Hong Kong-based financial consultant Yoshimitsu Sasago is unsettled by developments since the recent leak of client data from a Panama-based law firm.

Sasago has served Japan-based clients in Hong Kong for the past 10 years. Sometimes they ask him to provide a perfectly legal but somewhat tricky service: to help set up a very small — apparently shell — company in an offshore tax haven such as the Cayman Islands or British Virgin Islands, and then to open an account for that company at a major bank in Hong Kong.

“No information is disclosed, so no one can tell which company is owned by whom at all. That’s the juiciest part of a tax haven firm,” Sasago told The Japan Times by phone.

“You can use such an account as if it was your own wallet.”

Over the past several years, he says, an increasing number of Japanese individuals have used Hong Kong for services like these, in particular because few Japanese banks will open accounts for companies based in offshore tax havens.

But earlier this month, major banks in the territory suddenly stopped accepting Sasago’s applications to open accounts.

“After news reports of the Panama Papers came out, almost all the banks in Hong Kong have rejected requests for opening such accounts,” he said. “Some customers have asked me if they should withdraw their money. Others are wondering whether information about their bank account might be revealed.”

Earlier this month, the Washington-based International Consortium of Investigative Journalists and a range of news outlets worldwide started publishing revelations about rich people hiding their assets in offshore tax havens, based on a massive leak of records from Panama-based law firm Mossack Fonseca.

And more revelations involving the superrich and big firms may be in the pipeline.

On May 10, the ICIJ is set to release the names of the more than 200,000 offshore entities incorporated by Mossack Fonseca and people connected to them, or those listed as beneficiaries, shareholders or directors.

For that purpose, ICIJ will make public an online database that people can dig through and flag up suspicious names they find.

The Panama Papers leak “has scared rich people, business circles and players in the underground economy. They now fear that their secrets could be revealed,” said Tasuku Honjo, professor emeritus at Nagoya University of Economics at Inuyama, Aichi Prefecture, and an expert on tax haven issues.

Hong Kong banks now have good reasons to be concerned and may be tightening their internal regulations over accounts for offshore companies.

ICIJ revealed that Mossack Fonseca worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers.

Of those intermediaries, 2,212 entities were based in Hong Kong, more than any other nation or territory, according to ICIJ.

Sasago said there was a surge in recent years in the number of Japanese customers coming to Hong Kong to set up offshore companies and open accounts at Hong Kong banks, particularly after Japanese financial regulators started monitoring more closely assets held overseas by Japanese individuals.

For example, in 2014, the National Tax Agency launched a special team targeting the superrich to crack down on tax evasion both at home and abroad.

The same year, the agency started obliging Japanese citizens to report assets worth ¥50 million or more held overseas.

Implementation of this rule led to a surge in requests from Japan-based individuals to set up companies offshore, Sasago said.

But as far as Japan is concerned, the vast set of data that the Panama leak comprises may not throw much light on shady overseas assets held by Japanese entities, given the relatively small number of Japan-based firms and individuals listed.

The Panama Papers reportedly contain information about 214,000 offshore entities connected to 370,000 individuals and corporations in more than 200 nations worldwide.

Toshihiro Okuyama of the daily newspaper Asahi Shimbun is among the journalists who have taken part in the ICIJ-coordinated investigation. He says only about 400 individuals and corporations based in Japan have been found to be linked to the offshore entities named in the Panama Papers.

Teams from Asahi Shimbun and Kyodo News have investigated the backgrounds of the 400 people and firms and checked them against the names of Diet members and their close relatives. They found no evidence of links so far, Okuyama said.

He pointed out that Mossack Fonseca has no office either in Japan or the Cayman Islands — the world’s best-known tax haven and Japan’s favorite offshore financial center — and that it set up no shell companies there.

This may be a reason the Panama Papers data dump contains a relatively small number of names of Japan-based individuals and companies, Okuyama said.

According to data released by the Bank of Japan, Japanese foreign investment in the Cayman Islands, or a sum of direct investment and portfolio investment, reached a total of ¥65.7 trillion at the end of 2014.

This makes the Cayman Islands the second-largest destination of Japanese outward investment. The largest recipient is the United States, with ¥194.8 trillion.

“Japan’s investments in some countries are abnormally large. The Cayman Islands is one of them, and another is the Netherlands,” said Hiroshi Goda, a researcher at the Institute of Politics and Economy in Tokyo’s Koto Ward with knowledge of tax haven issues.

The Netherlands offers a number of tax incentives to attract foreign companies and is often used by multinational corporations as they set up complex corporate cross-border structures to take advantage of tax loopholes in different jurisdictions to reduce their liabilities.

According to the BOJ’s data, the Netherlands is the fifth most popular destination for Japanese foreign investment, with the combined balance of Japan’s direct investment and portfolio investments standing at ¥26.9 trillion at the end of 2014.

Goda is among those who believe many Japanese firms are using the Dutch tax system to save massive amounts of tax.

Nobuyoshi Chihara, a professor at Kyorin University in Tokyo, is a former senior Financial Services Agency official from 2005 through 2007 familiar with the monitoring of suspicious transactions and suspected laundering.

Chihara said Japanese firms are probably unfamiliar with Panama and did not recognize it as an attractive tax haven.

Another reason for Japan’s heavy investment in the Cayman Islands may be because most Japanese financial institutions have larger presences in the United States than in Europe. Given that the Cayman Islands has strong ties with Wall Street, it is natural that Japanese firms should head there rather than Panama, Chihara said.

At the same time, Chihara noted that many major Japanese financial institutions have invested in tax havens simply because they function as deregulated financial centers and it is easier to test new financial products and systems there.

Moreover, he noted that major Japanese banks tend to be conservative and cautious on risk. This may be why many Japanese firms tend to use the well-established financial system of the Cayman Islands, he said.

“But there are many other businesses offering private services by selling various financial products. Regulations are not very strict in such areas, and the story may be different there,” Chihara said.

In the interests of disclosure, in 2012 The Japan Times Chairman Toshiaki Ogasawara, who also serves as chairman of major auto parts maker Nifco Inc., was ordered to pay more than ¥100 million in back taxes after failing to declare about ¥1 billion in income over a three-year period through 2011.

Ogasawara moved to Hong Kong in 2008 and did not spend more than half a year in Japan during each of the years from 2009 to 2011.

Ogasawara believed this exempted him from reporting the income in question, but the Tokyo Regional Taxation Bureau found Ogasawara’s earnings taxable because it determined that his main residential base during the three years was Japan, said Kagetoshi Uchida, a tax accountant for Ogasawara.