PM Hashimoto too preoccupied with domestic politics

By Edward Neilan

Japan's main hope is to lead Asian economic comeback. One by one, Asian bubble economies have burst. A pressing question: Could China be next?

TOKYO (JP): Asia is looking to the leadership of Japan -- through example, mainly -- to recover from a 1997 financial crisis and guide it through a pivotal 1998.

But is Japan up to the task? Can the old dog learn the new tricks that are required to repair an Asian landscape littered with financial bubbles that have burst?

One problem is that Japanese society has deep roots in the "dango" mentality of a close-knit village. Bid-rigging, cover- ups, and the "Full Monty" (total) of corruption are endemic.

Listen to Shoichi Kobayashi, professor emeritus at Aomori University and a well-known commentator:

"This mentality lies behind the failure of Japan to pursue a demand-led economic growth that was championed by the United States and the International Monetary Fund."

He says changing the economy must go hand in hand with changing the national mentality.

In Kobayashi's opinion, "Japan's future depends on whether we can find politicians who can provide strong leadership and journalists who have the guts to call a spade a spade."

There must be some economic recovery and escape from the financial wreckage of a disastrous 1997 performance whose reasons for collapse are still not completely clear.

One by one the Asian bubbles have burst. Could China, with an overvalued currency, be next?

The obvious villains were irresponsible government officials who played politics with standard banking practices, Asia's old bugaboo corruption, reliance on edicts instead of the market and towering indebtedness.

But there may have been other causes.

Who can say that the handover of Hong Kong from British to Chinese rule July 1 had to do with confidence, currency speculation and stock market manipulation?

Were Malaysia, Indonesia, Thailand and South Korea -- hardest hit by the financial nose-dive -- also affected by the change in Hong Kong?

Does the continuing growth in China, bolstered by central government market involvement masked by low transparency, cause disruption in the regional markets? These are unanswered questions.

More than one analyst lays the blame for creating Southeast Asia's inflated economies on Japan's doorstep. Heavy Tokyo investing, plus local fiscal laxness, created an aura of false prosperity.

The necessity for a strong Tokyo rebound, return of investor confidence to South Korea and Southeast Asia, and continued growth and stability of China are seen as keys to an active 1998.

Ryuichiro Hosokawa, former managing editor of the Mainichi Shimbun, said "Economic experts, government officials and politicians have offered various opinions on the state of the Japanese economy. We have no way of knowing the truth. It is as if we are shrouded by a dense fog and have lost our sense of direction. Some pundits say recovery will start around 1998; others disagree."

Surveys show that half of Japanese industries are prospering while half are stagnating. Experts say the top management of troubled companies are responsible for their plight. That may be true, but banks' reluctance to provide loans -- emergency loans in particular -- makes things harder for businesses desperately trying to survive.

Hosokawa reflected the opinion of many analysts when he said "Prime Minister Ryutaro Hashimoto has committed a series of policy blunders, blindly following the advice of bureaucrats and implementing ill-timed measures."

Public anxiety over troubled financial institutions stems from Hashimoto's failure to clarify his policy regarding the ailing financial system. His mixture of tax cuts, bond proposals, budget slashes and government reorganization lacks cohesion.

As a result, Hashimoto's popularity rating fell to a lowest- ever 36 percent in an NHK-TV poll released on Dec. 22. The last time the poll was taken, in September, Hashimoto's approval rating was 45 percent.

A Western diplomat quoted here said "The view in Washington is that Hashimoto just doesn't get it. He is out of step with the times internationally and paying too much attention to domestic politics."