IS HE RUNNING INTO A WALL?

By FRANK GIBNEY JR./TOKYO

Japan is not unaccustomed to drama, but transforming catharsis is still a rarity. In the past three years and three months, the country has witnessed the fall of a virtual dictatorship--a party that had held sway for 38 uninterrupted years--and endured a succession of Prime Ministers that was practically Italian in its instability. The economy, once the envy of the world, has only now begun to emerge from four years of stagnation. Yet despite all appearances of revolution, the regime remains the same in the eyes of most Japanese. The nation is ruled not by the parliament or the Prime Minister but rather by a force as faceless as ancient Emperors and as intractable as smog: Kasumigaseki, the district in Tokyo where government bureaucrats have their offices and from which they have colonized the rest of Japan.

In the campaigning for next Sunday's parliamentary election, however, Kasumigaseki has come under attack as never before. Every participating political party is demanding deep reforms to curtail the power of the ministries. "Japan's political dynamism is such that if everyone starts saying the same thing, something will happen," says Takeshi Sasaki, a professor of politics at the University of Tokyo. "This election could create a national consensus for reform." Indeed, even Prime Minister Ryutaro Hashimoto, whose Liberal Democrats were in cahoots with the bureaucrats for decades, has promised to cut the 22 ministries in half if his party manages to once again win a solid mandate. Although the party is currently in the lead, polls predict that it will fall short of a majority, raising the specter of further coalition rule for the country. Whoever forms the government will come under pressure to restructure everything from Japan's backward social-welfare system to its hesitant defense role in the face of challenges from the rest of Asia.

Without a complete overhaul of the country's political, financial and education systems, dreams of prosperity could well become nightmares for Japan's future generations. The country's remarkable post-war growth was built around an industrial policy in which politicians, bureaucrats and corporate chieftains orchestrated every regulation, first in order to catch up with the West and later to keep themselves entrenched. But politics and the bureaucracy never got to evolve. When success brought on the frenzied speculating of the late 1980s, the ruling establishment covered one another's bets. In 1992 the bubble burst, the Nikkei stock index lost more than half its value, and Japan plunged into recession. The Liberal Democrats lost their grasp on power, returning a year later in coalitions. "The old corrupt system fell apart," says Taizo Yakushiji, a professor of international politics at Keio University. "So finally we're back to where we were in the early 1970s."

Today the bureaucracies that used to deliver progress only contribute sclerosis. Critics roundly blamed bureaucratic ineptitude for the sluggish rescue response to last year's Kobe earthquake, which took more than 6,300 lives in the region. The same complaints were repeated last summer, when a food-poisoning epidemic in Sakai City, near Osaka, spread to affect nearly 5,800 people throughout the country. "If the politicians stick to the status quo, then we will lose our position in the world market," says Isamu Miyazaki, a senior adviser at the Daiwa Institute of Research. Competition from China and other fast-growing economies in Asia, as well as the globalization of trade, is making it much harder for the stodgy Japanese bureaucrats to maintain the country's advantage. In fact, Japan's mandarins have kept borrowing to prop up the economy with massive public-works projects, running the national debt up to nearly $4 trillion--just about as much as the GDP--by far the worst record in the developed world.

The Oct. 20 election is an opportunity to rebuild official credibility. A record 1,503 candidates are standing for the Diet's 500 lower-house seats, and two-thirds of them are first-time contenders, born after World War II. The candidates will compete under a new electoral system designed to halt money politics and limit the influence of special interests. "We need to create a government that can bring about change," says Minister of Health Naoto Kan, the highly popular co-leader of the new Democratic Party, which is promoting its version of a "kinder, gentler" Japan. Depending on the political party, plans for administrative reform run from a polite overhaul of the Ministry of Finance--which bears most of the blame for the financial crisis--to moving the bulk of government out of Tokyo.

The main problem is that the Japanese people hoped for change three years ago, and are having a hard time taking these new pledges seriously. Despite Hashimoto's declarations, many Japanese expect the Liberal Democrats to sacrifice only the Ministry of Finance if they regain power. The electorate is so dyspeptic that just 52% of respondents in one survey said they plan to vote. Those who wish for a different Japan can only hope that the citizens who vote care enough for change.

--With reporting by Irene M. Kunii and Hiroko Tashiro/Tokyo

With reporting by IRENE M. KUNII AND HIROKO TASHIRO/TOKYO