A sex scandal dating back 42 years is emerging as a serious threat to the political career of Japanese Prime Minister Yoshiro Mori.

Prior to the lower house elections in June, Uwasano Shinso, a monthly muckraking magazine, published the claims of a former police officer that in 1958 Mori, then a 20-year-old university student, had been arrested in a Tokyo brothel. According to the magazine, Mori was released without formal charges or a court appearance.

Mori denied the claims and sued the magazine, demanding a public apology and $US100,000 in compensation. Even if true, the magazine would normally have had difficulty backing up its allegations. In cases where no conviction is registered, the police are not obliged to produce their records.

But on August 22, events took an unexpected turn. The Tokyo District Court accepted the argument of the magazine's lawyers that if the Prime Minister had lied about his criminal record it was a matter of public interest. Overruling objections by Mori's lawyers, the court commissioned an agent to hunt through the official archive of the Tokyo Police for the arrest charts for the date of the alleged crime—February 17, 1958.

Michio Sako, a legislator in Japan's upper house and a former public prosecutor, commented in last week's Japan Weekly Post: “If he [Mori] filed a lawsuit and it turns out that he was in fact arrested... he will be in deep trouble. It will be a fraudulent claim deceiving the court and attempting to earn some money from the trial. The Police Department must do their work to clarify the issue, accepting the court's decision and checking their records.”

The claims may be false, the records may no longer exist or the police may refuse to cooperate with the court on the grounds of protecting Mori's privacy. But at this point, the future of the prime minister hangs in the balance. If he is proven to have lied when the court reconvenes on October 3, demands for his resignation are likely to be overwhelming.

Mori only became prime minister in April, following the unexpected and ultimately fatal stroke suffered by his predecessor Keizo Obuchi. Under Obuchi, Mori was a loyal member of his dominant faction within the ruling Liberal Democratic Party (LDP) and held the post of LDP General Secretary. He was quickly installed as a stopgap leader by the Obuchi faction bosses to prevent a bitter factional brawl inside the party before the lower house elections.

Under Mori's leadership, the LDP went to the polls in June pledging to continue the high budget deficit spending policy carried out under the two-year Obuchi administration. Ostensibly aimed at bringing about Japan's economic recovery from the 1990-91 collapse of the stock and property markets, and the subsequent effects of the 1997-98 Asian financial crisis, the high levels of government borrowing have driven public sector debt to some $US6.3 trillion, more than 130 percent of Gross Domestic Product (GDP).

The Japanese economy, however, is still stagnant and unemployment is at historic highs. Much of the borrowing has been used to finance massive public works programs, which have primarily assisted the construction and real estate industry, retail firms and rural regions—all areas with traditionally close ties to the LDP. But the lack of jobs and growing economic insecurity among broad layers of the population has produced widespread alienation from the government.

The main opposition Democratic Party of Japan (DPJ) registered definite gains in urban areas during the election, campaigning for action to bring the budget under control and denouncing the public works spending as cronyism. An attempt by Mori to win support by invoking prewar Japanese nationalism through his comments on the “divine nature” of the Japanese emperor and nation backfired. His public approval rating plummetted to only 25 percent and has barely improved since.

Since the election, it is widely accepted within the LDP that Mori has to be dumped before next year's upper house poll. While the LDP retained government, it lost majority control of the lower house, winning only 233 of the 480 seats in the House of Representatives. It is now dependent upon the 31 seats of the small business orientated and Buddhist-based New Komeito Party to pass legislation.

Not expecting Mori's government to survive longer than six months, the major party factions, including Mori's own faction, did not propose leading figures for the cabinet—with the exception of key ministries such as Foreign Affairs and Finance. The libel case has unfolded in a climate of continuous recriminations against Mori over economic policy, attacks on his cabinet and open speculation as to who will replace him.

A government plan in July to bailout the bankrupt Sogo corporation with public funds was condemned throughout the major media. The politician centrally responsible for the proposal to save Sogo, Financial Reconstruction Commission chairman Kimitaka Kuze, was swamped with corruption charges and forced to resign.

Over the past fortnight, proposals within the LDP for a further $US90 billion in spending on another supplementary budget and public works program have been subjected to scathing criticism. Its chief proponent, LDP factional boss Shizuka Kamei, was immediately subjected to accusations of corruption in the Asahi Shimbun, the same newspaper that led the attack on Kuze.

Yomiuri Shimbun, a conservative and generally pro-LDP newspaper, commented on September 1: “Whether the government can put together a budget capable of turning this troubled nation around is highly questionable”.

The most significant criticisms came from within the LDP itself. Koichi Kato, a leader of the LDP “non-mainstream” factions and a contender to replace Mori, denounced the budget plans as “unrealistic”. Kiichi Miyazawa, the elder figure in the Kato faction and Mori's own Finance Minister, declared: “The time when we could pay any price to take measures against a slump has passed. A large extra budget is not necessary.”

Kato is an advocate of Thatcher-style economic deregulation in Japan. He is also an opponent of the coalition with the New Komeito Party and has made clear his preference for the opposition Democratic Party. If Kato's small faction of 50 to 70 legislators defected to the DPJ, it could possibly bring down the LDP government.

Factional jockeying is already underway for a leadership spill at the annual vote on the LDP presidency, a post that traditionally determines the prime ministership and is currently held by Mori. The Obuchi faction, the largest in the LDP, has re-elected as its leader Ryataro Hashimoto, who was prime minister from 1996 to 1998 before being forced out by Obuchi. According to the Yomiuri Shimbun, Kato is now holding weekly meetings with Hashimoto and other factional leaders.

The speculation over whether Kato, Hashimoto or another figure will replace him produced an outburst from Mori in late August. Before an audience of LDP legislators and businessmen, Mori complained: “I am not clinging to the job.” The following day he declared: “Now is the time our LDP should be firmly united. Those who are talking about the next Prime Minister should step forward.”

Yet the fact no date has been set for a vote on the LDP presidency and no open challenge has been advanced, points to the inability of the LDP factions to come to any agreement. Mori has been left to stagger on because what is at stake is not only who holds the top post but also the future direction of the government's economic and social policy.

By ordering a review of the police files and adding credibility to the magazine's allegations against Mori, the Tokyo District Court is responding to powerful currents within the Japanese political establishment that want the question settled and Mori out.