Who's watching the watchdogs? That, analysts and activists say, is the question that should be foremost in citizens' minds as they ponder the latest in a long list of scandals to hit the cream of corporate Japan.

The disturbing answer - "often, no one" - is one reason Japan finds it so hard to reform its economy despite more than a decade in the doldrums and policy-makers' promises of change.

The president of Tokyo Electric Power Co. (Tepco), Japan's largest power utility and a firm closely linked to the nation's policy elite, said on Monday that he and four other top executives would resign over a scandal involving the falsification of reports to cover up damage at nuclear reactors.

The scandal came to light last Friday, more than two years after an employee at the unit of US-based General Electric Co. which conducted the safety checks told authorities that there appeared to be problems with Tepco's reports.

Critics said the sluggish official response was symptomatic of a deeper problem - the cosy ties which for decades have linked top companies, their official overseers and politicians in a triangle of mutual interests.

"The watchdog issue, the whistleblowing, it's all part and parcel of the same thing. A company like Tepco is in there at the heart of policy-making and is very, very representative of corporate Japan," said Noriko Hama, director of research at Mitsubishi Research Institute.

"It's very much a sign of the times that this kind of cooperative relationship has turned to collusion," she said.

"It shows that the edifice upon which post-war Japan relied is dysfunctional."

Industry Minister Takeo Hiranuma declined to say yesterday if anyone in his ministry would be disciplined but conceded that the scandal had hit the credibility of the nuclear industry and government energy policy, already tarnished by several accidents.

"I must say that, from common sense, two years is too long," Hiranuma said, referring to the time that elapsed between the authorities being told something was wrong and their reaction.

Consumer activists said Hiranuma's METI ministry and the Nuclear and Industrial Safety Agency could not escape blame.

"If METI and the safety agency knew about it, naturally they also have responsibility," said Yukiko Miki, executive director of Information Clearinghouse Japan, a group pushing for laws to protect whistleblowers and systems to deal with their complaints.

"More and more people have lost trust in companies and the government agencies to which they are closely tied," she added.

METI officials say their investigation was delayed by the difficulties of perusing old records and contacting those potentially involved in a case that may stretch back to 1986.

Critics, however, say Tepco's long-standing and tight ties with the bureaucratic and political establishment - relations typical of many blue chip companies - probably played a role.

Outgoing Tepco chairman Hiroshi Araki, for example, was not only a vice-chairman of powerful Keidanren business lobby, but chairman of the group's Committee on Corporate Behaviour, set up to address issues of business ethics and corporate governance.

Such relations have been blamed not only for scandals but for policy mistakes ranging from the failure of financial industry watchdogs to force banks to deal with their crippling burden of bad loans, to the inability of bureaucrats at the agriculture and health ministries to ensure the safety of the nation's food.

Confidence in food safety has been jolted by a series of scandals including the government's failure to prevent mad cow disease from tainting the nation's beef and its mishandling of the matter after the first case was confirmed a year ago.

A government scheme to aid the hard-hit beef industry by buying up domestic meat then spawned more corporate misdeeds.

On the banking front, few analysts trust the assessment of problem loans by the Financial Services Agency, a watchdog agency set up after a series of scandals highlighted the tendency of the powerful Finance Ministry to coddle the industry.

"The FSA listens more to what financial institutions say, as opposed to what is good for the economy or society as a whole," Mitsubishi Research's Hama said.

The ties among corporate, government and political elites mean Japan lacks a system of checks and balances to put pressure on the authorities to alter outmoded and mistaken policies.

"It's very much 'You scratch my back, I'll scratch yours'," said Jesper Koll, chief economist at Merrill Lynch in Tokyo.

"It's a mandarin elite system gone haywire."

Impetus for change can be seen, however, not least in Japanese voters' growing tendency to reject old-style politicians with collusive ties to vested interests.

Voters in rural Nagano Prefecture on Sunday joined the trend, re-electing maverick novelist Yasuo Tanaka as governor despite support for his main opponent by the political establishment.

The reform-minded Tanaka was forced to seek re-election after he was kicked out of his job by local lawmakers outraged by his decision to halt spending on pork-barrel public works projects.

"Basically, the only thing to fall back on is a healthy civil society," Mitsubishi Research's Hama said.

"The Nagano election... was a healthy thing and the way these (corporate scandals) are coming to light through leaks is a sign of the essential health of non-corporate, non-political Japan."