Japan's Ruling Party Buys Breathing Room. TAKESHITA SUCCESSOR SOUGHT

THE dramatic resignation of Japanese Prime Minister Noboru Takeshita is likely to gain the ruling Liberal Democratic Party breathing room in its desperate battle to weather the seemingly unending revelations of the ``Recruit scandal.'' The hope is that a new Cabinet will be able to limit the damage expected in elections for the upper house of parliament scheduled for later this summer. More importantly, the Liberal Democratic Party (LDP) wants to avoid a full-scale general election which it fears it could lose.

But analysts believe the relief could be short term. The deep-seated hostility to the ruling party is unlikely to be satiated. And the essentially caretaker administration that will be formed is likely to be a weak government, unable to deal effectively with growing domestic and foreign policy problems.

Prime Minister Takeshita resigned Tuesday in a bid to, as he put it, ``regain public trust in politics.'' The veteran conservative leader acknowledged that ``the rising political distrust that started when the Recruit scandal broke is an extremely serious crisis for Japan's parliamentary democracy.'' The revelations began last June when it was unveiled that the Recruit Company had offered stocks to a long list of Japan's elite before the stocks were offered to the public at large. Once on the public market, the value of the shares increased sharply. The Recruit Company has also made contributions to politicians in an alleged attempt to gain favors.

The premier said Tuesday that he would leave office after the passage of the budget early next month. In the interests of ``continuity of Japan's diplomacy,'' he said he would go ahead with plans to visit Southeast Asian nations starting Saturday.

The LDP has begun steps to choose a successor to Takeshita. Virtually all of the current party leaders are tainted by having received funds from the Recruit Company. Speculation about a new premier now centers on Masayoshi Ito, a party elder statesman with an image of honesty. Mr. Ito is, however, ailing and has repeatedly said he did not want the job, opening the possibility of an unexpected choice.

Takeshita's resignation meanwhile has been hailed by business leaders, including Takashi Ishihara, chairman of the Japan Committee for Economic Development, whose criticism of the premier last Friday was a key factor in feeding a sense of political crisis.

Socialist Party leader Takako Doi called the resignation ``the first step for the victory of public opinion.'' The next steps she demanded were dissolution of the Parliament to hold elections and a thorough investigation of the scandal, including summoning former Prime Minister Yasuhiro Nakasone, a key figure in the affair, as a sworn witness.

The opposition parties have been demanding Mr. Nakasone's testimony as a condition for resuming consideration of the budget. But following Takeshita's announcement, the opposition decided to resume deliberations, although it will still press for Nakasone to appear. The budget could pass the lower house this week.

The selection of the new prime minister, predicts political commentator Shigezo Hayasaka, will take place in mid-May. The LDP will then attempt a ``rollback'' policy, he says, taking steps such as income-tax reduction and political reforms aimed at avoiding defeat in the summer elections.

``Anybody like Ito, who is believed to be clean, will help the image of the LDP in the short-term,'' comments Shoichi Oikawa, a veteran reporter for the daily Yomiuri Shimbun. ``But after several months pass,'' he cautions, ``that kind of government will show it cannot solve difficult problems.''

Japanese analysts and officials express concern that Japan will at least temporarily retreat from the stronger international role it had been attempting to play.

When it comes to taking the initiative, a senior official of the Ministry of International Trade and Industry says, ``this is really a serious setback for us.''

Japanese officials insist there will be no change in basic policies. But, admits a Foreign Ministry official, ``the lack of leadership'' will be felt when it comes to making decisions ``at the cost of some economic interest groups.'' This could have particular impact, he suggests, on actions such as increasing imports from the United States, reforming the distribution system, or taking an active role in international economic cooperation.

``Compared to Noboru Takeshita, the next leader will not have as much political power,'' says Mr. Hayasaka, a former aide to ex-Premier and political boss Kakuei Tanaka. But, he says, the leader ``will have the power to determine policies backed by the total agreement of the LDP.''

Takeshita, during his brief 17 months in office, had distinguished himlf by his ability to get some difficult policies implemented. He pushed through a removal of import quotas on US beef and citrus products; he forced passage of a tax-reform package which included a highly unpopular sales tax; and his government took initiative in areas such as third-world debt policy.

Indeed Takeshita got into political trouble not only because of the Recruit scandal but also because of the impact of his reform policies. Traditional supporters of the conservative ruling party have fled the party.

The opposition has done all it can to capitalize on these discontents by appealing to disaffected constiuencies. The scandal has been the catalyst, with a steady stream of revelations of how Recruit money found its way into the hands of politicians and others. The investigation carried out by the public prosecutors has already yielded 13 arrests.

The opposition held the budget hostage as its main lever against the government. Takeshita had tried to wait them out, hoping the conclusion of the prosecutors' investigation would take the pressure off. The party held fast in its refusal to allow Nakasone to be called as a witness in Parliament.

But the pressure increased in recent weeks as the focus of revelations shifted from Nakasone to Takeshita. His explanation of some 151 million yen (about $1.2 million dollars) in political fund donations from Recruit was not accepted by the public.

Opinion polls showed support for the government dropping to unprecedented low levels. Even among LDP members, a poll last week showed one-third believed Takeshita would resign soon.

So when it came Tuesday, the resignation was surprising only in its timing. Most observers had still expected the veteran politician to hang on until later this summer, at least through the July economic summit of Western and Japanese leaders in Paris.

Sources close to the Prime Minister say he made his decision after the failure of the opposition talks, feeling there was no other alternative. Many political analysts believe that Takeshita will emerge from this as a powerful kingmaker in the party.