How Scandal Finally Outran the Reformer

By J.F.O. McAllister/Washington

Japanese custom dictates that when alcohol is served, it is permissible to let one's guard down. Early last week Prime Minister Morihiro Hosokawa did just that over an eel-and-sake dinner in a fancy Tokyo restaurant, confiding to his dining partners that he wanted to quit. His indiscretion was immediately leaked to the press, prompting an official denial that same night. Three days later, however, Hosokawa set his resignation in motion. A popular reformer who came to power last August pledging to sweep out "money politics" was outrun by a scandal of his own making.

At a hastily called press conference Friday, Hosokawa confessed that his previous explanations of a questionable 1982 loan had not been candid. "I sincerely apologize to the people of Japan," he said. But to most Japanese, mired in their worst postwar recession and governed by a weak seven-party coalition, no apology was enough. Hosokawa's abrupt decline was a depressing signal that big-money politics still haunt the Japanese government.

The suspect loan, worth $960,000, came from the Sagawa Kyubin trucking company. Hosokawa claims that he repaid the money, but critics say he kept it to fund his campaign to become governor of Kumamoto prefecture the following year. When pressed, the Prime Minister first asserted that he used the cash to purchase an apartment in Tokyo and to repair the roofed gate and plaster wall of an ancestral home. Opposition legislators charge that he bought the apartment before he received the loan. They tracked down the construction workers and determined that they charged only $67,000 for the repair -- and did the work a year after Hosokawa received the loan. Also, the paperwork Hosokawa released to prove he had repaid the loan appeared incomplete. One ledger included the date "Sept. 31," suggesting that it was a hurriedly conjured reconstruction. The inept handling of what at first appeared to be a minor, perhaps nonexistent transgression inspired some commentators to compare Hosokawa's problems to Bill Clinton's Whitewater saga. At his departure press conference, Hosokawa expressed the "sincere hope that this act of mine will result in restoring public trust in the political process."

Not likely. Whatever his faults, Hosokawa, not a particularly corrupt figure in Japanese public life, was responsible for passage of a landmark political- reform bill. Most of the senior politicians now jockeying for his job came of age in the same money-swamped system, and the opposition Liberal Democratic Party, which ruled Japan for 37 years until displaced by Hosokawa's government, lost two of its last 10 Prime Ministers to scandal. In fact, some analysts think Hosokawa, because of his popularity, could have beaten back the attempts to unseat him. But this supremely independent descendant of feudal lords does as he pleases. He reportedly told his eel-and-sake companions that he wanted more freedom to move around. Some Japanese thought him irresponsible for leaving so abruptly. "He's stepping down in the middle of things," said Tamotsu Dendo, 41, a piano tuner. But others praised Hosokawa for not succumbing to the obsessive desire to cling to high office. "His manner of retreat was refreshing," says senior Diet member Kozo Watanabe.

Despite his downfall, Hosokawa will be remembered for his role in prying Japanese politics free from the hammerlock of the L.D.P. But he leaves behind ^ an awkward governing coalition, which includes highly conservative former L.D.P. barons widely viewed as corrupt, as well as pacifist social democrats and disparate smaller parties. The power brokers who remain are struggling to hang together in the face of attempts by political rank and file to find a sturdier combination. At week's end the leading candidates to become Prime Minister were Tsutomu Hata, head of the coalition's second biggest party, and former Foreign Minister Michio Watanabe, with former Prime Minister Toshiki Kaifu as the dark horse.

Whoever follows Hosokawa will preside over a weak government in which politicians will be concerned with building coalitions while avoiding scandals of their own as they look toward the next general election. "That means the bureaucracy will be left 'home alone' to run the country," says a U.S. official. But major initiatives, like opening up Japanese markets to avoid a fight with Washington, will require real political risk-taking, which is now much less likely. That's bad for Bill Clinton, who has staked a lot of his hopes for easing trade tensions on his ability to get along with fellow reformer Hosokawa. "This makes our life on the trade side very difficult," says the U.S. official.

Of course, while Hosokawa is now down, he is not necessarily out. His grandfather Fumimaro Konoe was Prime Minister three times, resigning twice over a misjudgment. Asked if he would like to return to the top job, Hosokawa responded, "I have no such thoughts." But that's just what he said the week before he became Prime Minister.

With reporting by Kumiko Makihara/Tokyo and Ann M. Simmons/Washington