Japan's Mori Re-Elected, Names Cabinet

T O K Y O, July 4, 2000 -- Prime Minister YoshiroMori was re-elected by parliament today and quicklyannounced a new Cabinet charged with ensuring Japan’s economicrecovery stays on track.

But even before the Cabinet lineup featuring familiar facesin key posts was announced, speculation bubbled that Morihimself may have trouble hanging onto his post.

Analysts said it was too soon to predict the prime ministerwould lose his job in coming months. But he is fresh from anelection setback and faces a more confident opposition,criticism over a new scandal and a controversial corporatebailout.

The pitfalls ahead are many, and the unpopular Mori couldface tough going once a July 21-23 Group of Eight summit ofthe richest industrialized nations and Russia has passed.

He kept Finance Minister Kiichi Miyazawa, Economic PlanningMinister Taichi Sakaiya and Foreign Minister Yohei Kono onboard, as expected, to handle the summit.

Cabinet Adrift

Opposition parties kept up a drum beat of criticism.

“Despite the fact that Japan is confronting the majorchallenge of structural reform, it is unclear what the newcabinet is trying to accomplish,” said Tsutomu Hata,secretary-general of the main opposition Democratic Party.

“The second Mori Cabinet is a Cabinet adrift,” Hata said.

The current Cabinet is expected to last only until January,when the number of ministries will be cut to 12 from 22 as partof a sweeping government reorganization.

Mori himself got some good news and some bad today.

The Bank of Japan’s key “tankan” survey showed thatbusiness sentiment improved sharply in the three months to June,with an index measuring confidence at large manufacturers risingto plus-three, the first positive reading since September 1997.

But the “tankan” portrayed a two-tiered economy ofglobally competitive manufacturers and cosseted smaller firmsand non-manufacturers still mired in their worst postwardownturn.

Potentially more troubling for Mori was a public opinionpoll showing the popularity of the main opposition DemocraticParty has more than doubled, while support for his dominantLiberal Democratic Party sagged.

The opinion poll in the conservative daily Yomiuri Shimbunsaid support for the Democrats jumped to 20.6 percent from 9.6percent while that for the LDP — the dominant party in thethree-way ruling camp — fell to 29.9 percent from 34.2 percentin May, when the paper’s last survey was conducted.

A June 25 election for parliament’s lower house returned thethree-way ruling coalition to power, but slashed its presence inthe chamber and deprived the LDP of its outright majority.

The Democrats, who attacked Mori’s performance and the LDP’sfree-spending policies in the campaign, made substantial gains.

Analysts have said LDP elders and Mori’s rivals may beloathe to fight an upper house election in July 2001 with theunpopular premier leading the fight, but much can happen beforethen.

Scandals, Bailouts, Bargaining

Mori is also plagued by a scandal over the arrest lastFriday of former Construction Minister Eiichi Nakao on suspicionof taking 30 million yen ($283,700) in bribes from aconstruction firm in exchange for helping it to win public workscontracts.

Prosecutors raided the Construction Ministry on Monday inconnection with the case and speculation is swirling that thescandal might ensnare some key LDP figures.

Chikage Ogi, leader of the tiny New Conservative Party, wastapped for the construction hot seat. Ogi, a former musicaltroupe star, told her first news conference it was a bit likegetting the booby prize.

But she pledged to work to improve the ministry’s image andshow that “not all public works are evil.”

Questions are also mounting about a decision by financialauthorities to use 200 billion yen in tax money to keep ailingdepartment store operator Sogo Co Ltd afloat.

The Democrats, other opposition parties and the media haveattacked the move, which analysts worry could become a templatefor further corporate rescues that would add to Japan’s bulgingpublic debt—already the worst among the advanced nations.

New Posts and Telecommunications Minister Kozo Hirabayashi,who takes over before tough talks from July 10 on U.S. demandsfor deep cuts in the rates telecoms giant NTT (Nippon Telegraphand Telephone Corp charges rivals to link into its lines, saidJapan should “rationalize” its telecommunications costs. Hegave little sign of how the feud would be resolved.