Hosokawa to Resign as Japanese Premier : Asia: He apologizes to nation for controversy over his personal finances. Parliament had been at impasse over dispute. His coalition took power last year after 38 years of Liberal Democratic rule.

Prime Minister Morihiro Hosokawa, beleaguered by a controversy over his personal finances, announced today that he intends to resign.

Hosokawa, who took over last August after 38 years of unbroken rule by the Liberal Democratic Party, said he will step down because of an impasse in Parliament over charges that he received an illicit $952,000 payment from a gangster-tainted parcel-delivery firm.

Hosokawa called the transactions “something for which I must take moral responsibility.”

“I apologize and ask for your understanding,” he said.

Hosokawa would be the fourth of Japan’s last five prime ministers to step down because of scandal.

Hosokawa, 56, insisted that he received the money in 1982 as a loan and that he had repaid the money in full by 1991. Liberal Democrats, however, began a boycott of parliamentary proceedings to demand that Hosokawa allow his former secretary to testify in Parliament to clarify details.

The prime minister had been trying to win approval of an already overdue budget for the fiscal year that started a week ago, but the scandal had paralyzed parliamentary business.

In a nationally televised news conference, Hosokawa revealed that he had just discovered an incident that occurred more than 10 years ago in which staff members in his office had entrusted Hosokawa’s own personal funds for “investment” to a friend.

The prime minister said he could not reveal the details now but admitted that the incident involves “legal problems.”

“As a politician, I must straighten my collar,” Hosokawa said.

He also admitted for the first time that he had not paid interest on the controversial loan. Instead, funds represented by the interest payments were reported, legally, as political contributions, he said.

Socialist Chairman Tomiichi Murayama told reporters that “with the Parliament this stagnated and no outlook in sight for movement, Hosokawa said he felt he had to assume responsibility.”

Yuichi Ichikawa, chairman of the the Buddhist-backed Komei (Clean Government) Party, said the prime minister told the leaders he had no problems to face on the loan from the Sagawa Kyubin Co. But he quoted Hosokawa as admitting that he had discovered “some legal problems” with “the management of my political funds.”

Murayama and Ichikawa were interviewed as they emerged from “consultations” that Hosokawa called with coalition party leaders. When Murayama said the prime minister told the leaders that he intended to resign, reporters exclaimed: “The prime minister resign?!”

Shortly after the meeting with his coalition partners, Hosokawa convened a meeting of his Cabinet ministers to inform them of his decision.

Masayoshi Takemura, chief Cabinet secretary, said no date has been set for a resignation by the Cabinet as a whole. A Cabinet resignation, required any time a prime minister quits, could precipitate a general election. However, reports that Hosokawa is accepting personal responsibility did not point toward an election.

The approval of the lower house of Parliament is needed to elect a new prime minister.

The announcement, although it came after a series of mishaps and failures by Hosokawa, left politicians so astonished that no one was yet making predictions of what will happen.

At the least, Hosokawa’s resignation was expected to seriously impair the government in its efforts to work out a market-opening package of measures to lift government regulations on business by June and further spur a faltering economy that achieved only 0.1% growth last year.

Hosokawa had promised the action before a Naples, Italy, summit of the Group of Seven advanced industrialized democracies, at which he was to have met President Clinton.

Hosokawa and Clinton met in February but failed to agree on measures to cut Japan’s growing trade surpluses. The episode brought U.S.-Japan economic relations to a new level of tension.

In the first five minutes after Hosokawa’s resignation became known, the Tokyo Stock Exchange fell 150 points. The yen also dipped on the foreign exchange market.

In 1989, when then-Prime Minister Noboru Takeshita suddenly resigned in the midst of the Recruit Co. stocks-for-favors scandal, the process of selecting a new prime minister consumed more than a month, even though it only involved selecting another Liberal Democrat as the leader.

This time, with a coalition backed by eight parties in the upper house and seven in the lower chamber of Parliament, the process promises to be more complicated.

One possibility is Foreign Minister Tsutomu Hata, leader of the Japan Renewal Party, the second-largest in the coalition.

Late last July, Hosokawa patched together his coalition under a banner of political reform and opposition to the perennial rule of the Liberal Democrats and a chain of scandals under their governments.

Although left-wing Socialists sabotaged the coalition’s political reform bills in the upper house in January, Hosokawa hammered out a compromise with Yohei Kono, who took over the leadership of the Liberal Democrats after former Prime Minister Kiichi Miyazawa resigned. Bills to put into force the reforms and a new electoral system were passed last month.

This year, Hosokawa has stumbled on one issue after another.

In February, he announced a plan to raise a 3% consumption tax to 7% three years after cutting income taxes by 20%--without informing his coalition partners. A day later, after the Socialists threatened to withdraw from the coalition, he rescinded the plan.

Unprepared because of preoccupation with the political reforms, Hosokawa said no to Clinton’s demands for market opening--a move that initially brought him praise. But his failure to come up with substantial counterproposals later subjected him to criticism.

The prime minister’s troubles reached a peak, however, when his repeated attempts to explain the money he received from Sagawa Kyubin fell on increasingly skeptical listeners. His opinion poll ratings fell as low as 47%, compared to more than 70% last summer. And the mass media, which had backed him solidly, began writing ever more critical editorials, urging him to clear up the facts of the loan.

In the last few days, newspapers began running summaries of Hosokawa’s administration--as if they were writing political obituaries.