The land of rising expectations: An old man's vision has transformed politics in Japan, writes Terry McCarthy

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A POLITICAL order that had lasted for 38 years came to an end yesterday, as the Liberal Democratic Party (LDP) lost its absolute majority in the lower house of Japan's Diet, or parliament. But it remains the single largest party, and in the short term Japan faces a period of political uncertainty as the LDP and the other parties jostle to form a coalition for the next government.

However, in the longer term, yesterday's election will appear as a landmark in Japanese politics, the beginning of a shift away from a system that concentrated exclusively on export-led economic growth and ignored broader issues of foreign policy, consumers' rights and rewarding lifestyles. A new political paradigm for Japan is evolving.

The seeds for yesterday's upheaval were sown about five years ago, but few people realised it at the time. They came from a grizzly old LDP veteran, Shin Kanemaru, who ironically had profited more than most from the old LDP-dominated political structure.

Known as 'the Don', he controlled a huge political fund-raising network, and although he never aspired to the premiership himself, he had immense power behind the scenes. Mr Kanemaru was responsible for appointing three prime ministers in a row, including the current prime minister, Kiichi Miyazawa.

In the late Eighties, Mr Kanemaru began making oblique references to changing the political power balance and forming a coalition with members of other parties. Politics was moribund, politicians had no new ideas and bureaucrats were, in effect, ruling the country. Japan needed a second political party that could take on the LDP. Few people paid him much attention: he was in his late seventies, and critics dismissed his ideas as the musings of a veteran in his dotage.

But some of the LDP leaders realised Mr Kanemaru was serious when it became clear that he was engaging in a huge fund-raising operation which was not feeding into the LDP coffers. They suspected he was amassing money to launch a new party, made up of some LDP defectors and some opposition politicians who were sympathetic to his ideas.

Then came the Sagawa Kyubin scandal, in which a parcel delivery company was shown to have paid billions of yen to politicians in Tokyo. But investigators concentrated almost exclusively on Mr Kanemaru, and he was arrested in March and charged with massive tax evasion on money and gold bars that he had in his house and his office. In restrospect, it is becoming clear that this was the money he was preparing for his new party, and that the Sagawa scandal was probably initiated indirectly by other LDP leaders in an attempt to block Mr Kanemaru's plan to split the party.

Waiting in the wings was Ichiro Ozawa, the 51-year-old lieutenant of Mr Kanemaru. Mr Ozawa is regarded as arrogant, ruthless and quick to speak his mind in a culture where consensus is valued above all. But he picked up the baton of change, transforming Mr Kanemaru's predominantly domestic vision into a more wide- ranging strategy for Japan that foresaw the country playing a larger role in the international community.

In December last year, Mr Ozawa set up a reform group within the LDP, as pressure increased on the ruling party to respond to calls for change to the old money-politics system. As the parliamentary furore over the lack of progress in instituting political reform reached a peak last month, Mr Ozawa and 34 other LDP members suddenly switched sides and voted with the opposition in a no-confidence motion. This led to the calling of elections, and the establishment of the Shinsei party, led by the former finance minister Tsutomu Hata, but in fact the creation of Mr Ozawa.

In his book published last month, A Plan to Remodel Japan, which has already sold 250,000 copies, Mr Ozawa lays out a bold vision of how Japan must reform itself to prepare for the 21st century. He calls for politicians to reassert leadership over the hordes of bureaucrats who now control the status quo, and he says the Japanese must learn to relate to foreigners not just as potential business customers.

He attacks Japan's closed markets - a frequent source of complaints by foreign countries, and says people's lives should be less dominated by big business. Most controversially, within Japan, Mr Ozawa argues strongly that Japanese troops must play a larger role in UN peace-keeping operations overseas, which may require a revision of the Constitution.

But Mr Ozawa's most immediate priority is a revision of the electoral system, without which he says no real reform of the political system can be achieved. Currently, voters elect three to five people from each constituency, often with several candidates coming from the same party. This results in campaigns based not on policies but on local favours and financial handouts. The system dates back to 1925, and was devised by bureaucrats with the precise aim of keeping politicians at each others' throats and thus less able to challenge the power of the bureaucracy.

Mr Ozawa is in favour of a single seat constituency system, where each party would only run one candidate, would be forced to campaign on policy-related issues and would reduce the importance of money in campaigns.

This will be the most important issue facing the next government. Most commentators expect that yesterday's elections will mark the beginning of a turbulent period that could last several years before a new political structure falls into place. But underneath the turbulence a new political paradigm will be establishing itself, one that is more suited to the country that is now the second largest economy in the world but still behaves as if it must keep building its economy to the neglect of anything else.

Reformist politicians will benefit from a groundswell of popular dissatisfaction with today's Japan: consumers are tired of paying high prices for goods because of protected markets, and workers are losing enthusiasm for the long hours they have to spend in their offices, to the detriment of family life and leisure time. This dissatisfaction on its own was not strong enough to change the country, but given some political leadership it will add to the momentum for change.

The process of forming a consensus around this new political model has already begun: the big business associations which have been funding the LDP for the past 38 years have indicated that they will now spread their support to other conservative-oriented parties. Voters are slowly waking up to the fact that now there will be a real alternative to the LDP, and not just token opposition from the Socialists, who were never thought of as being able to form a government. And, gradually, the mumblings of a septuagenarian politician will be transformed into a new political vision for Japan.