Successor to Top Lobbyist in Japan Faces Tough Task : Manufacturing: Eishiro Saito leaves the Keidanren business federation at a time when its influence has waned because of aging leaders, scandals and a decline in the importance of heavy industry.

When 79-year-old Eishiro Saito steps down this week as chairman of Japan’s most powerful business lobby, his successor will inherit a legendary organization, but one that’s losing its luster.

The Federation of Economic Organizations, better known as Keidanren, has gained widespread international recognition for the huge role it played in bringing Japan to its current heights of prosperity and economic development.

However, its influence has waned in recent years because of aging leadership, business scandals and a decline in the importance of heavy industry that traditionally has dominated the federation.

Most observers believe that Friday’s leadership change may mark the beginning of a transitional period for the federation, although they expect no immediate switch in the policies of Japan’s economic giants.

The 44-year-old Keidanren was first regarded as the voice of “Japan Inc.” in the 1950s. As one of four large industrial federations, Keidanren helped direct business development and ensured support from the government by controlling business donations to political parties.

The federation became the “overall coordinator and fund-raiser” for the Liberal Democratic Party that has governed for 35 years, journalist Karel Van Wolferen wrote in his book “The Enigma of Japanese Power.”

Keidanren has 938 corporate members, including nearly all the nation’s major companies, and 121 business associations. Steelmakers, shipbuilders and power companies traditionally have dominated the leadership.

Saito and his successor, Gaishi Hiraiwa, are from this old guard. Saito is honorary chairman of Nippon Steel Corp., the world’s largest steelmaker, while Hiraiwa is chairman of Tokyo Electric Co., the world’s largest private electric power producer.

Keidanren is still very close to the governing party. Its opinions on everything from trade to U.S. relations to foreign aid carry enough clout to draw most foreign business and political leaders to the federation’s somber building on a side street in the Otemachi business district.

But Keidanren has lost some pull in political circles as the “base of expertise,” which policy-makers depend on for information, said Kermit L. Schoenholtz, an analyst for Salomon Bros. Asia Ltd.

A symptom of this loss of influence was seen last spring, when Liberal Democratic Party officials bypassed the federation and collected political donations from companies directly.

Japan has also lost the national consensus of the immediate postwar years when government, industry and most private individuals believed that all Japanese should work together to rebuild.

“The business community as a single community is breaking down,” said Seichiro Yonekura, a professor of business history at Hitotsubashi University.

As the main symbol of the tight relations between big business and government, Keidanren has been tarred by recent business scandals involving its members, some observers say.

Keidanren also lost esteem among the public earlier this year when Saito issued a report opposing proposed land taxes on corporations designed to reduce Japan’s outrageously high real estate prices, a problem that many people have blamed on corporate greed.

“The image of Saito (came) down” as a result, Yonekura said.

But his image was already hurting. During Saito’s first two-year term, which began in 1986, he had been considered a lucky optimist exemplified by his philosophy: “Seek for brightness and do not look at darkness.”

But several articles in the local press in the past two years criticized him for weakness and lacking a philosophy.

Hiraiwa, 76, has a reputation for relatively progressive thinking, although he has not yet articulated a philosophy for Keidanren. A seemingly cheerful man, he also is known as self-effacing and patient, in part due to his 13-year service as a federation vice chairman.

Compared to Saito, the new chairman is seen as someone “more in tune with popular opinion,” said Gregory Clark, a professor at Sophia University who studies Japan’s economy.

Shijuro Ogata, deputy governor of the Japan Development Bank, believes that Hiraiwa may be “in the long run, the beginning of a transition” to younger leadership.