Leading Article: Restructuring, Japanese style

THE RUSSIANS called it perestroika. The Japanese prefer to use the English word 'restructuring', or an abbreviation of its first two syllables. But the changes taking place in the two countries have much in common. The old, group- oriented Japan caught up skilfully with Europe and the United States. A mature economy that leads the world in cars and electronics has different needs.

The growing realisation that Japan's economic problems are more than just cyclical is having grim effects. Earlier this week, the Nikkei stock market index sank towards 16,000, hitting its lowest level for a year. Japanese business leaders are now, by more than 10 percentage points, the greatest pessimists in the industrial world.

Yet there is good news amid the gloom. The Japanese started talking about the need to grow up and meet their international responsibilities a decade ago. Now the worst recession since the war has made them do something about it.

The relationship between labour and capital is changing, with companies starting to ask for lay-offs and workers to demand their full holiday entitlements and resist the more intrusive forms of corporate behaviour. Consumers are looking for bargains, instead of being suckered with branded handbags and pounds 100 designer melons.

The civil service is in retreat. Having stonewalled a request from the government for advice on red tape that might usefully be repealed, bureaucrats will now find deregulation forced upon them. The absurd custom of allowing senior civil servants, rather than their ministers, to speak in the parliament chamber is likely to be abolished.

The fate of Morihiro Hosokawa's seven-party coalition, encompassing everything from right-wing Buddhists to unreconstructed socialists, is hard to predict. But Mr Hosokawa, who is more frank than most Japanese politicians, has climbed up the opinion polls remarkably as the economy has deteriorated. He now seems set to keep his promise of reforming the political system by the end of 1993, and to cut income taxes and raise the sales tax to a realistic rate in 1994. That achievement would help him win an early election against the Liberal Democrats.

The Prime Minister's next hurdle is to state categorically in the Gatt talks later this month whether Japan is willing to begin dismantling its ban on rice imports. It is an open secret that Mr Hosokawa's partners want him to say no. Saying yes would benefit Japanese consumers, give the economy a boost, and earn Tokyo much international goodwill.