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Here Comes Hashimoto


International Business: JAPAN

HERE COMES HASHIMOTO

With his slicked-back pompadour, 1950s sideburns, and caustic wit, Ryutaro Hashimoto has always played the maverick in consensus-loving Japan. Around the conservative Liberal Democratic Party, Hashimoto even became known as Mr. Pamado, after the Japanese word for hair gel, because of his image as a smooth political bperator. Most recently, the International Trade & Industry Minister won celebrity status for his abrasive negotiating style in this summer's tumultuous U.S.-Japan auto talks.

Now, Hashimoto, 58, is on his way to becoming Prime Minister. In a surprising development on Aug. 28, Hashimoto effectively won the leadership of the conservative LDP when incumbent President Yohei Kono, who is also Deputy Prime Minister and Foreign Minister, announced he would not fight for the job in a Sept. 22 party leadership vote. With his victory as party president virtually assured, Hashimoto is setting his sights on reviving Japan's biggest political party and becoming the most assertive Prime Minister since the war.

His ascent would help Japan's economic recovery, which is already getting an assist from a recent string of financial bailouts. But more broadly, Hashimoto's leadership would expand Japanese influence in Asia while creating even testier trade relations with the U.S. (table). In all these areas, he would be able to exercise real clout. One reason is that, after a long series of Prime Ministers with little grip on the mechanisms of power, his background as MITI's czar and as Finance Minister would give him a shot at exerting a measure of influence over elite bureaucrats. The son of a wartime Cabinet minister, he has strong bases of support in many industries and among right-of-center political groups.

The political shakeup won't happen overnight. With Hashimoto as LDP leader, the next step is expected to be a major upheaval within the wobbly three-party coalition government of Socialist Prime Minister Tomiichi Murayama, of which the LDP is the largest bloc. The coalition has already signalled its intention to hold general elections in early 1996. The expected winner is the LDP, which has been forced to share power with the Socialists since a series of corruption scandals ended its 38-year reign in 1993.

LONG COATTAILS. Hashimoto's popularity is the ticket the whole LDP could ride back to uncontested power. A recent poll by Nihon Keizai Shimbun, Japan's economic daily, named him as the electorate's first choice for Prime Minister, eclipsing so-called reformers who bolted from the LDP. "If the LDP has a popular leader like Hashimoto, chances are they will win," concedes Yoshio Terasawa, an Upper House Diet member of the breakaway New Frontier Party.

That's not to say Hashimoto is a sure bet. Although he has vowed to sever all links "between politics and dirty money," his opponents are sure to make an issue of Hashimoto's ties to LDP faction leaders such as ex-Prime Minister Noburo Takeshita. Then, there's Hashimoto's fiery oratory style. It played well in U.S.-Japanese trade talks, but could be a liability on the broader world stage. "When he becomes premier, he will adjust his style to become softer, more serious," predicts party honcho Koichi Kato, chairman of the LDP's Policy Research Council.

For now, Hashimoto has vowed to work with Murayama, given the need to push a $10 billion economic stimulus package through the Diet by yearend and to host November's Asia-Pacific Economic Cooperation forum in Osaka. But Hashimoto's instincts couldn't contrast more with the Socialists'. As Murayama issued a heartfelt apology on the 50th anniversary of Japan's defeat, Hashimoto paid a controversial visit to Tokyo's Yasukuni Shrine, the venerated memorial to Japanese war dead. Hashimoto is president of the 1 million-plus member Japan War-Bereaved Families Assn., a group that believes Japan fought an honorable war of liberation in Asia.

Unlike Murayama, Hashimoto aims to see Japan play a diplomatic role commensurate with its economic power. He is squarely behind Japan's bid to gain a permanent seat on the U.N. Security Council. And Hashimoto favors sending Japanese troops and security forces on U.N. peacekeeping missions abroad.

Hashimoto would also be more sympathetic to Corporate Japan's calls for assertive measures to tackle the economy's post-bubble ills. For example, he's already pushing for an easing of securities-transaction and property taxes. That's in sharp contrast to the Socialists, who have been loath to bail out executives and property speculators whom they perceive as greedy opportunists. UBS Securities Inc. analyst Cameron Umetsu thinks a Hashimoto victory would be bullish for stocks. One reason: Hashimoto has set an ambitious goal of driving down by the year 2000 Japan's massive current account surplus to roughly 1% to 2% of gross domestic product, from almost 3% now, in order to bring the superyen back to earth.

Hashimoto, as former Finance Minister, also has the right credentials to accelerate Japan's cleanup of its financial system. After years of denial, the Finance Ministry and the Bank of Japan are beginning to move in that direction. A month after dispatching truckloads of yen to handle a $1 billion-plus deposit run against Tokyo's biggest credit union, Cosmo Credit Corp., authorities on Aug. 30 swooped down to rescue two big Osaka-area financial institutions at a cost of more than $10 billion.

But the tricky task of streamlining the financial system is just beginning, and Hashimoto's ascendancy would help guide it. "He speaks the Tokyo language" of elites, says Fuji Research Institute Corp. Chairman Toru Kusukawa, "Hashimoto is a man who can lead."

Perhaps the biggest imponderable about Hashimoto is how he would deal with the Americans. He proved himself a resolute infighter during acrimonious auto trade talks in June, which played well with a Japanese public increasingly fed up with U.S. trade demands. Nevertheless, White House officials feel Hashimoto is a guy they can do business with. Says a senior Clinton Administration official: "He talks loud and carries a big stick, but he is willing to negotiate and reach agreements in the end."

Still, Hashimoto is sure to keep taking a tough line on trade disputes with the U.S. over everything from semiconductors to film to telecommunications equipment. Nor will Washington likely appreciate Hashimoto's greater focus on Asia. He and other members of his increasing nationalistic generation hope to use Japan's wave of investment and development aid flowing into the region to help Japan Inc. extend its tendrils over these blooming markets.

In a Japan increasingly edgy about its future, Hashimoto's brash style touches a powerful current. Should his political ambitions be realized, the world will confront a far different style of political discourse from Japan in years ahead.

IF HASHIMOTO BECOMES PRIME MINISTER...

JAPANESE ECONOMY He would be much more inclined to take steps to ease woes in Japan's financial sector and stimulate overall growth through spending measures and some deregulatory steps.

U.S. RELATIONS He would be more assertive, insisting that Tokyo and Washington negotiate as equals. That would probably spark tougher trade disputes.

ASIAN RELATIONS He would accelerate Japan's engagement with Taiwan and Southeast Asia, including Indochina, but his hawkish views could worsen ties with China and South Korea.

SECURITY POLICY He would promote Japan's membership in the U.N. Security Council and forge a more active Japanese foreign policy that might include a military dimension.

DATA: BUSINESS WEEKBy Brian Bremner in Tokyo


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