The city voted to sell off Tanaka's profitable divisions to cover the railroad. Nagaoka City Assembly further decided to set up a special investigation committee. This interested the Nagaoka Prefectural police who also decided to figure out the mystery of the expanding deficit. On September 9, they searched the offices of the Nagaoka Railroad and arrested the company's chief accountant on suspicion of a breach of trust and embezzlement.[34] Tanaka was forced to move quickly before the Prosecutor's Office could file formal charges. He bought up every last share of municipally owned stock, freeing the city of any responsibility for the company. Delighted, the city bought some bulldozers and dissolved their investigation.[35]

The Nagaoka Prefectural Police however, were not delighted and continued the investigation. They arrested the company's gravel division chief, Jinmatsu Kataoka, on suspicion of embezzlement. The police also arrested the managing director, Toei Seki, on suspicion of special breach of trust. In addition to those arrests, eight members of the Nagaoka City Assembly were investigated on suspicion of accepting bribes. Tanaka was also questioned and his private company papers were seized. In the end the police couldn't make a case. Tanaka and gang walked away free and clear, though at an incredible financial loss. Tanaka's power, financially and politically, suffered setbacks; 1955 had been that kind of year.

In 1956, things got back to normal. Tanaka took on the chairmanship of the League to Link a Railroad from Koide to Tadami and helped push through various laws concerning roads, parks, airports and others. Federal money for reclamation of unproductive terrain was allocated in an effort to decrease dependence on foreign goods and services. Tanaka's position on the Commerce and Industry Committee gave him an inside track on available funds. Etsuzankai found Tanaka a project along the Uono River. The project was 1,412 acres of unused land, perfect for conversion into rice fields. The work began at once and was finished in just five years.[36] It was a bread-and-butter accomplishment that endeared him to the families along the river.

Also that year, Tanaka's stepdaughter, Shizuko, was omiai-ed off to the nephew of Hayato Ikeda. This November marriage was a momentous occasion for Tanaka. He was already a powerhouse within the Sato Faction and this marriage now made him a member of the Ikeda family. No one in the LDP could claim such an enviable position. Only Tanaka had instant access to both party strongmen.

1957 saw Yoshida and Sato finally join the LDP. On the downside the year ended on a bittersweet note. Tanaka's deeply cherished personal secretary, Teruji Hikita, became fatally ill. For a decade, Hikita had been at Tanaka's side. His departure left a vacuum that was filled by a mysterious cabaret hostess named Aki Sato and others. Nothing was known about Sato until 1974 when Takaya Kodama, a freelance journalist for the Bungei Shunju, published the article Sabishiki Etsuzankai no Jo-o (The Lonely Queen of Etsuzankai).

After the Tankan Scandal, Tanaka vowed that he would become a Cabinet Minister before he reached age forty.[37] Kishi took office in 1957, making Tanaka's braggadocio a reality. He appointed Tanaka as the youngest Minister of Posts and Telecommunications (The only other politician to become any kind of Minister at such a young age was Yukio Ozaki, during the
first Cabinet of Shigenobu Okuma in the Meiji period. By coincidence, he was also thirty-nine when he was appointed Minister of Education, Culture and Science.) in Japanese history. Tanaka had worked hard for this job. Obviously, he had Sato's blessing, but more important, he used his family influence with Ikeda to get him into the Second Kishi Cabinet. Ikeda had been a member of Kishi's short-lived First Cabinet, but resigned in disgust over Kishi's Bill to Revise the Duties of Police Officers. Ikeda had declared that he would never join a Kishi Government again. Tanaka stepped in and convinced him to accept a post as Minister of International Trade and Industry.[38] The move was most advantageous to Kishi, and for Ikeda it also held some benefit for his later run for the Prime Ministership. Ikeda had clear cut economic visions. Tanaka persuaded him that the Cabinet position Kishi was offering would be administratively useful at a future time. In a roundabout way, Ikeda was Tanaka's stepping stone to Kishi and in a larger sense to political prominence.

