Tokyo's Own Comeback Kid?

Once-reviled Ryutaro Hashimoto could become Premier again

Japanese Prime Minister Yoshiro Mori couldn't be much less popular than this: The latest polls give Mori's cabinet a rating of around 20%. Scandals in the government, a weak economy, policy gridlock--there's not much to like about the 62-year-old politician's rule. So it's no surprise that Tokyo's political cognoscenti give the Mori government just a few more months of life.

So who might be waiting in the wings? None other than Ryutaro Hashimoto, 63, Japan's Prime Minister from 1996 to 1998. Hashimoto, now a star of Mori's Cabinet, seems to be in a leading position to succeed his boss. A second Hashimoto term would mark one of the great comebacks in Japanese politics. It might also mean some intelligent policymaking--provided Hashimoto has learned from his mistakes.

Hashimoto has had to dig himself out of a deep hole: He resigned in disgrace after voters pummeled his party in a legislative election. Ordinary Japanese blamed Hashimoto for driving Japan's seemingly recovering economy back into a sinkhole by raising consumption and social taxes. "I never expected him to revive," says independent political analyst Minoru Morita. "He made major mistakes. He caused the recession."

But Hashimoto has survived, and thrived. His seniority in the Diet took him to the top titular post of the ruling Liberal Democratic Party's leading faction. From there, he made a surprisingly easy jump into the new Cabinet that Mori named in December. He now holds the prestigious post of State Minister for Administrative Reform. He also handles delicate negotiations over the continued presence of U.S. troops on Okinawa and Russia's World War II occupation of several northern Japanese islands. "This is the biggest remaining postwar problem," says Hashimoto. "Maximum diplomatic negotiations are under way."

A lifetime of making connections inside the LDP assisted Hashimoto's comeback. His benefactors are the handful of genro, or elder statesmen, who really pull the political strings in Japan. His chief sponsor is former Prime Minister Yasuhiro Nakasone. Hashimoto's popularity with voters has also undergone a renaissance; he scored among the top four politicians in a mid-December poll. Despite his disastrous handling of the 1997 tax hike, Hashimoto's other achievements stand out in contrast to the ineptitude of the Mori administration. Hashimoto gets full credit for pushing through Japan's groundbreaking Big Bang financial reform and for engineering recent cutbacks in the government bureaucracy.

Administrative reform is still the former P.M.'s passion. "This year will be the showdown," he says. "By summer I want to realign our basic concepts." His new job also makes him the point man for deregulation, a top priority of foreign companies and governments.

Hashimoto--or "Hashiryu" as the Japanese call him--emphatically denies any interest in being Premier again. But one of his closest political confidantes, LDP Deputy Secretary-General Akihiko Kumashiro, says he is the first choice of the genro, and his promotion is mainly a matter of timing. "He has to wait for the right chance," says Kumashiro. That chance almost certainly will be in September, when the LDP holds its biennial election for president, and thus Prime Minister. The choice is expected to come down to Hashimoto and Junichiro Koizumi, a former head of the heavyweight ministries of health and welfare, and posts and communications.

UNKNOWN. Yet Koizumi is a leader of Mori's own faction, and probably would not stand for reasons of honor. In any event, "he's an unknown quantity," says a Western diplomat in Tokyo. At the same time, "Hashimoto is the smartest guy in the Cabinet," adds the envoy. His ascension would please U.S. officials, since Hashimoto buys into the latest proposals for bilateral security deals, deregulation, and the need for a stronger Prime Minister.

A renascent Hashimoto could revive bad memories in the markets. "We have an allergy toward Hashimoto," says a fund manager, recalling the tax hike that killed the recovery. "If he's elected, the yen and Nikkei [index] are bound to fall." Maybe. But the consensus in the government and business elite is that Japan needs a strong leader. Ryutaro Hashimoto is as close as they can come.

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