Takeshita to Quit in Japan Scandal : Prime Minister Assumes Blame for Crisis Over Influence Buying

Apologizing to the Japanese people for allowing “distrust of politics” to develop into “a grave crisis for our system of democratic politics,” Prime Minister Noboru Takeshita announced today that he will resign after Parliament enacts the fiscal 1989 budget.

Takeshita made the surprise announcement in a nationally televised news conference after informing top officials of the ruling Liberal Democratic Party and the Cabinet of his decision.

Deliberations on the budget for the fiscal year that began April 1 have been stalled since March by a boycott by opposition parties demanding that facts of a widening influence-buying scandal be clarified.

The 65-year-old prime minister said he would step down to assume responsibility for “distrust of politics” caused by the scandal, in which he admitted that his aides had received more than $1.5 million in contributions and stock profits from Recruit Co., an information and real estate conglomerate.

3 Cabinet Members Forced Out

The scandal already has engulfed three of Takeshita’s Cabinet members, who were forced to resign. Thirteen other people, including two top bureaucrats who served while Prime Minister Yasuhiro Nakasone was in office, and leading businessmen have been arrested for illicit financial dealings, revelations of which started breaking last summer.

None of the politicians have yet been charged.

Asked about a successor, Takeshita said that “one who is quitting should not make demands or specify conditions.” He reiterated that statement when asked if he thought his successor should be a leader untainted by the scandal.

Repercussions from a highly unpopular 3% consumption tax Takeshita enacted last December combined with the scandal to drive the prime minister’s support ratings to all-time lows. One poll released this month reported that only 3.9% of the people supported him.

“Severe distrust in politics, spurred by the Recruit issue, is a grave crisis for our system of democratic politics. As the supreme leader of the government and the president of the Liberal Democratic Party, I feel a deep responsibility. Especially because (my aides) contributed to distrust in politics, I deeply apologize to the people,” Takeshita said, reading a statement. “To restore trust in politics, I have decided to remove myself” from the prime minister’s post, he added.

Takeshita, however, declared that passage of the budget is “essential to the people’s livelihood,” and he noted that “even now, there is no outlook for when the budget will be enacted.” The prime minister declared he will “exert full efforts” to enact the budget and then “carry out my decision to remove myself.”

Takeshita also said: “My Cabinet will resign en masse after the enactment of the budget bill.”

At least a month will be needed to finalize approval of the budget in both houses of Parliament.

The resignation announcement came only four days before Takeshita was scheduled to leave for a tour of the nations of the Assn. of Southeast Asian Nations. Declaring that continuity in diplomacy is essential, the prime minister, after consulting Foreign Minister Sosuke Uno, announced he will make the nine-day trip as planned. He also said he will not ask, “from my side,” for a change in a scheduled four-day official visit to Japan by South Korean President Roh Tae Woo. It is to begin May 24.

Senior officials in Seoul, however, indicated that Roh may decide to postpone the visit.

Had Promised Reforms

Although Takeshita, for months, had rebuffed calls for his resignation by insisting that he would carry out political reforms, disclosures that he himself had received massive political contributions from Recruit prompted Takashi Ishihara, chairman of the Keizai Doyukai, one of Japan’s four major business organizations, to call last Friday for him to step down.

Ishihara’s appeal, the first from a business leader, was followed by reports that members of the ruling party wanted Takeshita to step aside before an election for the upper house of Parliament is held this summer.

Deliberations on the fiscal 1989 budget have been stalled by an opposition demand that former Prime Minister Nakasone testify about profits his aides received from trading in shares of Recruit Cosmos, a real estate affiliate of Recruit Co.

Takeshita’s announcement was made with the expectation that it would induce the opposition to resume deliberations on the budget, Chief Cabinet Secretary Keizo Obuchi said. It also was made with the hope of avoiding a general election at a time when the ruling party was expected to suffer a setback at the polls.

Should the ruling party use its commanding majority to enact the budget unilaterally, a dissolution of the lower house, which elects the prime minister, was regarded as inevitable.

Opposition spokesmen, however, reacted to Takeshita’s announcement by calling for dissolution of the lower house and a general election. They also said they would continue to demand that Nakasone testify under oath.

The ruling Liberal Democrats will choose a successor for Takeshita as party president, who then would be anointed as prime minister by Parliament.

