Both Sides Act to Help Japan Leader Stay On : Asia: Politicians say economic and foreign policy needs can’t wait. Prime minister’s last-ditch effort to save political reforms viewed as futile.

Japanese leaders on both sides of the political fence moved Saturday to help Prime Minister Morihiro Hosokawa stay in office, even if he fails in an eleventh-hour bid to salvage his political reforms.

“Full efforts must be devoted to carrying out measures to spur the economy,” said Michio Watanabe, former foreign minister and a major faction leader of the opposition Liberal Democratic Party.

“I don’t think anyone will try to force the prime minister to assume responsibility” for the stunning defeat of Hosokawa’s reform bills in the upper house of Parliament on Friday, Watanabe said.

Yoshiro Mori, the Liberal Democrats’ secretary general, also said that priority must be given to economic measures and foreign policy issues. Hosokawa is scheduled to meet President Clinton in Washington on Feb. 11.

The opposition’s expressions of support for Hosokawa came as leaders on both sides predicted the prime minister’s last-ditch attempt to come up with a compromise package and enact it by next Saturday, when the current session of Parliament ends, will prove futile.

Hosokawa was expected to ask that both the upper and lower houses establish a 20-member joint committee to hammer out the compromise. Any revised bills would require the approval of two-thirds of the joint committee but only a simple majority of each house.

The lower house passed Hosokawa’s reform package last Nov. 18, but on Friday, a rebellion by 21 of Hosokawa’s coalition members--20 of them Socialists--sent the bills to defeat by a vote of 130 to 118 in the upper house.

In a debate broadcast today by NHK, the semi-governmental national TV network, Watanabe demanded that Hosokawa scrap his election reform plans and agree to enact only a bill designed to uproot corruption.

Leaders of both the coalition and the opposition Liberal Democrats reportedly suggested that a “consultation committee” be established to continue debate on political reforms after the close of Parliament.

Establishment of such a committee could sound the death knell for reform, but it would hand Hosokawa a face-saving way out of the pledge he made last August to “assume responsibility” if the bills were not enacted.

Some commentators, however, said Hosokawa might resign--without calling a general election--out of personal conviction to keep his promise. In that case, the lower house would choose a new prime minister.

With Japan’s economy in deep recession, a sense of crisis has emerged among both politicians and business people who believe that the government must act immediately to spur growth.

The budget for the next fiscal year, which usually is compiled by the end of December, still has not been drawn up. And an announcement of a package of measures to spur economic growth that had been planned this week was expected to be delayed by the last-minute efforts to win approval for political reform.

Even if Hosokawa stays on, the blow to his leadership may prove fatal.

With proof in hand that he cannot count on the support of the Socialists, the largest group in his coalition of seven parties in the lower house and eight in the upper chamber, attempts to cut taxes to spur growth are likely to be more intractable. Socialists adamantly oppose any increase in a 3% consumption tax as part of a deal to cut income taxes, while the Finance Ministry insists on a trade-off.

Japanese economists, as well as Clinton Administration officials, regard an income tax cut as essential to spur consumption, lift the economy and pull in more imports. Japan’s trade surplus with the United States last year was expected to amount to about $56 billion.

Friday’s defeat for Hosokawa, Japan’s best hope for political change in decades, also called into question whether he could carry out other pledges to reduce government intervention in the economy, disperse central government powers to local administrations and put the consumer--instead of the producer--at the core of policy.

An agreement by Hosokawa to stay on would ensure he could make his scheduled trip to Washington. But both sides admit yearlong talks to conclude a “framework” for U.S.-Japanese economic relations remain stalemated.

Hosokawa and Clinton had been scheduled to sign the framework at their February meeting.

The newspaper Yomiuri reported today that Foreign Ministry officials are studying what to do if the Clinton Administration decides to postpone the meeting because of lack of hope for an agreement.

Hosokawa is to meet today with Treasury Secretary Lloyd Bentsen, who is on the final leg of a 12-day international tour.

The prime minister’s proposed political reforms would have carried out the biggest overhaul of Japanese politics since the post-World War II American occupation.

The reforms would have scrapped electoral districts from which an average of four representatives are chosen, created new constituencies in which only one candidate is elected and established a system of proportional representation in the lower house.