Kaifu Proposes Wide-Ranging Reforms : Japan: But securities scandals may overshadow plans to revise the electoral system, military and financial regulation.

Prime Minister Toshiki Kaifu told an extraordinary session of the Japanese Parliament Monday that he will seek to pass legislation to reform Japan’s electoral system, to give its military a new role and to strengthen financial regulation.

But observers are calling Kaifu’s program overly ambitious. The Parliament is expected to spend so much time digging into recent financial scandals that it has already been dubbed “the Securities Parliament.”

As Kaifu spoke of how “improprieties” by banks and securities companies had “undermined general investor trust worldwide in the integrity of our stock markets,” television cameras fixed their lenses on stone-faced Finance Minister Ryutaro Hashimoto.

In the latest disclosure of a still-widening scandal, Hashimoto admitted Saturday that his secretary, Toyoki Kobayashi, helped three people, including the owner of a tempura restaurant frequented by Hashimoto, borrow $10 million from Fuji Bank without collateral. The news reinforced a growing sense, after a long string of scandals, that the privileged and well-connected get special treatment in Japan’s financial system.

Late last week, it was reported that a company in which the son and wife of Liberal Democratic Party power broker Shin Kanemaru were deeply involved was one of hundreds of companies that collectively received more than $1 billion in compensation from securities companies to cover their stock-market losses.

Kaifu promised in his speech to submit legislation during the 61-day parliamentary session that would prohibit brokerages from making such payments.

The prime minister would like the Parliament to spend the bulk of its time passing a complex political-reform bill that he has been championing against heavy opposition within the ruling party. Passage of such a bill, pundits have said, would assure him a second term as prime minister when the party chooses a new leader in October.

Kaifu is also pushing for a law that would allow Japan’s military, known as the Self-Defense Forces, to participate in peacekeeping activities overseas. With the exception of minesweeping duty in the Persian Gulf this year, the Japanese military has not been sent to overseas duty since World War II, and Japan was criticized for not contributing more to the Gulf War effort.

But after Parliament gets through with the scandals, there may be little time for much else. Special parliamentary committees are being established to investigate the securities scandal, and opposition parties have promised to call in key figures to testify before the legislature.

Meanwhile, the outpouring of disclosures on financial shenanigans seems unlikely to subside.

Japanese television reported Monday that Tokyo police have created a 50-member investigative force to look into the money scandals. The group is expected to investigate, among other issues, the securities companies’ widely reported ties to gangster groups and the billions of dollars in fraudulent certificates of deposit created by employees at Fuji Bank in the names of key customers.

The aggressive police action is proving embarrassing to the Ministry of Finance, which is charged with regulating the securities and banking industry.

Hashimoto today denied a newspaper report that he plans to resign, saying his priority is to resolve the various financial scandals that have shaken Tokyo markets.

He was speaking to reporters after Yomiuri Shimbun reported that the minister, under fire for lax supervision of the scandal-plagued securities and banking industries, had decided to step down late this month.