Japanese Voters Roar

If you or your mutual fund manager were waiting for a quick revival of Japan's economy, your wait just got longer.

In a stunning repudiation of the way Prime Minister Ryutaro Hashimoto has managed this country's troubled economy, Japanese voters yesterday strongly backed untested opposition parties in elections for the upper house of parliament.

It seemed all but certain last night that Mr. Hashimoto would have to resign, although his Liberal Democratic Party (LDP) will be able to choose the next prime minister since it has a majority in the more powerful lower house.

If Hashimoto is surprised at how the voters have turned against him and his party, he is not alone. Until yesterday, the public seemed remarkably undisturbed by Japan's crumbling economy, which has excited so much concern abroad. Suddenly, they seem angry and engaged.

Though the LDP remains in power, it will now have to wrestle with a more intimidating opposition, in particular a political maverick and former Cabinet member named Naoto Kan. "The voters have given us a chance," said Mr. Kan, the leader of the newly formed Democratic Party, which was yesterday's most notable victor.

The voters chose representatives to occupy half of the 252 seats in the upper house. According to media projections available early today, the LDP will take no more than 50 seats, down from the 61 seats it contested. The party had hoped to win 69, which would have given it a majority in the house.

Hashimoto's failure to achieve the break-even point was said to be reason enough for the party to find a new leader. Appearing under the klieg lights as the votes were counted yesterday, the prime minister seemed shaken, apologetic, and a little sweaty. "It's my responsibility," he said wanly, using the code language that indicates a resignation is in the offing.

Even so, the LDP has more or less run the country for all but 10 months of the past 43 years and remains a formidable force. It's also worth noting that Japan's voters have used upper house elections to register protests, and then turned around to favor the stability and familiarity of the LDP in balloting for the lower house, the more influential body and the one that elects the prime minister.

In the long run, Sunday's voting may impel Japan's leaders to take more radical steps to clean up this country's bad-loan-burdened financial system and bring the economy out of recession. In the meantime, however, political turmoil and economic inaction are the most likely prospects.

For one thing, the LDP will likely have to select a new leader and then elect him prime minister in the lower house. The choice of the party's elders could be Seiroku Kajiyama, an LDP veteran who has lately been writing lengthy magazine articles critical of Hashimoto's leadership, or Foreign Minister Keizo Obuchi, a bland politician who is next in line for the top job, according to some party watchers.

The most unexpected aspect of yesterday's voting - and the factor that probably brought down Hashimoto - was the high turnout rate. According to media estimates, nearly 58 percent of Japan's voters came to the polls, compared with 44.5 percent in the last such elections three years ago.

Behind the upward surge was the country's vast bloc of independent voters, always the most unpredictable part of the local political calculus. A third of them voted for the Democratic Party (DPJ) and a fifth cast their votes for the stalwarts of Japanese opposition politics, the Japan Communist Party (JCP). The Communists are not considered serious contenders for power. Yesterday, independent voters, in a part of the balloting where one chooses a party and not a candidate, offered their strongest support to the Democrats, followed by the JCP. The LDP came in third.

Almost everyone seems to think the stagnant economy, which is causing record unemployment and high bankruptcy rates, drew the voters to the polls. But some observers are skeptical about the voters' message. "The wind didn't blow for the DPJ or the JCP," says Takashi Mikuriya, a political historian at Tokyo Metropolitan University. "It simply blew against the LDP."

"Even though people raised a 'red card' against the LDP's economic policy," the professor adds, referring to the way soccer officials eject players, "there is no other alternative. That's the reality Japan is facing."

Kan "is probably the biggest winner," says Isamu Ueda, a member of the lower house. The DPJ may end up with 27 seats, up from 18, and now becomes the central force in opposition politics. The party is also the opposition leader in the lower house.

Unlike many of Japan's opposition figures, who are LDP defectors, Kan is an independent politician who came into politics as a citizen activist. Two years ago he impressed many Japanese when he served as health and welfare minister in a coalition cabinet.

He exposed ministry policies linked to the deaths of hundreds of Japanese who used tainted blood products in the 1980s, and his forthright apologies have brought him an enduring popularity.

But Yasunori Sone, a politics professor at Tokyo's Keio University and a longtime associate of Kan's, says the market reaction to the elections is unpredictable.

Investors could conclude that Japan's voters, having found the LDP incapable of resolving bad loans and other economic problems, are now demanding tougher reforms, he says.

"The market could react quite positively to that, but on the other hand the LDP still has power," he adds. "It will have to work with the opposition and that could mean a delay" in addressing reform. The upper house can delay legislation for 60 days.

As in other Asian countries over the past year, Japanese leaders have discovered that they are responsible not just to their voters but to the thumbs-up, thumbs-down verdicts of investors around the globe. And the Asian financial crisis, which a delay in Japan's recovery could make even worse, has demonstrated that the global economy also requires a kind of global political accountability.

"This time you had foreigners asking questions," Professor Sone explains. "The No. 1 question was: Hashimoto has made many mistakes, yet he remains in power. Why? And ... the economic situation is so serious, but voters never get angry. Why?"