A Test Of Fire For A Samurai

With the flourish of samurai politics, powerful Finance Minister Ryutaro Hashimoto offered last month to make a "beautiful exit" and resign to put an end to Japan's snowballing financial scandals. "Cutting my neck," he told power brokers in the ruling Liberal Democratic Party, "would be the cleanest way to go." They appealed to his fighter instincts to stay on.

But now, as scandals involving Japan's brokers and bankers start to claim political victims, Hashimoto is feeling the cold metal against his neck. Once considered a strong contender to become Prime Minister this fall, the 54-year-old Hashimoto is facing the fiercest battle of his stormy career. A report in a Japanese newspaper has linked him with an unsavory deal to funnel loans to several of his acquaintances. Smacking of the same kind of favoritism for which Hashimoto blasted mighty Nomura Securities Co. and other brokers, the revelation has dashed his chances of becoming the next Prime Minister. The issue is whether Hashimoto can cling to power at the Finance Ministry.

Not one to back down from a fight, Hashimoto is resisting calls by the opposition party to resign. Making a beautiful exit and quietly rebuilding alliances with LDP power brokers is not Hashimoto's style. He is cut from a different cloth than many of the consensus-minded players in Nagata-cho, Tokyo's political district. Hashimoto is consistently ranked as one of Japan's most popular politicians, and he has been able to cash in on his good looks and sense of drama to ease through tight spots. If he plays the scandal right, he could transform disaster into opportunity--and catapult his career even higher.

Fiery temper and all, Hashimoto is a good example of a new generation of more cosmopolitan but tough-minded politicians, less inclined to toe the U. S. line. They were all born after 1925, when the late Emperor Hirohito ascended the throne. Hashimoto and his peers share views shaped by the prosperous postwar years and conditioned by Japan's growing independence. While older politicians are more respectful of U. S. generosity, men of Hashimoto's age don't exhibit the same sense of indebtedness.

He's also a doer. While many Japanese politicians are content to maneuver in the shadows, Hashimoto relishes his role on the front line. The LDP leadership has singled him out at different points in his career to deal with thorny issues. While others ran for cover, Hashimoto helped to privatize the railroads and push through a bitterly controversial tax on consumer goods. Even if Hashimoto resigns, Japanese politics repeatedly proves that there is life after scandals. With at least another 10 years to maneuver to become Prime Minister, Hashimoto is a man to watch.

BELLWETHER. But it won't be easy to tough this scandal out. Hashimoto faces weeks of grueling investigations by the Diet into the scandals and into the ministry's and his personal role in policing the industry. Already, he is showing some signs of strain, telling colleagues that this ordeal was like "sitting on a bed of nails." The daily newspaper Yomiuri Shimbun reported on Aug. 6 that he will resign by the end of the month, which the LDP promptly denied. Hashimoto declined an interview.

If Hashimoto goes, Japanese politics will undoubtedly experience a far-ranging shake-up. For starters, his resignation would deal a major blow to Prime Minister Toshiki Kaifu. Although largely powerless as a leader, Kaifu has been able to survive on his Mr. Clean image. One reason is that Hashimoto has borne the brunt of the attacks by the opposition and the media on the ministry's failure to root out financial excesses. As far as Kaifu is concerned, Hashimoto is equipped to take the heat. But his resignation would expose Kaifu to the full fury of the Diet and make it more difficult to maintain his Teflon image. "If Hashimoto resigns, the next to go will be Kaifu," predicts Yasunori Sone, a politics professor at Keio University.

Such upheaval would also frustrate the Bush Administration's efforts to improve relations with Tokyo. Having painstakingly cultivated Kaifu for two years, White House officials hope he will implement needed trade and political reforms. During a special session of the Diet, Kaifu is backing reform bills that would redraw political districts and impose stricter guidelines on campaign gifts. But first, he needs Hashimoto to press ahead with legislation to outlaw compensation payments for stock market losses and to reorganize the ministry's enforcement division.

