Japan's Prime Minister Yasuo Fukuda said he was "shocked" to learn that more than 300 finance ministry officials accepted gifts from taxi drivers to take expensive late-night rides using government funds.

One official received more than 1.5 million yen ($14,000) in cash and vouchers over five years, the ministry said in a statement late yesterday. As many as 502 officials at 13 ministries received gifts from taxi drivers, the state-run broadcaster NHK Television said today.

"I was shocked to hear this," Fukuda told lawmakers in parliament today. "Public servants are strictly governed by ethics and they shouldn't engage in acts that appear suspicious to the public."

The revelation threatens to undermine Fukuda's already faltering popularity. Political gridlock, the government's loss of millions of pension records and a new insurance system that collects premiums from the elderly has halved Fukuda's approval rating since he took office in September.

"The taxi scandal may severely damage Fukuda," said Minoru Morita, a political analyst and author of a book on the ruling Liberal Democratic Party. "Opposition parties will probably call for Cabinet ministers to take responsibility."

The finding is "very shocking" and "severe punishment" will be issued, Finance Minister Fukushiro Nukaga said at a press conference in Tokyo today. "Public officials are supposed to serve to the nation in a fair manner, and this kind of thing should never, ever happen."

No Evidence

There is no evidence that officials broke the law because they didn't receive the gifts in exchange for favorable treatment on matters that fall under its supervision, the Finance Ministry said in yesterday's statement. The ministry will stipulate that employees won't be able to receive gifts from taxi drivers or call on a specific driver, it said.

Ministry employees use taxis to return home when they miss the last train because of work. Tokyo's train and subway networks close down after midnight.

Nukaga said he was informed about the case three days ago and immediately ordered a hearing among all officials.

"We'll do our best to perform a thorough investigation and we're committed to preventing this kind of thing from happening again," he said.

The government needs to take strict measures to ensure officials don't violate the public's trust, Chief Cabinet Secretary Nobutaka Machimura told reporters today. Part of the problem is that officials have to work late every night, he said.

Bureaucrat Scandals

Scandals involving government bureaucrats hastened the resignation of Fukuda's predecessor, Shinzo Abe. News that the government lost more than 50 million pension records caused Abe's popularity to plunge and allowed the opposition Democratic Party of Japan to win control of the upper house last year.

Since the July election the DPJ has delayed refueling missions in the Indian Ocean and rejected four central bank candidates in March and April, saying their experience at the Finance Ministry and on government panels may jeopardize the Bank of Japan's independence.

The upper house today postponed a vote to approve Kazuhito Ikeo for the bank's policy board, two chamber officials said. The People's New Party decided yesterday to leave the opposition alliance led by the DPJ in the upper house after its decision to support Ikeo, Kyodo News Service said, citing party lawmakers. The PNP, which holds four seats in the chamber, had demanded the DPJ reject the nomination because Ikeo supported the privatization of the postal service and other reforms it had opposed, Kyodo said.

`Bit Players'

"When you have a coalition with bit players, these conflicts are bound to happen," said Norihiko Narita, a political science professor at Surugadai University in Tokyo. "It's a step back for the DPJ, which wants a united front against the LDP."

Without the PNP the DPJ and its alliance hold 116 of 242 lower house seats. The DPJ may postpone the vote on Ikeo beyond the current session of parliament, which is scheduled to end June 15, Yukio Hatoyama, the party's secretary general, told reporters in Tokyo today.

http://www.bloomberg.com/apps/news?pid=20601101&sid=afGHXYgDT6xA&refer=japan