It was hard to understand, but the mass media went on a rampage. They complained that a Cabinet Minister had no business poisoning society's youth with praises of gambling. Tanaka was at once labeled the "Naniwabushi Minister" and the issue of his propriety was taken up in the Diet. Interestingly, all the negative publicity helped Tanaka more than it hurt him. The Naniwabushi reciting supplemented his folksy Davy Crockett image. NHK had given the nation its first real look at the youthful Minister from the western frontier and the people liked him. He was a breath of fresh air compared to the stuffy Tokyo University types so prevalent in Japanese politics.

Nowhere did Tanaka's new popularity show up better than in his own constituency during the general election of 1958. His voting percentage jumped seven points, up 30,889 votes from his 1955 showing. He totaled an amazing 86,131 votes. Tanaka's nearest challenger came in a dismal 30,732 votes behind. It was a new beginning. He would never again fall from first place in the Third District.[40]

The first issue Tanaka faced in his ministership was a strike by the Japanese postal workers. Tanaka ruthlessly dealt with them by dismissing the Chairman of the Postal Labor Union and imposing stiff punishment on an unheard of 22,476 union members. The crack-down worked.
A second issue he had to deal with was a small avalanche of petitions for television licenses that had been piling up since 1951. Until Tanaka, the Ministry had managed to license only two stations, the NHK public network in 1951, followed four years later by the Nihon Television (NTV) commercial network. The administrative problem was of two sorts: first, the two top bureaucrats in the Ministry felt that it was too soon to license a large number of networks, and second, the former Ministers had been afraid to choose any specific applications over any others. The reason was clear cut. The applicants were all newspaper moguls and financial leaders in society. Understandably, the old Ministers were reluctant to risk suffering the wrath of anyone influential. Tanaka acted with exacting precision. He forced the problem bureaucrats into retirement and replaced them with his own people. In terms of licensing, he had no real favorites among the competing entities. Tanaka had two clear choices the simplest was to give licenses to all of the eighty-six who were competing; the other, a more profitable solution, was to give a license to everyone who was willing to contribute to the Sato Faction's war chest. To this end, Tanaka granted preparatory permission to thirty-six private broadcasting stations, with seven more allocated to NHK.[41] Tanaka proved himself to be both shrewd and dynamic. (Tanaka also granted permission to NHK and NTV for colorcasting two months later.)
In contrast, Prime Minister Kishi didn't fair so well. Kishi, who would become known as the "Phantom of the LDP," never quite got used to being in the public eye. Like his little brother, Eisaku Sato, he possessed a bureaucrat's personality, preferring shadows over light. No matter how hard he tried, he just couldn't present an image of sincerity. A large part of his problem was the past. People would not let him forget his involvement as a Cabinet Minister for Hideki Tojo or the time he had done in Sugamo Prison as a Pacific War criminal. Kishi tried to be kind by giving the people health insurance and social security. It wasn't enough. The U.S.-Japan Mutual Security Treaty happened to expire during his term. As a matter of course, it required re-negotiation. Kishi secured a favorable deal, but the Socialists went berserk anyway. Organized over the security treaty issue, the Socialists were able to assemble several marches involving millions of people. In one such gathering, 5.8 million people encircled the National Diet building and a female student from Tokyo University was accidentally killed. Kishi ended the social trauma by ramming the treaty's ratification through the Diet in a special midnight session of the LDP. This task completed, Kishi resigned and returned to the shadows that he so dearly loved.

The five factional leaders, Ichiro Kono, Aiichiro Fujiyama, Banboku Ono, Mitsujiro Ishii and Hayato Ikeda immediately declared their candidacies for party president. Kono was too dark and would only evoke hostile public opinion toward the LDP. Kishi hated Ono but liked Ikeda. The other candidates just didn't have the numbers if Sato supported Ikeda. Sato had been friendly with Ikeda until the Kishi Cabinet problem created a few bitter feelings. The two rivals had gone to the same high school in Kumamoto so that old school bind still existed. Tanaka decided to take the role of mediator, persuading dissenting Sato Faction members to support Ikeda.[42] Considering the public hatred showered on his older brother, Sato had no personal desire to walk into that mess. Ikeda was without question the best possible choice to succeed Kishi.

