal Party (Yoshida was Prime Minister) and receiving a further boost from a study conducted by an American investigation committee. Niigata was able to win support from the LDP's Hatoyama Faction. Hatoyama had recovered from his illness and returned to political life in the fall of 1952. His faction and Yoshida's Faction were both strong and the Liberal Party eventually became divided over this issue.

The entire situation just fell into Tanaka's lap. On the one hand, he was a member in good standing of the Yoshida Faction and on the other, Niigata's plan called for most of the construction to take place in his district.

Because of the division within the Liberal Party, the government's Public Utility Committee had conducted a serious study of both plans and dispatched an inspection team to Niigata and Fukushima.[21]

In a come-from-behind effort, Niigata Governor Okada raised an estimated 40 million yen ($2,000,000) on the sly from the Prefecture and the Tokyo Electric Company to entertain these inspection teams at the Oyu hot springs resort in Niigata.[22] Tanaka was also invited in an effort to woo him away from the Yoshida position. In what may have been the party of the century, these officials were lavishly treated to expensive gifts, sumptuous meals and prostitutes for years until 1953. Niigata's semi-corrupt tactic postponed rejection of their construction plan.
Initially, Niigata's generosity was most compelling and Tanaka joined the team that was working inside the Yoshida group for Okada. Whether for reasons of political reality or because someone else's generosity was even more compelling, Tanaka suddenly shifted his position in favor of a compromise plan[23] that would only divert 73 million tons of water a year to Niigata. The compromise plan was approved.

Construction officially began in 1954. It would take fifteen years and cost 114 billion yen ($5 billion). The project was so large that it triggered a kind of gold rush fever in both prefectures. Tanaka, through intuition and advance knowledge, had decided two years earlier to have Seki expand his Nagaoka Railroad Company by starting up a gravel division. By 1954, he had cornered the aggregate market in Niigata.[24] He further centered his new gravel empire in the town of Koide, which by coincidence happened to be the government's starting point for the Tadami River Project. The first construction project was a road that linked the Tadami work site to Yunotani village. That alone cost 4 billion yen ($176 million). The road was a then extended from Yunotani to Koide. All told, 7000 construction workers were employed in the project. Koide and Tadami became a boom-towns and not only did Tanaka make a handsome profit on the road to Tadami, but once it was finished he had clear transportation to the dam sites for his aggregate. The profit of his gravel division within the Nagaoka Railroad Company more than doubled in a year.[25]

Politically, Tanaka also came out on top. Once under way, the Tadami River Project gave birth to a vast array of construction and support industries that helped develop the eastern section of the Third District and provided a new source of supporters for Tanaka and Etsuzankai. Governor Okada didn't fair so well. Exposure of his sake (alcoholic beverage made from rice) and sex parties in the local media cost him his next election. Tanaka, only a participant, escaped legal allegations of wrong doing and with Etsuzankai behind him, swept the polls to secure his fourth term. (In Tanaka's 1946 bid he only placed eleventh, with 4 percent of the vote (34,060); in 1947 he placed third with 14 percent of the vote (39,043); in 1949 he placed second with 14 percent of the vote (42,536). After Nagaoka Railroad, he jumped to first place with 13 percent of the vote (62,788) and with the go-ahead on the Tadami project he won first place again in 1953 with 18 percent of the vote (61,949). This totaled one loss and four wins, in a steadily increasing rise.[26].)

(The Tadami River story, far from complete, reemerged eight years later and brought with it new scandals and new profits for Tanaka.) While the Tadami project brought immediate returns at the polls, Tanaka's vacillation and eventual betrayal of Governor Okada didn't win him any friends in Niigata's political circles or with the Hatoyama Faction in Tokyo.

Tadami was the largest project Tanaka had been involved in thus far. Big things have a way of being complex; avoiding pitfalls through skillful tradeoffs was the only way to come out on top. Tanaka's ultimate goal was to enhance his position nationally, and if he was to be in a position to buy loyalties, he needed money and lots of it. For better or worse, Tanaka's fate lay with Yoshida. To have angered Yoshida Faction members over the Tadami issue in favor of Okada and Hatoyama would have gained him good will in greater Niigata, but it also would have been a career blunder. Tanaka thus traveled the middle course for as long as was possible politically before returning to the fold. His timing in this was superb, having gained millions in the gravel venture, upping the power of Etsuzankai, providing jobs and securing a fourth term at the top of the polls. In return for these rewards, he sacrificed his backroom standing in Niigata. However, by the time the Niigata bigwigs could finally extract some sort of revenge in the 1955 election, he had begun adding yet another railroad to his collection and had gathered enough federal money to begin stretching the Tadami Railroad Line, then Koide to Oshirakawa, to the town of Tadami in Fukushima Prefecture. In addition, he began a reclamation project to restore the wasteland along the Uono River and initiated numerous road improvement projects in his district. These works served as a form of political damage control and as in all of Tanaka's public works, they turned out to be personally profitable as well.

Tanaka was now thirty-five years old, his political reemergence was almost complete, lacking only a reappointment to a Cabinet position. He was ready to become a starting player once again. He no doubt would have become just that if the Tokyo District Prosecutor's Office had not threatened to issue a warrant for the arrest of Sato, his political boss. Prime Minister Yoshida invoked Article Fourteen of the Public Prosecutor's Office Law, thereby stopping the arrest warrant which set off a flood of criticism resulting in the collapse of Yoshida's fifth and last cabinet. (Of the thirty-two people prosecuted during the scandal, only five were politicians.) For Sato, it was of some urgency that he lay low for awhile. As went Sato, so went his faction. To Tanaka's horror, everyone joined Sato on the back bench.

