An Indonesian business partner of a Japanese COVID-19 subsidy fraud suspect said Thursday he felt sorry and shocked over the man's sudden arrest earlier this week.

The arrest of Mitsuhiro Taniguchi, who is suspected of swindling hundreds of millions of yen from a Japanese subsidy program for small companies hit by the coronavirus pandemic, has destroyed the hopes of continuing fish farming in the village of Sri Dadi in Indonesia's Lampung Province, according to Masduki, his business partner.

Masduki, 43, who is also a teacher, said he knew Taniguchi as a "bona fide investor" economically supporting him and other freshwater fish farmers in the village.

Photo taken June 9, 2022, shows a house in Sri Dadi, Indonesia, where Mitsuhiro Taniguchi was staying. (Kyodo)

"Fish sales dropped during the pandemic, and then he came here as a kind of savior, an angel to save our lives," Masduki told Kyodo News in an interview, accompanied by other villagers. "However, our hopes and happiness were only short-lived as he was suddenly arrested."

Taniguchi, wanted by Tokyo police, was arrested in the village Tuesday night for allegedly violating Indonesia's immigration law after Japan revoked his passport.

With his former wife and two sons, the 47-year-old man is suspected of fraudulently receiving more than 960 million yen ($7.18 million) by submitting thousands of false applications for the government's subsidy program.

He is believed to be a ringleader of a group involved in a series of frauds from May 2020 to September of the year, according to Tokyo's Metropolitan Police Department.

The arrest has grabbed headlines in Japan as the amount of public funds involved is the most illicitly received by a single group in connection with the subsidy program, and Taniguchi's whereabouts were unknown after he left for Indonesia in October 2020.

Japanese police have already arrested Taniguchi's former wife and two sons, who were part of the group with at least 10 people, on suspicion of fraud. The police are coordinating with Indonesian authorities to transport the fugitive to Japan soon.

Recalling the moments of capture by immigration officials, which were witnessed by Indonesian police, Masduki said Taniguchi tried in vain to evade arrest.

He gave up after talking over the phone with a staff member of the Japanese Embassy in Jakarta, according to Lampung Police spokesman Zahwani Pandra Arsyad.

"He was a bit defensive, which I think was normal in such a situation," Zahwani told Kyodo News.

"He the Indonesian language, 'Kenapa?' (Why?), when the immigration officials were going to arrest him. We explained the reason but he kept asking why," he said.

Zahwani also said that during his stay in Indonesia, no crime by Taniguchi, either in the village, as well as in other parts of the country, was reported to local police.

"The villagers considered him a good man because he was going to invest in a fish and shrimp business in the village. Who knew that he might have used his money illegally taken from Japan for money laundering," the senior police officer said.

According to Masduki, Taniguchi has invested at least 500 million rupiah (about $35,000) in their fish farms to buy baby fish of a variety of popular local fish, including catfish and gourami.

Lampung is famous for its gourami, which is popular among Indonesians.

The Japanese man, Masduki said, has also bought some cars and trucks for fish farming operations in the village and other two locations in West Sumatra province where he also invested his money.

"Now I am really confused...what I should do with the fish, whether we can go on with this business or not. All of the farmers asked me the same question for which I don't have the answer," Masduki said.

"Without fresh investment of around 1 billion rupiah to feed a total of 800,000 baby fish with necessary feed and vitamins, the fish may die soon," he sadly sighed.

(Sepsha Dewi Restiananingsih contributed to this article from Jakarta)