In 1960, Ikeda became Prime Minister. He reigned for four years until cancer brought about his retirement. During Ikeda's tenure, Tanaka was rewarded with two very important posts: Chairman of the Policy Affairs Research Council of the LDP in 1961 and Minister of Finance from 1962 to 1964. These two appointments had become requisite for anyone wishing to become Prime Minister, an ambition Tanaka couldn't have considered realistically until Ikeda paved the way. Once he chaired Policy Affairs for the LDP, he became unofficially earmarked for future party leadership by older and younger Dietmen, major business interests and the press. Tanaka was now a person worth knowing, a person whose friendship was worth cultivating.

Tanaka's rise within the party could be ascribed simplistically to his unique go-between role involving Sato and Ikeda or attributed to his leadership skills. Both played a role, but the real Tanaka ontology can perhaps be viewed in his incredible ability to amass money for himself and for others. Newspaper accounts of the period proclaimed that Tanaka alone accounted for 40 percent of the faction's political contributions.[43] (Ten years earlier, Tanaka had stated boastfully that he had bought the position of Minister of Posts and Telecommunications. This time around the media was ahead of him. A pattern had emerged, reminiscent of the old koku system that Tanuma had exploited so adeptly two hundred years earlier.) Given the size of the faction, one can conclude that the other members were inept or that Tanaka was indeed an unusual talent. To explain Tanaka's source of funds is to equally explain his rise to power. As a Finance Minister he had access to corporate bank accounts for the party and could naturally coerce major financial institutions into providing contributions. Such maneuvers and favor exchanging were, after all, a Cabinet member's prime function. Perhaps Tanaka did it better than anyone else, but there were a lot of ministers and it was doubtful that this alone would be enough to push Tanaka upward. Only if he had been an alumnus of Tokyo, Waseda or Keio Universities would it have been sufficient. Tanaka, in this regard, could not have hoped to compete with Sato's other designated new leaders: Takeo Fukuda, Kiichi Aichi, Tomisaburo Hashimoto and Shigeru Hori. Of this group, Sato clearly favored Tokyo University Law School major, Fukuda. Deep down, Sato felt that a person of Tanaka's background shouldn't be a candidate for Prime Minister.

Tanaka, a perennial dark horse, needed something special, something outside a dependence on party coffers, if he dared hope of making a reproach to LDP orthodoxy. What Tanaka needed was his own political fortress. That fortress was Etsuzankai and it began its drive toward national potency during the Ikeda years, unfolding on the pavement of National Highway 17, accompanied by the establishment of Echigo Kotsu (Echigo Transit).

For two millennium, Niigata had been cut off from the Pacific side of industrial power by an imposing range of mountains known as the Mikuni. Niigata's only real access to eastern Japan was through a single decrepit train tunnel that went as much over the mountains as through them. Niigata's heavy snowfalls often shut this route down. The blueprint on Route 17 proposed to puncture a chain of solid and massive tunnels through the Mikuni Mountains, thereby providing an avenue to Tokyo. It was the tunnels that made the highway one of the most important construction projects in Niigata's long and neglected history. It was the "Etsuzan "in Etsuzankai.

The central government had been overly tardy in getting this project completed. Since 1952, Tanaka had been barraged with requests to get the bureaucrats moving. Of particular annoyance to local Niigata officials was Tokyo's secrecy over what the highway's route would be after the tunnel was completed. In the mid-50s, the Mayor of Koide clandestinely got an advance look at the government's plan.[45] To the Mayor's chagrin, the road was to be constructed in the straightest possible and most cost-efficient line, without regard to its effect on the livelihood of the communities it bypassed. The original plan met everyone's worst expectations by traveling right past North Uonuma County,[46] perhaps the fastest developing region in the Third District outside Nagaoka. From a government perspective, the highway was the focus; local politics were inconsequential. In defense of the government, it can be said that when they first drafted the plan they had no way of knowing that Tanaka and Etsuzankai would so completely transform the area of Niigata that looked to them like mere wilderness.

The misguided highway clearly threatened everything that Tanaka had helped build around Koide, including his gravel division. In the late fifties, via some shadowy artery, the Naniwabushi Minister convinced relevant officials to extend the highway northward past Koide.[47] It would cost Japanese taxpayers a little more but it would make a lot of folks in Niigata happy, or so Tanaka thought. The new plan ran along the western side of the Uono River, which meant that the towns of Koide, Hirokami and Yunotani would be left off the main route by a couple of dozen meters. The towns of Horinouchi and Yamato were on the correct side of the river and they were expectantly happy with the new plan, as was Tanaka. He was delighted just to get the road into the county.

