The Importance of Morihiro Hosokawa : The embattled Japanese prime minister fights for reform--and political survival

Politics Japanese-style has rarely been easy for the West to decipher. But since August, nothing has been subtle in the political machinations in Tokyo. The stranglehold of bureaucrats and entrenched special interests on government policies has become markedly visible in the midst of Prime Minister Morihiro Hosokawa’s battle to keep his fragile coalition in power.

With his opponents preoccupied with infighting and intent on tarnishing Hosokawa, the economy continues to drift, political reform is sidelined and consumers and businesses alike grow uncertain and fearful.

Four months ago, voters signaled a desire for change, booting the Liberal Democratic Party out of power after 38 years. Today, they face a depressing return to the status quo unless the embattled Hosokawa can achieve both political reforms and economic stimulus. So far both are stalled, leading to paralysis on crucial policy issues and sending the Tokyo Stock Market into turmoil. One hopes these events will inspire the Japanese to support Hosokawa--a prime minister with the highest public support in recent history--more than ever.

Hosokawa staked his coalition government on being able to pass political reform by the self-imposed deadline of year’s end. A political reform package cleared the lower house last month and faces a tough test in the upper house of Parliament. The legislative session is likely to be extended into next year.

The prime minister’s efforts have been complicated by Japan’s worst economic downturn since World War II. He has had to retreat on his indications last week that pump-priming measures were imminent. The problem: a squabble between the powerful Finance Ministry and the Social Democratic Party, the biggest member of the Hosokawa coalition, over tax cuts. The bureaucrats will not accept an income tax reduction without an increase in the national sales tax.

Sensing that Hosokawa is vulnerable, his old party, the LDP, is attacking full force, even lobbing at him allegations of scandals of the type that helped bring down the party. He has been peppered with questions about an unusual loan, which he has admitted taking from a trucking company, and about how he used the funds.

Despite the political disruption, Hosokawa implied this week that Japan would--however reluctantly--open its market to foreign rice, thus eliminating one major stumbling block to concluding current world trade talks. If he pulls off political reform and stimulative economic measures, Hosokawa is expected to push hard for deregulation on everything from air fares to land-use policy. That will be far from easy. But a more open Japan is precisely what the United States has long sought and hopes to achieve in bilateral U.S.-Japan trade talks now going on.