Aozora Bank raided over Surugaya's fake capital increase.

OSAKA, Nov. 15 Kyodo

Police raided the Aozora Bank  headquarters in Tokyo on Monday in connection with a window-dressing capital increase at the Japanese confectionery maker Surugaya.

The Osaka prefectural police believe Aozora extended a 1.2 billion yen loan to a Tokyo investment company via the company's affiliate on Dec. 12 last year before the firm provided 1.15 billion yen to Surugaya to ostensibly underwrite the new shares, investigative sources said.

The police suspect the bank may have known the money would be used for a fake capital increase as the affiliate paid back the loan to the bank in three days.

Aozora spokesman Masaaki Harada said the bank has always conducted business in accordance with the law. The bank will make an announcement on the case in an appropriate time, he said.

The police also raided the main Surugaya store in Wakayama.

The police on Saturday arrested five people -- three from Surugaya including its president, Yoshiharu Okamoto, and the other two from the underwriter -- on suspicion of reporting the padded amount of capital by faking the capital increase.

The police suspect Surugaya faked the capital increase to ensure its continued listing on the Second Section of the Tokyo Stock Exchange.

Surugaya's history dates back to 1461. Its business has been falling in recent years as consumers gradually move away from Japanese-type confectioneries.

The company posted a 740 million yen loss in the fiscal year ended in March this year.