‘Dark Horse’ Candidates

That successor is likely to be chosen from among “dark horse” ruling party leaders. All of the conservatives’ major faction leaders have been implicated in the Recruit scandal.

Most prominent among the names mentioned as a possible successor was Masayoshi Ito, who served as foreign minister from 1980 to 1981 under Prime Minister Zenko Suzuki. He is currently chairman of the ruling party’s executive board.

Takeshita was reported in favor of choosing Ito as his successor. Ito, however, said this morning that “a younger person” should be chosen. In the past, the 76-year-old leader also has cited health reasons for refusing to seek the prime minister’s post. He reportedly suffers from a severe case of diabetes.

Another possibility is Masaharu Gotoda, who served as Nakasone’s chief Cabinet secretary. He now heads a ruling party political reform committee.

Neither Ito nor Gotoda have been named as recipients of Recruit funds.

Takeshita’s resignation promises to complicate U.S.-Japan relations, leaving Japan without effective leadership on the eve of decisions that must be taken by the U.S. Trade Representative’s Office by May 30 to designate which among America’s trading partners will be condemned for “unfair trading practices” under the 1988 Omnibus Trade Law. Japan faces possible retaliation for its telecommunications, distribution system, rice and semiconductor policies.

The move also could snarl ongoing negotiations with the United States on joint U.S.-Japan development of a new Japanese fighter jet, dubbed the FSX project, worth some $7 billion.

In San Jose, Calif., where he had accompanied President Bush on a speech-making tour, White House spokesman Marlin Fitzwater said: “Mr. Takeshita has been a very good friend of the United States. We would not expect our relationship to change in any substantial way.”

“Japan is a close ally and friend,” Fitzwater added later in a terse formal statement. “We will continue to work closely with the new prime minister and the new government.”

In his first eight months in office, Takeshita won high marks from U.S. officials for settling a host of individual trade issues. Disputes over entry to Japan’s construction market and quotas Japan had maintained on 12 farm products were settled, and, last June, Takeshita approved a dramatic, eventual lifting of import quotas on beef and oranges.

Noted as a leader skilled in getting things done through back-room dealings, Takeshita also proved a surprise in diplomacy by making a series of foreign tours to Southeast Asia, the United States, Europe and China last year after assuming office in November, 1987. On his second visit to Washington last January, Takeshita declared that Japan was prepared to broaden its foreign aid and assume a political role not only in Asia, its traditional “back yard,” but throughout the world.

Takeshita confessed that he had not expected the Recruit scandal to “swell to this point.”

“From my personal self-reflection,” Takeshita said, the issue exploded because of a “gap in the consciousness toward money” that he said exists between politicians and the public.

Although most of the scandal revelations involve financial dealings that are legal, they emerged as Takeshita submitted to Parliament an extensive reform package that he declared was designed to ensure “fairness” in the nation’s tax system. Disclosures of the vast amounts of special favors and contributions Recruit Co. and its affiliates had spread through both Japan’s political and business world contrasted sharply with the sense of fairness of most Japanese.

THE RECRUIT AFFAIR

A look at Japan’s Recruit Co. scandal, which has claimed its biggest victim with Prime Minister Noboru Takeshita’s resignation announcement:

The beginning: In 1986, Recruit Co. offers bargain-priced shares in a subsidiary to 150 politicians and business leaders. Shares double in value after stock goes public, enriching those who sell. Prosecutors allege transactions were bribes.

Takeshita’s link: An aide and a relative reportedly profit by about $192,000. Takeshita also acknowledges receiving $1 million in political donations from Recruit. He tells Parliament donations were legal, but over weekend also admits receiving $385,000 loan from Recruit in 1987.

Ex-Prime Minister’s tie: Aides to Yasuhiro Nakasone--under whose administration the share transactions took place--reportedly profit by about $460,000.

Resignations: Three members of Takeshita’s Cabinet--Finance Minister Kiichi Miyazawa, Justice Minister Takashi Hasegawa and Ken Harada of Economic Planning Agency--quit because of links to Recruit.

Among the arrests: Recruit’s founder, Hiromasa Ezoe, faces multiple charges of bribery. Several other Recruit executives, ex-chairman of Nippon Telegraph & Telephone and two former vice ministers charged.