Japan's new populism threatens business as usual Coalition vows end to 'money politics'

August 15, 1993|By John E. Woodruff | John E. Woodruff,Tokyo Bureau

Tokyo -- After four decades of the best governmental relations money could buy, the stewards of Japan Inc. are finding it hard to adjust to Prime Minister Morihiro Hosokawa's wildly popular -- new coalition government.

And the stakes in this year of political turmoil couldn't be higher for the recession-weary companies that power the world's second-largest economy.

What, executives wonder, will the reformist coalition mean to economic prospects -- and to the cozy business-government partnership cited as the key to Japan's postwar revival?

A related problem: how to handle the hundreds of millions of dollars companies gave annually to the now-ousted Liberal Democratic Party to cement that partnership. Which leader, executives ask, is the key to the governing seven-party coalition -- Mr. Hosokawa of the Japan New Party or political wizard Ichiro Ozawa of the Japan Renewal Party?

"I'm advising my clients to continue the relationships they have within the LDP, and to wait at least one more election before thinking about opening relationships with the new parties," said lobbyist Dan Harada, who represents Mobil and other big foreign companies. Asked whether that strategy applied to political donations, Mr. Harada simply smiled.

Japan is in its worst recession since World War II. Economists predict gross domestic product will grow by less than 2 percent in the year to March 1994, painful for a country accustomed to 5 percent growth in the late 1980s. And in the year to March 1994, Japanese companies are likely to record their fourth straight year of declining profits.

Amid that slump, business leaders are calling for government action to stimulate the economy. For example, the Keidanren, Japan's biggest business association, wants income tax cuts to stimulate consumer spending -- a move that also could help U.S. exporters.

So far, though, tax cut proposals have been rebuffed by finance ministry bureaucrats, who fear a budget deficit. No one knows how the new government will react to such key issues -- rhetoric over political reform has drowned out detailed, economic planning so far.

Most business leaders have welcomed the new government's willingness to consider stronger fiscal measures to stimulate the economy. Many also have welcomed the coalition's calls for faster, deeper deregulation of financial markets and other government-burdened industries.

But one business' deregulation is another's loss of long-standing protection.

Stockbrokers, bankers and insurers have been icily silent when members of the new Cabinet have spoken of faster deregulation, which could mean razing barriers among financial industries, and giving foreigners more opportunities to compete. Already, Morgan Stanley has the fastest rate of profit growth of any brokerage house in Japan, thanks to its expertise in niches such as derivatives.

One measure of the business community's response was the lack of takers when Mr. Hosokawa sought to include a business leader in his Cabinet.

For three days, the media reported that Sony Corp. President Akio Morita would be the new foreign minister. But Mr. Hosokawa put Deputy Prime Minister Tsutomu Hata in charge of foreign affairs; Mr. Morita and several other top business figures reportedly declined invitations to join the Cabinet.

What's at stake in the long run? Nothing less than the government-business partnership.

Over the decades of unchallenged LDP rule, the system worked this way: Businesses underwrote vast vote-buying operations and made selected LDP leaders rich. In return, the party kept a lid on consumer and labor stirrings, while serving as a buffer with bureaucrats and regulators when needed.

The new governing coalition rose to power campaigning against "money politics," and its reform plans are heavy with legislation jTC to phase corporate money out of politics over the next five to 10 years. Details could come out this week.

Meanwhile, Japan's powerful business and industrial associations have created a commission to study political donations. That's not pocket change -- the Keidanren and the three other top business groups each contributed more than $100 million to the LDP for July's election, according to estimates.

But that commission's publicly stated charge is fairly narrow: deciding whether to deal some or all coalition parties in on campaign money long reserved exclusively for the LDP. That involves assessing the power of Mr. Ozawa and other reformist leaders.

"Once the business community decides whether Ozawa has a chance of success in bringing the entire opposition under his wing, then they still have to decide whether it is in their interest to help him, to fight him or to attempt some kind of neutrality," said political analyst Shunichi Matsunaga. "You can be sure that will be a very agonizing decision."

Few simple answers

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