Corporate milch-cows take hard look at LDP: Donors' dilemma as Japanese ruling party faces stern poll test

MONEY doesn't talk in Japanese politics. It shouts, very loud and very far. At election time in particular, the ruling Liberal Democratic Party (LDP) is like a huge shuddering cash register, spewing out money to campaigners, party hacks and hangers-on across the country.

At the last general election in 1990, the LDP is estimated to have indulged in a spending orgy that came close to pounds 250m.

Most of the money comes from Japanese corporations but they now face a dilemma: should they continue to pump billions of yen into the LDP, which they have bankrolled for 40 years, knowing that this time it might lose the coming election?

A surprisingly public argument has broken out among the leaders of industry over political funding.

Gaishi Hiraiwa, who heads the Keidanren, the Federation of Economic Organisations, which is Japan's single most powerful business lobby, has said they will continue to fund the LDP as before. Last year Keidanren members gave the party 13bn yen ( pounds 78m).

But other groupings of executives, of employers' associations and regional business chambers have disagreed, arguing that their funding should be split between the governing and opposition parties.

'The LDP and also parties with similar policies will be receiving support from the business community,' said Osamu Uno, head of the Kansai Economic Federation, based in Osaka, central Japan. It is noteworthy that the issue is merely how political donations should be shared out: there is no suggestion that business should scale back the amount it spends on politicians, even in the current climate of 'political reform'.

The LDP's credit-rating has declined with banks, which last week refused to lend the party the Y20bn it asked for to fund its campaigning.

The banks fear that if the LDP loses the election, it will not receive the usual amount of corporate donations it has used in the past to pay back loans. Instead, a consortium of 10 of the nation's top banks will probably authorise a loan of Y15bn.

The LDP's chances of holding on to the parliamentary majority it has enjoyed since 1955 looked even slimmer yesterday as five opposition parties reached an agreement to co-operate in the elections in an anti-LDP bloc. The coalition was organised by Tsutomu Hata, the former finance minister who led the revolt against the Prime Minister, Kiichi Miyazawa, in parliament 10 days ago.

Mr Hata has since set up the Shinsei, or New Life party, and yesterday he was joined by the Socialists, the Komei party and two smaller opposition parties eager to end the LDP's monopoly on power. The ruling party knows it is fighting for its life. With no new policies or ideas to attract voters, it is resorting to the kind of politics it knows best: kinken seiji, or money politics, which has served it so well in the past.

Yesterday in Tokyo's municipal elections, the LDP added two seats to the 42 it held in the city's 128-member assembly, but the Kyodo news agency said its performance indicated the party was heading for a serious setback in the general election on 18 July.

The fund-raising dinners have already got under way. On Thursday members of the LDP's second-largest faction, led by Hiroshi Mitsuzuka, held a party in a Tokyo hotel for 2,000 guests, with tickets at Y30,000 a head.

The LDP is not alone in rushing to raise money: even Mr Hata's Shinsei party is out looking for funds. Coincidentally, the Shinsei party was holding a fund-raiser in a hotel across the road from Mr Mitsuzuka on Thursday: tickets were Y20,000 a head, and some 900 people turned up.

Mr Hata had been asked earlier in the week whether he would not turn away from the money politics that he had criticised in his old party. 'Frankly speaking, because we still have to fight in the system we ultimately want to abolish, each of us has to struggle for financing,' he answered, ever the realist.

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