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Hashimoto Is Poised To Make His Play


International Business: JAPAN

HASHIMOTO IS POISED TO MAKE HIS PLAY

The Prime Minister may soon call elections--and win big

Ryutaro Hashimoto has certainly had a good run since assuming the Premiership last January. His coalition government, led by his Liberal Democratic Party, has deflected public outrage over a $6 billion bailout of corrupt housing-loan thrifts. It has soothed U.S. trade relations without big concessions. Japan's $5 trillion economy has snapped out of a four-year funk. And the opposition New Frontier Party has proved about as alluring as day-old sashimi.

Now, Hashimoto, 59, may be about to make his big play. Although he does not have to face voters until next July, election fever is raging in the smoke-filled back rooms of Nagata-cho, Tokyo's Capitol Hill. LDP members are prodding Hashimoto to call a vote by yearend, maybe even in October. The economy is growing, and opposition leader Ichiro Ozawa is out of favor. So taking the plunge this fall would offer the LDP a great opportunity to resume the dominance of Japanese politics it enjoyed until scandals forced it from power in 1993.

NO CAKEWALK. Whenever the runoff comes, Hashimoto and Ozawa, 54, will seek to address a deep economic anxiety. After spending most of the decade in the doldrums, Japan's economy should produce 2.7% growth this year. But things are already starting to look dicey for 1997. Many economists expect growth to slow to just 1.7%. That is adding to the unease among Japanese edgy about scandal-prone financial institutions, the fraying of the cradle-to-grave social contract, and deteriorating high-tech competitiveness.

As they present ways to deal with this distress, the two politicians will offer vastly different takes on Japan's future. Ozawa champions deregulation, tax cuts, and a weakened bureaucracy. Hashimoto is more focused on fiscal tightening and tax hikes to tame Japan's swelling budget deficit. Heading into the campaign, Hashimoto's defense of the status quo seems to be winning out over Ozawa's proposals for dramatic change.

Hashimoto will get a boost from diplomatic meetings, including a scheduled summit with President Clinton in New York In late September. That follows a session of the U.N. General Assembly, where Hashimoto will push for permanent Japanese membership on the Security Council. German Chancellor Helmut Kohl will arrive in Tokyo on Oct. 31 for a state visit.

Nevertheless, the election won't be a cakewalk for Hashimoto. His government's approval rating is just 31%. The LDP has been embarrassed by allegations that General Secretary Koichi Kato accepted an illegal political payoff six years ago--a charge he denies. Ozawa is calling for an investigation. The weakening economy could hurt, too. Last September's $130 billion package of tax breaks and public-works programs will start to lose its oomph later this year. But in April, an LDP-backed sales tax increase goes into effect. The tax is supposed to close a budget gap that is 4.2% of gross domestic product, compared with 2% in the U.S. Ozawa has pounced on the issue by proposing a sales tax freeze until 2001. Even some LDP members advocate shelving the plan for a while.

WOOING DEFECTORS. Still, odds are that the LDP would come close to a majority in a quick election. It probably would land some 230 of the 500 seats in the lower house of the Diet, up from its current 208, figures Yasunori Sone, a political scientist at Keio University. Getting a majority would require wooing back LDP defectors from the New Frontier and keeping an alliance of sorts going with the Social Democratic Party and the New Party Sakigake. That's more complicated now that a new party is being formed by Sakigake defectors led by Yukio Hatoyama and his brother, Kunio, who resigned from the New Frontier.

After a snap election, a victorious Hashimoto might cut a deal on U.S. force deployment on the southern island of Okinawa, where the bulk of America's 47,000 troops reside. He'll feel pressure to act: A lopsided Sept. 8 referendum in Okinawa, in which 90% of voters backed reductions in American troops, has emboldened locals to push for more concessions to kick-start the island's ailing economy.

Fortunately for Hashimoto, the demands of areas like Okinawa have little impact on voters on Japan's main islands. If, as appears likely, many of them back his party, Hashimoto will be the strongest Japanese Prime Minister in a decade. The bizarre interregnum of the past three years will then have concluded, with the LDP once again safely in control of Nagata-cho.By Brian Bremner in Tokyo


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