Japan's Uncertain Trumpet

February 09, 1994

Japan's Prime Minister Morihiro Hosokawa has been sufficiently weakened by political battles he barely survived to make his Friday meeting with President Clinton a probable waste of time. His political and economic reforms riddled by compromise, he hardly seems strong enough to make Japan's interest groups accept numerical goals to measure progress in opening markets to foreign competition.

That is the key remaining U.S. demand on Japanese economic restructuring. Mr. Hosokawa's economic stimulus package, just enacted, goes about as far as American firms can expect in boosting Japanese demand for their products and services.

While the Japanese power struggle over the stimulus was going on, U.S. trade representative Mickey Kantor was cooling his heels on a visit scheduled to break the deadlock on measurable goals and ensure a successful summit. Mr. Hosokawa's cabinet was too preoccupied to give Mr. Kantor the attention he expected.

Mr. Hosokawa's $140 billion stimulus package is impressive enough, except that there is a catch to it. It consists of tax cuts totaling $54 billion and spending increases of $66.7 billion, half in public works. The catch is that Mr. Hosokawa sprang a sales tax increase on everyone to replace the income tax reductions favoring the rich, which many in his own coalition would not accept. So the question was left open, with a decision to be made later how to replenish the $54 billion, which might very well dilute the stimulus.

This followed the compromise with the opposition Liberal Democrats, the former ruling party, that saved Mr. Hosokawa's political reforms. Japan's multi-member parliamentary districts will be replaced by single-member districts and proportional representation, which are thought to be less corruptible. But corporate donations to candidates, which Mr. Hosokawa wanted abolished, are saved.

Just to rub in the fragility of the Hosokawa regime, a Japanese magazine has just reported that a corporate magnate implicated in scandal spent millions improving a property owned by Mr. Hosokawa's family. This cannot help his image and popularity.

After three years of recession, Japan is going through a crisis in confidence that has revolutionized its psychological relations with foreign nations. The Japanese no longer think themselves 10 feet tall, and it is about time their foreign competitors and partners don't either.

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