New Coalition of Reformers Finally Takes Power in Japan

But bureaucrats and LDP-business ties pose serious challenges

FOR more than three decades, the dons of Japan's ruling Liberal Democratic Party would meet business leaders each month for a power breakfast. Over miso soup or grilled fish, they cut secret deals to help turn Japan into an economic superpower.

But no more.

And in back rooms of restaurants, LDP leaders would also gather with powerful bureaucrats to tell them how to protect and finance favored industries, especially construction.

Those days are gone, too.

The LDP is out of power, officially, starting today. The Japanese emperor, Akihito, will ritually anoint a new prime minister, Morihiro Hosokawa, who heads an anti-LDP coalition of seven parties.

Just by taking power, Mr. Hosokawa has partially broken Japan's "iron triangle," or what he calls "the cozy relations among politicians, bureaucrats, and business." He vows to "pay any price" to destroy the triangle.

The ties worked simply enough. Corporate money backed LDP campaigns. The LDP helped corporations deal with bureaucrats. And bureaucrats got jobs in corporations after an early retirement.

The average Japanese, meanwhile, was left with a society of strict controls, and foreign companies stood little chance of breaking into the system.

Catapulted to power by LDP corruption, Hosokawa will have trouble dealing with the LDP as an opposition party. The LDP used parliamentary tactics last week to delay his taking office by four days.

And Hosokawa must also cope with his unwieldy coalition of conservatives and Socialists, united almost solely to reform an election system that has favored the LDP for 38 years. He appoints his Cabinet today from the various parties.

"Our support from the people could burst like a bubble," says Tsutomo Hata, a coalition leader and head of the Japan Renewal Party. "We must be aware of that."

But Hosokawa's toughest task may lie in proving that non-LDP politicians can stand up to both business and bureaucrats.

"However much tribute is paid to political reform, the change of government will have no meaning unless a dent is made in those [iron triangle] relations," said an Asahi newspaper editorial. "That process will also be watched closely by the international community as a means to open Japan's domestic market."

Hosokawa's coalition promises to make Japan more consumer oriented and to decentralize power away from Tokyo. "Deregulation will bring transparency," Mr. Hata says. "And the world will come to understand Japan."

But the dawn of a new political order in Japan has yet to be proven. Hosokawa and his Cabinet must walk a fine line between cooperation and antagonism with ministries, which hold valuable information.

Nothing will test Hosokawa more than setting budget priorities, however. The process, which starts this month, has been largely controlled by finance ministry bureaucrats, not politicians.

The ministry also is holding fast against an income tax cut that many in the coalition favor. Any changes in taxes could drive an ax into the brittle alliance. "Tax is one area in which we have had very heated debate," Hata says.

In policy issues, too, Hosokawa will face conflict. He favors compensating victims of the 1967 Minamata mercury poisoning caused by industrial pollution, for instance.

But the Japanese Environmental Protection Agency (EPA) has long opposed it. "Even under a new government, we would not change our policy on the matter," top EPA bureaucrat Atsuo Yagihashi said defiantly last week.

In other issues, such as rice imports and airline fares, bureaucrats may stand up for their regulated industries against the coalition.

But some ministries are sensing the new political wind and coming forward with budget proposals that appear to favor consumers.

The finance ministry is thinking of shifting public works projects from roads to sewers. And the construction ministry is talking about new policies for housing. Many Japanese are without sewers or their own homes.

The other corner of the iron triangle, business, has been reluctant to abandon the LDP totally or alter its system of corporate "donations" until it is sure the coalition is stable, or a two-party system develops. "We can't change the system immediately," says Sony Chairma Akio Morita. "The political parties need the money."

The biggest business group, the Federation of Economic Organizations, is moving toward funding conservative parties in Hosokawa's coalition.

The coalition has plans to phase out all corporate donations to politicians within five years and replace the system with state subsidies and regulated individual contributions.