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Scandal Said To Weaken Japan In Dealings With United States

March 12, 1989

TOKYO (AP) _ The arrests of prominent public figures accused in a stock scandal have seriously shaken the Japanese government and hurt its stature in dealings with the United States, political analysts say.

Over the past several weeks, television reports have shown business leaders and top bureaucrats being hustled off to jail, where they are held without bail until indictment.

So far, prosecutors have arrested 12 people on suspicion of giving or taking bribes or violating securities laws in the scandal.

Since July, 17 top politicians - including Prime Minister Noboru Takeshita, former Prime Minister Yasuhiro Nakasone and 11 other Liberal Democrats - have been linked to the affair.

No politicians have been arrested, but disclosures of alleged influence buying have eroded public support for Takeshita’s 16-month-old government.

The scandal also has weakened the government’s ability to handle domestic and international issues, says Tokyo University professor Takeshi Sasaki.

″Japan’s image is very important, given its growing influence in international affairs,″ he said.

But, Sasaki said, ″This scandal has just confirmed Japan’s corrupt image in the eyes of foreigners, especially Americans.″

The scandal centers on Recruit Co., an information conglomerate that allegedly sold shares of unlisted stock in a subsidiary to more than 150 senior bureaucrats, politicians and executives in return for favors.

When the shares began over-the-counter trading, they soared in value, yielding handsome tax-free profits.

Because of the scandal, ″Other nations are likely to distrust Japan and question its motivations,″ said political analyst Takeshi Inoguchi.

Although the case mainly is a domestic affair, local news reports point to trade friction with the United States as a possible factor behind it.

Opposition politicians allege that Nakasone, during his 1982-87 tenure as prime minister, arranged for Nippon Telegraph and Telephone Corp. to purchase two U.S.-made Cray supercomputers to help quiet Washington’s complaints about Japan’s huge trade surplus.

Last Monday, two former NTT executives who bought Recruit stock shares were arrested on suspicion of receiving bribes. Prosecutors allege the telecommunications giant in turn provided Recruit with special favors, including reduced rates for circuits and the resale of the two supercomputers.

Opposition parties have demanded Nakasone testify in Parliament about his links to Recruit. Nakasone denies wrongdoing and refuses to testify.

Polls indicate public disapproval ratings for Takeshita’s administration have soared to about 60 percent while his approval ratings have plunged to about 20 percent.

The scandal has aggravated the anger of rural voters - long a bastion of support for the Liberal Democratic Party - who resent concessions to U.S. demands that Japan open its farm markets.

Although it refuses to allow rice imports, Japan agreed under U.S. pressure last year to end quotas on imports of beef and citrus products.

Some analysts predict a major upset in July elections for half of the upper house of Parliament, where the Liberal Democrats hold 143 of the 251 seats. A severe setback would endanger Takeshita’s chances next October to win another two-year term as party president and prime minister.

Analysts say, however, that Washington will still be dealing with the Liberal Democrats next year, regardless of Takeshita’s fate.

Successive scandals have failed to shake the Liberal Democrats’ grip on power. With the exception of 10 months of Socialist government from 1947 to 1948, the party and its predecessor have governed Japan since World War II.

Takeshita, vowing political reforms to restore public trust in government, has ruled out opposition demands to resign and call an early election.

More importantly, Japan’s conservative electorate does not view the socialist and communist opposition parties as viable alternatives, says professor Sasaki.

The scandal has caused the greatest political fallout in Japan since former Prime Minister Kakuei Tanaka was accused in the Lockheed affair in 1976.

Tanaka was convicted of taking a $2 million bribe after the U.S. aircraft company admitted it spent $12.1 million to advance its sales in Japan.