The Mayors of Koide, Yunotani and Hirokami protested, arguing that Tanaka hadn't done them any favors. Normally, Tanaka wouldn't have paid any attention to the ingrates, after all the road was headed toward Nagaoka and it just didn't make sense to bend it back over the Uono River if the waterway could be avoided altogether! The situation, however, wasn't normal. All the concerned Mayors belonged to Etsuzankai and Tanaka had every intention to keep it that way. He returned to the planning agency and "persuaded" the officials to do what just isn't done, to build two extra bridges[48] and to "zig zag" the federal highway past all five towns. In Niigata, Tanaka became a legend and to this day National Highway 17 runs a fairly straight course until it enters the Prefecture of Niigata.

Crooked roads have a way of spotlighting crooked men. A special investigation committee was organized and once again the National Police were investigating Tanaka. As with the Nagaoka Railroad and Tadami River Project allegations, they came up empty. However, they did snare two members of the Horinouchi Town Assembly and arrested them for bribery.[49] The police also tried to snare the Mayor of Horinouchi by extracting a confession out of the Deputy Mayor, but they were robbed of a witness when the Deputy Mayor, in typical Japanese fashion, committed suicide to protect his boss.[50] Consequently, the confession couldn't be used. In Koide, the Chief of the Enterprise Department was arrested[51] and the Mayor came under heavy fire, but successfully eluded the investigation. Tanaka's exact involvement remains a mystery, though it became very clear that "black koban s were flying about the gambling place."

During this period, the National Police had one more shot at Tanaka. The development of the Tadami River was about to enter its number four dam stage. The money was allotted. Surprisingly, the chain of dams originally called for in the compromise plan turned out to be too many. The Tokyo Electric Company was required to continue construction whether anyone wanted the dams or not. Fearful they would be stuck with maintenance costs for hydroelectric power stations that no one could use, the power company joined forces with Tanaka to stop the Tadami River Project in Niigata. Together they rallied their forces in the Niigata Prefectural Assembly to force a discontinuation of the project and to wrangle a compensation package for affected municipalities. The package came to 285 million yen($10.3 million).[52] This was federal money left over from Tadami. Compensating communities for potential losses was indeed a very humane act. The problem for the police and other investigating bodies was how the money was distributed. (Compensation went as follows:
Niigata Prefecture, 55 million yen ($1.9 million); Koide,15 million yen ($543,000); Irihirose, 88 million yen ($3.1 million); Yunotani, 55 million yen ($1.9 million); Sumon, 38 million yen ($1.37 million); and Hirokami, 34 million yen ($1.2 million).[53]) The only criteria seemingly employed was a community standing in Etsuzankai. The town of Koide, for example, was given 15 million yen ($543,000), of which 9 million yen ($326,000) went to the city's merchant union, an organization headed by the Koide chairman of Etsuzankai.[54] A special task force investigation committee tried to summon Tanaka,[55] but he had grown too powerful in national politics for that. The investigation died for lack of a confession.

If Etsuzankai had a bottled cash flow before Route 17 and the "great Tadami compensation give-away," their position was certainly more comfortable afterwards. Kickbacks, even if rampant, were incidental compared to the legitimate residue from these ventures.

Inside the Third District, National Highway 17 gave Tanaka a "Robin Hood" mystique that he would never forfeit. The pay-off came in political contributions. Membership in Etsuzankai became chic for all the prefecture's construction businesses, expanding Tanaka's operating budget and resource pool. Another profit that couldn't be discounted was the new construction companies that these projects brought into being as well as the resulting tertiary industries which increasingly depended on Etsuzankai for contracts. By policy, federal works split their contracts between large and small companies. To do otherwise would have centralized the capital in Tokyo and been contradictory to development.

