Japan's PM contenders debate ailing economy

Ryutaro Hashimoto (right) with former leadership contender Hiromu Nonaka

In this story: The 200-day plan Koizumi's solid position RELATED STORIES, SITES

By staff and wire reports

TOKYO, Japan -- The four candidates hoping to replace Japan's unpopular Prime Minister Yoshiro Mori have used their latest debate as a platform to discuss the nation's economic woes.

The race to replace Mori as Liberal Democratic Party president is being led by former Prime Minister Ryutaro Hashimoto and Junichiro Koizumi, a former health minister, with the Liberal Democratic Party's policy chief Shizuka Kamei and Economic Minister Taro Aso trailing.

All four contenders are scrambling to win the votes of fellow party members in the run-off to be the LDP's next leader, replacing Mori. The winner of the LDP run-off is expected to be officially named prime minister shortly after the party election.

Whoever wins the vote next Tuesday by the party's members of Parliament and representatives of its local chapters is assured of becoming prime minister because of the Liberal Democrats' strength in Parliament.

Hashimoto told reporters on Wednesday he did not oppose the use of public money to help Japan's banks dispose of shares in public companies as part of a campaign to solve Japan's financial woes.

"I think the banks are holding too many shares in relation to their capital," he said. "It is not wrong to use public funds if needed."

The issue relates to whether the government should order the banks to cut their holdings in public companies -- often clients of the banks -- to reduce their vulnerability to stock market fluctuations as well as reduce their ability to drag down the share market by dumping large tranches of shares.

Japan's stagnant economy -- underpinned by its weak share market and ailing currency -- has been the main focus of campaigns so far. Japan remains in a slump, with unemployment at near record levels and business sentiment gloomy.

The 200-day plan

Hashimoto, in announcing his candidacy last week, pledged to implement a "200-day plan," in which he would try to bolster the economy and tackle the nagging problem of bad debt that has hamstrung Japan's banking industry.

"In the past, this would have been impossible," he said at Wednesday's debate. But he added that Japan's prime minister has greater decision-making power due to recent reforms, and vowed to set economic goals and pass the needed laws to meet them within that period.

Ironically, Hashimoto was prime minister when the LDP implemented a fiscal tightening, or increase in taxes, in 1997 that helped push Japan into recession and set the stage for a massive routing at the polls the next year.

Koizumi has focused on his pet project of privatizing Japan's huge postal savings system, but began Wednesday by stressing another favorite theme -- the importance of stopping a plunge in support for the ruling party.

"The most important thing now is to restore trust in politics," Koizumi said, alluding to anger at the scandals and gaffes that have dogged Mori over the past year.

Mori's lack of support -- in the single digits in recent polls -- forced him to announce he would step down this month, instead of in September when his term as party president was to end.

Hashimoto had generally been regarded as the strongest candidate because he leads the largest faction within the party, with about 100 votes. Before Wednesday's debate, another major faction, with 43 votes, endorsed him.

But his support of a sales tax increase during his 1996-98 tenure as prime minister has made him unpopular with the voters, and many party members fear his election could hurt the party in Parliamentary elections this summer.

Koizumi's solid position

Koizumi, meanwhile, has seen support among the party rank-and-file grow recently and, with the party's second-largest faction behind him, analysts believe he could now be in a solid position to challenge Hashimoto if he can win most of the local party chapter votes.

Each of the 346 LDP lawmakers has one vote in the contest, while the party's 2.4 million other members' ballots are boiled down to 141 votes -- three for each of Japan's 47 prefectures (states).

The Manaichi Shinbun newspaper said on Wednesday that Hashimoto has a lead in only 10 prefectures.

Prefectural chapters are now holding elections to determine how to distribute their three votes.

The Associated Press & Reuters contributed to this report.

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Liberal Democratic Party of Japan

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