Sato and numerous others in the Yoshida camp almost had been caught accepting healthy amounts of "Black Money" from shipbuilding and marine transportation companies that were seeking a larger share of government loans. This scandal, dubbed Zosen (shipbuilding), was the second such public affair since the war and Yoshida was most anxious not to repeat Ashida's Shoden mistakes. Abusing the power of his office, Yoshida simply shut the entire investigation down. Yoshida's overly straight-forward approach would have worked, had the Hatoyama Faction of the Liberal Party not seceded from the party. Hatoyama's group formed their own party, an action that brought the Yoshida Government tumbling down. It was the end of an era. Yoshida refused to work with Hatoyama in any way, shape or form, thus in essence, ending his career.

On December 10, 1954, a feeble and sickly Ichiro Hatoyama finally became the Prime Minister, a post that had eluded him for nine years. Tanaka liked Hatoyama, but Hatoyama hated Sato as a person and a politician. Hatoyama made a special point to exclude Sato from all things governmental. Sato retaliated by declaring himself an Independent which brought Tanaka's career to a dead halt. Absolutely disgusted with Sato, Tanaka for the first and only time gave serious thought to voluntarily retiring from political life.[28] Resignation, however, was not in Tanaka's character and he chose to ride out his depression by taking joy in his insignificant leadership roles as Chairman of the Liberal Party's Niigata Chapter, President of Riken Chemistry, Inc. and President of his old night school, Chuo Engineering.

Party politics had become chaos a reality somewhat lost on Hatoyama who cheerfully threw fuel on the fire by proclaiming that he would seek a revision in Japan's Peace Constitution
(Since 1955, the constitution issue has dominated the political agenda. Article Nine prevents Japan from becoming a nuclear power while other portions limit, in the abstract, military expenditures to 1 percent of the GNP.) and begin rearming the country. This war renouncing document was generally disliked by all Japanese because it was perceived as more American than domestic. The rightists particularly disliked those articles that prevented Japan from joining the world's arms market, while the leftists desired unarmed neutrality and didn't mind a new constitution as long as all articles renouncing war were retained. Constitutional revision in Japan became a buzz word capable of igniting explosive passions. Hatoyama promptly discovered that this leftover issue from Yoshida had one unfortunate drawback, it galvanized an otherwise dormant Socialist Party.

In the 1955 election, Zosen, the revision issue and prefectural backstabbing caused by the Tadami betrayal cost Tanaka exactly 6,707 votes.[29] It was enough to drop him out of the top spot. He did retain his Diet seat, finishing second in the polls with 55,242 votes,[30] but there was little solace in this. His voting percentage dropped three points, eroding both his power and prestige. As if this wasn't bad enough, there was the added humiliation of placing 11,104 votes behind the Third District's only Socialist first place winner, Ryuichi Inamura.

Nationally, Tanaka's party was devastated, losing fifty-nine Diet seats. It had been a stunning rebuke for Yoshida and Sato. The defeat was rendered somewhat meaningless in that the lost seats mostly went to Hatoyama with the opposition Socialists gaining a significant twenty-four seats. The 1955 election didn't solve any problems, it only magnified them.

Before the election, Yoshida controlled 171 seats, Hatoyama 125 and the Socialists 132. Yoshida wouldn't cooperate with Hatoyama and Hatoyama wouldn't cooperate with Sato. After the election, Hatoyama controlled 185 seats, Yoshida 112 and the Socialists 156.[31] Hatoyama still wouldn't cooperate with Sato and Yoshida still wouldn't cooperate with Hatoyama. If the government was to restart, Hatoyama had to form a Cabinet and without the formation of a majority coalition he couldn't do that. In addition to numerous influential party elders, the factional displacement was as follows: Shigeru Yoshida and his lieutenants Banboku Ono, Hayato Ikeda and Eisaku Sato versus Ichiro Hatoyama and his lieutenants Tanzan Ishibashi, Ichiro Kono (Sato's biggest rival), Takeo Miki and Nobusuke Kishi.

A compromise had to be worked out and eventually one was, the old DLP, which had been split into the DP and the LP, became the LDP (Liberal Democratic Party). In forming the LDP, it was decided that the Party President should be elected by LDP Dietman in both Houses and one or two representatives of the Party's Prefectural chapters. This system accelerated the growth and development of factions within the LDP, because it forced presidential hopefuls to enlist the support of as many Dietman as possible under their banner. The declaration of the LDP was made on November 15, 1955. No one could have known it at the time, but in Japan that date marked the birth of one-party democracy which lasted nearly four decades.

In its declaration, the LDP defined its basic principle as stabilizing the livelihood of the nation through the creation of a welfare state based on individual creativeness and freedom of enterprise. Its characteristics were defined as:

1. A party serving no one particular class, but serving all classes based on the spirit of loyalty and brotherhood;
2. Pacifism in conformity with the United Nations Charter;
3. Anti-communism, class-ruling Socialism and class autocracy;
4. Pro-parliamentary rule;
5. Preservation of tradition that conforms with cooperative and constructive spirits; and
6. Full employment.

The party defined its mission as correcting the mistakes of the American occupation namely, a national weakness caused by overly democratic and liberal policies that allowed Communist and Socialist groups to take advantage of the chaotic situation. To this end, it was the party's mission to reform education, renovate political circles, accomplish self-economy, create a welfare society, develop peaceful diplomacy and revise the SCAP Constitution.

Common principle was established, but harmony was not. Yoshida and Hatoyama had not settled their differences and Sato was still locked out. Tanaka however, had already been elevated to House Chairman of the Commerce and Industry Committee in Hatoyama's 2nd Cabinet and now was appointed as a member of the Policy Planning Council of the new Liberal Democratic Party.[32] It wasn't much, but at least his career was on the move again as a part of Hatoyama's administration.