Still another benefit worthy of mention is Tanaka's inside track with the federal highway planning office. Someone within that agency belonged to him. Perhaps the individual was cultivated while Tanaka was serving with the Railroad Construction Council (1961), or during his tenure on the House Construction Committee (1947), or even prior to that when he was in the business of construction himself. In any case, it is certain that he had a lot of friends in the industry. It is equally certain that the bureaucrats couldn't operate independently of their political overseers if they wished to advance in their profession. To this end, it must be noted there were at any given time at least five hundred other Dietmen of Tanaka's rank. What is hard to grasp is how Tanaka arranged for revision of the highway's design and how it came to pass, and how in that very same period (1961-1962) Tanaka won approval for another national highway (Route 252 ), and gained funding to double-track the Joetsu Rail Line and to build the titanic New Shimizu Tunnel through the Mikuni Mountains.

Echigo Kotsu Political Fortress

At precisely the same time that Tanaka was engineering Route 17 and Route 252, the Joetsu Rail Line double track, the Mikuni Mountain Tunnel and the New Shimizu Tunnel, and bringing the Tadami River Project to a profitable conclusion, he set out to improve the condition of his financial base, the Nagaoka Railroad, Gravel, Bus and Taxi Company. The Nagaoka Railroad was a small operation even by Niigata standards; nationally it was irrelevant. This would soon change because of the very construction works that Tanaka was promoting.

Once the highways and tunnels were finished, Niigata would be only five hours from Tokyo. The one-day connection offered two exciting possibilities for entrepreneurs with foresight. First, it would make Niigata City the gateway for trade with the Communist Bloc nations, and second, it would open up the prefecture to the tourist industry. It was no exaggeration to say that Niigata possessed a breathtaking landscape. Its clear lakes and sandy coastal beaches were ideal for swimming and fishing in the summer; its mammoth, snow-capped mountains were perfect for skiing in the winter. Compared to the sweltering, cement-topped Tokyo, Niigata would be a prize diversion. Tanaka was not the only one to recognize this.

Buses were a prime form of local transportation during the Ikeda years; automobiles were an extravagance. The bus business was made exceptionally profitable by the unique Japanese business practices of kenshu and enkai that reinforce a sense of work camaraderie. Kenshu is often in the form of so-called study or in-service training trips, while enkai literally means "to give a party." Whether an enterprise was public or private, big or small, at least once a year, work teams chartered buses for a brief weekend holiday. The employees went for picnics, hiking, sightseeing or for a relaxing stay at a hot springs resort. In Japan, this made the bus and tourist industry synonymous.

Quite apart from Tanaka's puny Nagaoka Railroad, Niigata had several sizable bus companies. Niigata Kotsu was the largest, with routes throughout the Niigata City area; Kubiki Automobile was the other company of size. Nagaoka Railroad and Chuetsu Automobile were merely small competitors; they had been fighting it out illegally (It was disclosed by the N.R. company auditor
during a shareholders' meeting in 1958 that three million yen ($118,000) in black money had been used for the entertainment of mayors along desired bus routes. It was further disclosed that N.R. and Chuetsu had entered into a fare reduction that was in violation of the law. The company, however, never faced formal charges.) since 1958 for bus routes in the depopulated Third District. By 1960, the price-slashing war between Chuetsu and the Nagaoka Railroad left both companies weak (Nagaoka Railroad still had not recovered from the railroad deficit problem that the city of Nagaoka and the National Police had saddled it with in 1952). From here, the drama that lead to a Tanaka dynasty began to unfold.

Niigata Kotsu, as well as three different goliath Tokyo transportation corporations (Tokyu, Tobu and Seibu), all had designs on taking control of Niigata's Third District in order to profit from the expected tourist boom. Niigata Kotsu sought to increase its corporate strength by buying up shares of the Nagaoka Railroad[56] and hoping to force Tanaka into a merger. If successful, Niigata Kotsu could monopolize the area and freeze out the Tokyo corporations. Tanaka didn't mind the idea of keeping Tokyo management out of Niigata, but he did take exception to being used as the vehicle of that strategy. In a counter move, he turned to his friend Kenji Osano for help. Tanaka hoped to secure his position by buying up shares of his rival company, Chuetsu, with secret loans from Osano.[57]

