NEWS ANALYSIS : Japanese Prove to Be Hard Sell for Yeltsin : Politics: Gulf remains after Russian president employs his erratic personal style to appeal for investment.

On his first official visit to protocol-minded Japan, Boris N. Yeltsin could not resist a mild harangue. How can such a rich neighbor, he complained, ignore billion-dollar investment opportunities across Russia’s vast, underdeveloped landscape?

After ticking off a short list of lucrative prospects--oil, atomic energy, telecommunications, space exploration--the Russian president demanded: “Those of you with bad memories, write it down!”

No one in the audience, a staid lunchtime assembly of Japan’s leading industrialists, moved to take notes. Yeltsin waited for the delayed translation to sink through their earphones. After an awkward silence, he muttered: “I see nobody wants to show that he has a bad memory.”

As Yeltsin struggles to destroy the legacy of communism and guide his people into the free market, few things frustrate him more than the slow delivery of a tiny fraction of the billions in aid and investment he expected from rich capitalist nations.

Viewed from Tokyo’s boardrooms, however, Russia is not just Moscow but the wild Far East, a frontier land where market reforms degenerate into jungles of conflicting laws, blurred lines of bureaucratic authority and corruption.

“They have a lot to sort out over there,” said a Japanese shipping executive after the lunch.

The gulf between Yeltsin and his hesitant Japanese partners was evident during his talks Tuesday and Wednesday with Prime Minister Morihiro Hosokawa. Although Yeltsin made conciliatory gestures toward bridging it, a quick payoff for Russia is unlikely--as much for political and economic reasons as for the burly Siberian’s erratic personal diplomacy.

The most immediate problem is a territorial dispute that has kept Russia and Japan from signing a treaty formally ending World War II.

When Yeltsin unveiled his reforms early last year, Japanese officials spoke of backing them with as much as $26 billion in government aid--if the dispute was resolved first. So far, $4.6 billion has been pledged and $700 million delivered.

Until this week, Tokyo ruled out major new commitments until Moscow recognizes Japanese sovereignty over four small Pacific islands seized by the Soviet army at the end of World War II.

Yeltsin hinted Wednesday that Russia would honor a 1956 Soviet-Japan pact to return two of the islands and negotiate the status of the other two. He also went further than any of his predecessors in apologizing for the deaths of thousands of Japanese war prisoners in Siberian labor camps.

In turn, Japan agreed to expand its official economic cooperation as the territorial issue moves toward a settlement. But Yeltsin left Tokyo with each side expecting the other to make the next move.

Yeltsin expects Japan to help develop industrial “free zones” in Russia’s Far East before new territorial talks--an idea Hosokawa did not endorse.

At the same time, Russian and Japanese commentators wondered whether the Russian leader, who survived a bloody coup attempt last week and is now more dependent on the Russian army, can afford to make concessions on an issue that stirs nationalist passions in both countries.

“Every new summit meeting will have to add some concession to the negotiations on the islands,” commented the Moscow newspaper Nezavisimaya Gazeta. “But politically and psychologically, it will be difficult for us to change overnight. The momentum may soon be lost.”

Even if the dispute is resolved, Russia will not necessarily become more attractive to Japanese investors.

As Yeltsin said at the luncheon at Keidanren, Japan’s leading business federation, Russia wants technology to dismantle nuclear weapons and crisscross its sprawling territory with modern communications. It has coal and oil that Japan needs.

“It takes colossal effort and investment,” Yeltsin said. “But you will make profits.”

It was a hard sell.

Gaishi Hiraiwa, chairman of Keidanren and Yeltsin’s luncheon host, told him that investors were frustrated by Russia’s red tape, faulty local infrastructure and inadequate legal system--the same complaints voiced by investors elsewhere.

“Yeltsin is a decisive man, but local administrators are difficult to deal with,” said Masano Ueda, a staff economist for the federation. “It will take a very long time to change this climate.”

Even worse, the territorial dispute has kept Japan from signing a trade agreement with Russia that would guarantee legal protection and favorable tariffs for Japanese firms doing business there.

Japan does have such an agreement with China. Partly as a result, Japanese private investments in China doubled last year, past the $1-billion mark. Japanese private investment in Russia is about 25 times less. In many cases, China offers to build infrastructure for foreign investors; Russia does not.

Yeltsin’s style is so personal that Japan’s willingness to help his country may depend more on him than on anything else. After their first close look at him, the Japanese are voicing mixed feelings.

His low bow and sincere tone in apologizing for atrocities against war prisoners had an emotional resonance throughout Japan.

He brought tears to Hosokawa’s eyes by handing him a crumpled photograph of Hosokawa’s uncle in the Siberian camp where he died a prisoner in 1956.

At other times, Yeltsin was the blunt, swaggering guest in a land where nuance and discretion go a long way.

He urged the industrialists to drink enough during their lunch so they would be “too tipsy to criticize my speech.”

And during a ceremonial banquet Tuesday night, Yeltsin startled his hosts by casting aside respectful formality and casually clinking glasses with Emperor Akihito during a toast.

“Just when you think he has shown an innocent, smiling face, he will suddenly wrinkle his brow and change to a sullen face,” the newspaper Asahi commented Wednesday. “He has a magnanimity unfettered by courtesies.”