As Foreign Minister, Hashimoto is a power in U. S.-Japanese relations in his own right. He's at the center of action on such issues as debt forgiveness for Egypt and Poland, Operation Desert Storm compensation, financial-market liberalization, and aid to developing nations. Although Hashimoto has on occasion sparred with Treasury Secretary Nicholas F. Brady, his U. S. counterpart, Brady has publicly lobbied on Hashimoto's behalf.

When the stock market scandal first broke two months ago, few, in fact, thought the trail would ever lead to Hashimoto. All eyes were on the Finance Minister to lead the charge in cracking down on Japan's brokers for reimbursing big clients for roughly $1 billion in losses. But in one of the twists for which Japanese politics is famous, Hashimoto suddenly became a target.

COZY LOANS. In a story broken by the Mainichi Shimbun on Aug. 3, Hashimoto's top aide, Toyoki Kobayashi, was said to have used his influence to arrange loans for three people with close links to Hashimoto (table). The loans went to a popular actor, an owner of a tempura restaurant, and a developer of sports facilities. Kobayashi promptly resigned. Standing next to Hashimoto at a press conference, Kobayashi accepted blame. But that argument is hardly convincing. On July 25, Kobayashi had reported the incident to Hashimoto. The Finance Minister reportedly reprimanded him for not being more careful. But Hashimoto did not make a public disclosure.

Even before this, his handling of the stock market scandal had come under attack. It took him three weeks to levy any discipline on the brokers. Few were impressed by his decision to cut his $120,000 salary by 10% for three months. And his repeated efforts to quash any form of a U. S.-style Securities & Exchange Commission so as to preserve the wide powers of the Finance Ministry cast doubt on his reputation as an independent thinker.

More dirt could fly before this scandal ends. But if anyone has good survival instincts, it's Hashimoto. In 1986, then-Prime Minister Yasuhiro Nakasone put Hashimoto in charge of the Transportation Ministry just as it went ahead with a controversial plan to privatize the national railway system. Faced with bitter opposition from Japan's unions, Hashimoto managed to get the plan through.

Tainted by the Recruit Co. scandal, the LDP again tapped into Hashimoto's popularity and named him secretary general of the party. With the goal of drumming up popular support, Hashimoto took to the road to pump flesh. His 10,000-mile charm offensive wasn't enough to save the LDP in July, 1989, elections, but it helped contain the damage.

Soon after, his rivals inside the LDP maneuvered him into becoming Finance Minister, where he faced widespread anger from Japanese consumers over a 3% consumption tax. In the logic of Nagata-cho, he was set up for a fall. Hashimoto not only survived, he turned the issue around. Taking advantage of his popularity with the voters, he took out newspaper ads to make a personal appeal to accept the tax. Public opposition faded.

Although he has proved useful in the hot seat, Hashimoto has not garnered much support within the LDP. Colleagues describe him as swift and energetic, even brilliant, but they're put off by his argumentative, albeit cool, style. More like a British member of Parliament, Hashimoto spars during Diet sessions with opponents. Along the way, he has bruised plenty of egos. "That approach doesn't work here in Nagata-cho," complains one senior LDP member. Even in his own faction in the LDP, headed by former Prime Minister Noboru Takeshita, Hashimoto has few followers.

SHOUTING MATCH. To a degree, Hashimoto is stepping in his father's footsteps. Branded as a troublemaker, Ryogo Hashimoto, a member of Japan's Cabinet during the U. S. occupation after World War II, first won a seat in the Diet in 1949 and soon earned the antipathy of bureaucrats for his inflexible--and often principled--ways. He even quit his job as Health Minister when Finance Ministry officials refused to increase welfare payments to Japanese war victims.

While equally outspoken, the younger Hashimoto has strayed from his father's maxim to defend the weak. In 1969, as a young assistant to the Health & Welfare Minister, he got into a shouting match with victims seeking greater compensation in one of Japan's worst cases of industrial poisoning. When colleagues intervened, Hashimoto roared at them to be silent. Embarrassed aides scurried around bearing gifts of sake to apologize to Hashimoto's supporters.

Hashimoto has become much more polished since then. Even so, his careeris in limbo as he weathers his firstscandal. Meanwhile, the rest of the worldis demanding a new brand of leadership from Japan. But the Finance Minister'splight and the series of scandals rocking Nagata-cho mean that will just have to wait.

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