Fallout Likely in U.S.-Japan Trade Talks

The resignation of Japanese Prime Minister Morihiro Hosokawa is likely to make the roiling trade dispute between Washington and Tokyo even more intractable in the near future, U.S. experts cautioned Friday. But over time, it could be a catalyst for significant progress.

Although Hosokawa’s weakened political position was common knowledge, Friday’s resignation announcement caught Washington by surprise.

President Clinton expressed concern that the effort to open commercial markets and reform the government, which began with Hosokawa’s arrival in office, not end with his departure.

When Hosokawa assumed office last July, the Clinton Administration was optimistic that his coalition, taking over after 38 years of rule by the Liberal Democratic Party, would lead Japan on a new economic course.

At the heart of the Administration’s policy toward Japan is an effort to get Tokyo to buy more products from foreign countries and reduce a trade surplus that soared to $120 billion last year, about half of it at the expense of the United States.

The Administration’s hopes for steady progress were dashed in February, when American and Japanese negotiators, on the eve of Hosokawa’s visit with Clinton at the White House, broke off talks intended to give U.S. businesses a toehold in key Japanese markets.

Hosokawa’s resignation was prompted by his political weakness and by doubts raised over his personal financial dealings dating back more than a decade. Even so, the repercussions could be felt in the trade arena.

In the view of U.S. experts closely following developments in Japan, this could happen in two steps:

* The shake-up that is likely to occur in the upper ranks of the Japanese government, regardless of who succeeds Hosokawa, will force political leaders to focus on more pressing domestic matters and will weaken their ability to pressure the powerful bureaucrats in the Ministry of International Trade and Industry into making concessions to U.S. negotiators.

“The bureaucrats are more powerful now. No senior, heavyweight politician can force a decision at this point,” said Doug Paal, who was President George Bush’s White House adviser on Asia.

* In the longer run, the turmoil could lead to approval of a new Japanese budget. The difficulty in gaining approval of a budget has kept political leaders from resuming their earlier focus on the U.S.-Japan trade dispute. Settling the budget dispute could clear the decks for resolution of the trade fight.

On the other hand, Paal said, if the coalition that Hosokawa put together last summer begins to fracture, the trade talk delays could be extended.

Clinton spoke with Hosokawa for about 12 minutes by telephone Friday morning. He said later that he had told the prime minister that he was “personally very sorry to see him step down.”

The President told reporters during a visit to Minneapolis that the change in Japanese leadership would produce no change in the United States’ position on the trade dispute.

“I think we should stick with our policy and be firm about it,” Clinton said.

“But plainly, the Japanese are going to need a little bit of time to reconstitute their government.”

Expressing hope for a renewed effort to reform the Japanese political and economic systems, Clinton said, “I wouldn’t write the epitaph for change too quickly.”

The course of economic reform in Japan, he said, “will not suffer an irrevocable setback as a result of the government shake-up.”

U.S. officials expressed confidence that they could work well with those whose names have surfaced as possible Hosokawa successors, including Foreign Minister Tsutomu Hata.

When Hata was finance minister in the Liberal Democratic Party government, “we had a good relationship with him,” a Treasury official said. He characterized Hata as “more on the reformers’ side,” despite his role in the government that the Hosokawa coalition threw out of office.

Still, the official said, the likelihood that Hata could push ahead with the reforms favored by Hosokawa would depend “on the politics of the situation” and the strength he would bring to the office rather than any policy preferences he might hold.

Indeed, said Chalmers Johnson, professor emeritus at the University of California, the dispute between the United States and Japan will not be resolved until Washington shifts from its insistence that Japan make radical changes in its way of doing business.

What should be brought home to the Clinton Administration, Johnson said, “is that the problem is not going to be solved by the Japanese. The Japanese will never open their markets in any sense that we understand it.”

* ECONOMIC BOOST: Hosokawa’s resignation could help Japan’s economy in the short run. D1

Reign Doesn’t Last a Year

Main developments in the Hosokawa administration:

* July 18, 1993: Parliamentary elections deprive the scandal-ridden Liberal Democratic Party, which had held power for four decades, of its lower-house majority. The defeat paves the way for the resignation of Prime Minister Kiichi Miyazawa.

* Aug. 6, 1993: Lawmakers elect Hosokawa prime minister.

* Nov. 18, 1993: The lower house passes a package of anti-corruption legislation, including a ban on corporate contributions to politicians and a change in the way the lower house is elected.

* Jan. 21, 1994: The upper house rejects the anti-corruption bills. Hosokawa had hinted he would resign if the bills failed.

* Jan. 29, 1994: Both houses pass a compromise that permits limited corporate donations to politicians.

* Feb. 3, 1994: Hosokawa suddenly announces a plan for a $57-billion tax cut combined with a hike in the national sales tax from 3% to 7% in 1997. Key parties denounce the plan; Hosokawa withdraws it a day later.

* March, 1994: The Liberal Democrats declare they will refuse to discuss the fiscal 1994 budget until Hosokawa allows a former secretary to testify about a $952,000 loan Hosokawa took from a trucking magnate. Hosokawa rejects the demand.

* March 30, 1994: An investment consultant says Hosokawa lied to Parliament about a large stock purchase in 1986. Hosokawa says his father-in-law made the purchase; the consultant says it was actually Hosokawa.

* April 8, 1994: Hosokawa says he will resign.

Source: Associated Press

Falling to Scandals

Five Japanese prime ministers have resigned in the last five years, and money scandals--or failure to pass legislation to stop them--have often been to blame:

The Hosokawa Scandal

Centers on a $952,000 loan Prime Minister Morihiro Hosokawa received in 1982 from a mob-linked trucking company executive. Opposition lawmakers say the loan was actually a political donation.

He was also grilled about a profitable stock deal, supposedly made by his father-in-law, that produced a nearly $500,000 profit.

He also disclosed a new potential scandal over personal investments entrusted to a close friend. Hosokawa said laws may have been broken but refused to give details.

His Biggest Success: Passing a sweeping set of political reform bills aimed at fighting the corruption that has become endemic to Japanese politics.

Who Is Next?: Though no clear successor had emerged, speculation centered on Foreign Minister Tsutomu Hata.

His Approval Rating: In a national poll in Japan:

March, 1994:

Approve: 53%

Disapprove: 31%

December, 1993:

Approve: 69%

Disapprove: 16%

September, 1993

Approve: 70%

Disapprove: 16%

Other Recent Resignations of Premiers

Noboru Takeshita (resigned April 25, 1989): Was forced to quit after admitting he received donations from the Recruit Co., the company at the center of perhaps Japan’s biggest postwar scandal. Recruit sold stock at cut-rate prices to major politicians or their aides, who later resold the stock for large profits.

Sousuke Uno (resigned July 23, 1989): Had barely taken office when it was reported that he paid a geisha to be his mistress and mistreated her when they broke up. Uno quit when the then-ruling Liberal Democratic Party did poorly in July elections for Parliament’s upper house.

Toshiki Kaifu (resigned Oct. 5, 1991): A little-known politician with a clean reputation, Kaifu promised to pass anti-corruption legislation. But when bills were introduced, LDP powerbrokers withdrew their support from Kaifu, and he was forced to quit.

Kiichi Miyazawa (resigned July 22, 1993): Had been one of the recipients of Recruit’s favors, but he too promised to pass anti-corruption legislation. When push came to shove in June 1993, however, he lost his resolve under pressure from LDP powerbrokers.

Sources: Times staff and wire reports, NHK Japan Broadcasting Corp.