Leading Article: Japan's setback need not spell disaster

PROOF of the depth of Japan's political crisis came on Friday night when NHK, the Japanese equivalent of the BBC, interrupted the dying minutes of the new year sumo tournament to broadcast a late-night press conference given by the Prime Minister. Morihiro Hosokawa's news was grave: the upper house of parliament had just thrown out the package of electoral reform bills to which he has dedicated his administration for the five months of its life.

Given that Mr Hosokawa first swore to enact his reforms by the end of 1993 but then awarded himself a further month's grace, he may be unable to avoid calling an election if he cannot get legislation through parliament before the current session ends on Saturday. The outcome of an election is impossible to guess: the behaviour of Japanese voters has become more volatile, and there is no telling which of the seven parties comprising Mr Hosokawa's fragile coalition might change sides and support the discredited Liberal Democratic Party, now in opposition.

Since the four bills now before parliament will not be passed in their present form, the defeat of Mr Hosokawa's reforms is a setback. But it need not be a disaster. Forces already in place have already brought about many changes in the old Japan. Deregulation is loosening the bureaucrats' stranglehold over business; society is becoming less rigid and intolerant; the country is opening up to imports.

On political reform, the Liberal Democrats have conceded much. The old multi-member constituencies, in which LDP factions felt obliged to spend corruptly, raised billions of yen fighting each other; they are to be replaced by parliamentary seats elected by a mixture of first-past-the-post and proportional representation. The under-representation of city voters, responsible for Japan's obtuse policies on agricultural trade, is to be partly remedied. But the LDP still resists banning political donations to MPs and establishing a less manipulable system of state subsidies and corporate donations to parties.

If Mr Hosokawa can win on this point, he will have achieved the reforms that matter most for the Japanese people. The LDP will no doubt press for the most advantageous outcome - but so will other parties, including the Socialists, whose 17 defectors sold Mr Hosokawa's bills downriver in the hope of hanging on to their seats. With its powerful local machine and the conservatism of Japanese electors, the LDP may even win the next election under a new system. If it does, Mr Hosokawa can console himself that his reforms enabled it to do so without cheating.