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Down In Flames
Japan's ruling party crushes a rebel — at a cost

Captain Kato tightened his "Kamikaze" headband, tipped his plane over, and dove straight for battleship Mori below. Through the hail of defending fire he flew, his squadron close behind. Then, just before impact, Kato pulled out of his dive, turning himself into a sitting duck for the gunners — and the Mori sailed on.

It had always risked becoming a suicide mission when Japanese political heavyweight Kato Koichi rebelled against Prime Minister Mori Yoshiro of his own Liberal Democratic Party. Kato vowed to support an opposition no-confidence vote against the unpopular Mori, saying the PM's ouster was essential for revitalizing the LDP and spurring much-needed reforms. The party hierarchy fought back with fury, threatening Kato and his allies with expulsion and political oblivion. For 10 days, the two sides glared at each other. Then, just hours before the vote's scheduled start on Nov. 20, Kato blinked, and merely abstained. "I've decided that we should make an honorable retreat as going ahead with our attack now would not guarantee victory," he said, tears welling in his eyes. Humiliating rout is more like it. The LDP-led ruling coalition voted down the no-confidence motion, while Kato, his supporters, and even his reform agenda went down in flames.

What was he thinking? Kato Koichi, 61, had long been seen as a future prime minister. The Harvard-educated former diplomat, who speaks fluent English and Chinese, is lauded for his grasp of policy and willingness to speak his mind. As head of the LDP's second-largest faction, a little patience and a little more shmoozing with fellow party leaders should have seen him in the top job in the near future. But Kato is an advocate of small government who opposes mindless public-works spending to revive the economy, putting him in conflict with the factions that dominate the party. He feared that Mori — with his tepid reforms, unending gaffes and sub-20% public approval rating — was leading the LDP, and Japan, on a path of no return. Shut out from the inner circle, Kato went to the public, where his revolt won a 54% approval rating. But the public counts for nothing in a faction fight, and his enemies had the numbers. If he had voted against Mori as he promised, Kato would have lost, but he might have been a defeated hero. By not doing so, he ended up simply a loser.

But if Kato lost the battle, his fight may have helped accelerate changes on the battlefield. "People now see that reforming the LDP is incredibly hard, even with the best efforts of Kato and his young supporters," says political analyst Okazaki Shigenori of UBS Warburg in Tokyo. "That is a plus." Many supporters are already disillusioned by the LDP. In last June's general elections, the party lost its parliamentary majority. It now governs at the sufferance of its coalition partners. With Kato's capitulation, that disillusionment is growing. "We've been betrayed by the LDP again, and by Mr. Kato who I'd trusted until now," said one message on a pro-Kato Internet website. "I'm tired of being made a fool of. Goodbye Kato faction. Goodbye LDP." Moreover, the crushing of young reformists inside the LDP could push some of them to bolt for the opposition, and discourage new talent from joining the party. Already, last June, more former bureaucrats ran for parliament under the banner of the opposition Democratic Party of Japan than the LDP.

Kato's revolt was also a battle over who the LDP wants to represent. The LDP draws its support primarily from protected, regulated sectors such as farmers and the construction industry. Kato's views advocating small government and deregulation are more in line with those of high-tech industries competing globally. "In addition to being a fight about philosophy and authority," said economist Robert Feldman of Morgan Stanley Dean Witter in a research report, "the battle in the LDP is about which set of support groups will give the party a better long-term future." Since protected old-economy companies are bleeding money while new-economy rivals grow, the search for funding should eventually push more politicians into the deregulation and reform camp. Even the LDP leaders who humiliated Kato know they barely squeaked through this conflict. They talk about the need to do something to win back disenchanted supporters. Change will not be quick, but it is nearing.

Despite Mori's short-term victory, he may not last long. Even after supporting him in the no-confidence vote, many LDP members are leery about having Mori lead the party into the upper house polls due next July. So are the LDP's coalition partners. If Mori is not pushed out before a cabinet reshuffle in December, he will probably go after the budget is passed early next year. But any replacement — the leading candidates are Foreign Minister Kono Yohei, Mori faction leader Koizumi Junichiro and former foreign minister Komura Masahiko — is likely to be a virtual Mori clone. "As long as the factions now controlling the LDP remain in charge, it's hard to imagine any policy changes," says Okazaki. "Only someone who won't change things can become premier." However, as the upper house election comes closer, the tectonic plates underlying Japanese politics are shifting. An earthquake cannot be accurately predicted but, eventually, it rocks.

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