Chuetsu was upset and, in an effort to protect itself, attempted to win financial support from Tokyo interests. Comically, the interests they contacted turned out to be Kenji Osano's.[58] The executives at Chuetsu apparently had no knowledge of Osano's friendship with Tanaka, so Osano happily obliged the Chuetsu request and began buying up shares overtly while Tanaka, covertly using Osano's money, also continued to buy shares. To complete the entire transaction, Osano, with Tanaka's blessing, brought in his friend Keita Goto, President of Tokyu Transportation, in the guise of a friend of Chuetsu.[59] Osano turned his stocks over to Goto and once this happened, Chuetsu believed that they had saved their position and that Tanaka was finished. It came as somewhat of a shock when Tanaka merged Chuetsu and the Nagaoka Railroad and ended up as Chairman of the Board for Tokyu's new Niigata-based affiliate. Even more surprising to Chuetsu executives was waking up the day after to find that Tanaka had purged them from their jobs and re-staffed their former company with Nagaoka Railroad and Tokyu management. Once the Nagaoka Railroad and Chuetsu were merged under Tokyu, they further absorbed the Tochio Railroad. Tanaka called the new company "Echigo Kotsu." Echigo is the old name for the Niigata
region of Japan. It was officially established in October, 1960.

In a bizarre conclusion to the birth of Echigo Kotsu (Echigo Transit), Tokyu's President, Keita Goto, died shortly after the mergers were completed and Tanaka mysteriously convinced Tokyu's Acting Director that Goto had personally promised him Tokyu's shares in Echigo Kotsu.[60] He was handed the stocks on a silver platter and the company became a pure Niigata corporation with 1,700 employees, capitalized at close to 507,500,000 yen ($20 million). Tanaka kept his gravel business independent, eventually passing management to his brother-in-law, Yasuhiko Kazamatsuri. Today the company is called "Chotetsu Kogyo." This all occurred in 1960, a year before Tanaka was appointed to the powerful chairmanship of the Policy Affairs Research Council of the LDP. (Tanaka was also appointed to the Railroad Construction Council in 1961.)

In 1962, a related opportunity suddenly appeared. Echigo Kotsu, the prefectural rival of Niigata Kotsu, came under attack from the nationwide Nippon Tsuun transportation company. Nippon Tsuun lived off lucrative contracts from the Japan National Railroad (the JNR is a public corporation) and they wanted to break that dependence by getting into the bus, truck and taxi fields. Tanaka rushed to the aid of Niigata Kotsu by buying up stocks in the company, thereby off-setting Nippon Tsuun purchases. Tanaka's successful effort had been well timed, so much so that a grateful Niigata Kotsu made him their Chairman of the Board.[61] In effect, by chairing the two largest companies, Tanaka's name became synonymous with "transportation" in Niigata.

Echigo Kotsu made an ideal political fortress for Etsuzankai. Tanaka established his political and financial organizations in Nagaoka at company headquarters. He erected a special secretarial department and began revamping his political arm by coordinating its Third District chapters. The new Etsuzankai was pyramided into three levels. At the bottom, Tanaka carved the Third District into about 317 local chapters divided into twelve distinct liaison conferences with an additional two conferences for young men and women.[62] The conferences were: South Uonuma County, North Uonuma County, Santo County, Kariwa County, South Kanbara County, Tochio City, Nagaoka City, Ojiya City, Mitsuke City, Sanjo City, Kamo City and Kashiwazaki City.[63]

The second level belonged to the managing director of Echigo Kotsu.[64] At the top were Tanaka and his inner circle Tokyo Etsuzankai group.[65] To house the Etsuzankai group, Tanaka restructured his private home in downtown Tokyo by adding offices and a few extras to the main living quarters. The complex was called "Mejiro-Dai" or just "Mejiro."

Upon reorganization, Etsuzankai added a novel feature that would become the group's hallmark. Devised by Tokyu executive Isamu Tanaka (no relation), it was known as the "voting rate system"[66] by which company accountants calculated the percentage of votes that Tanaka or any of his local protegés received in a given election. That is to say, they counted every town, village and hamlet in the Third District or wherever the election of interest was held. The voting percentages were then published in the Etsuzankai Newsletter. Publication served the purpose of fostering competition between local chapters. It rewarded the energetic and shamed the lazy.