By-Election Defeat Sends Warning To Japan's Ruling Party, Premier

THE second election shock to hit Japan's ruling party within a month bodes ill for its hopes of new foreign initiatives as well as the prospects of Kiichi Miyazawa to continue as prime minister.

The Liberal Democratic Party (LDP) lost a by-election yesterday for an upper house seat, repeating a loss in a similar vote last month. Initial results from yesterday's contest in Miyagi prefecture indicate a close win by a candidate backed by three opposition parties and the powerful Japan Trade Union Confederation.

These two recent losses, as well as two more local votes in coming weeks, are widely taken as mini-referendums on the LDP, which suffered a similar political low-point three years ago, when two prime ministers in a row were forced to resign.

In 1989, the so-called Recruit scandal and the opening of the beef and orange markets injured the LDP. Now the party has lost favor for two recent cases of corruption, known as the Kyowa and Sagawa scandals, as well as its moves to allow imports of rice and to dispatch the Japanese military to United Nations service.

Mr. Miyazawa, who took office only four months ago, has seen the popularity of his government drop nearly in half, according to several polls. He was advised by some party leaders not to campaign in Miyagi, which is a rice-growing area, after he hinted that he would open the rice market to foreign competition. But he campaigned anyway on Saturday.

Some LDP members may now try to force Miyazawa to resign or reshuffle his Cabinet in order to improve the party's image before a key election in July, when half of the 252 seats of the upper house will be up for grabs.

Ever since the party lost control of the upper house in 1989, it has been stymied in passing its pet legislation.

Some analysts predict the LDP may lose 18 or 19 of the 74 seats it now holds. If the party loses big in July, says LDP member Koji Kakizawa, "that will be the end of LDP government." The party has ruled for nearly 36 years.

LDP officials say their moves to liberalize rice markets and send troops overseas now face serious compromise. They have also sought to boost a sagging economy by threatening to fire the central bank governor if he does not lower interest rates.

Top leaders, including Miyazawa, are hastening efforts to overcome a corrupt image by offering new legislation on political reform. But measures such as reshuffling parliamentary seats, which now over-represent rural voters, and stemming money in reelection campaigns have proved in the past to be nearly impossible.

Trapped by the power of the rural vote, many LDP leaders say they cannot move to increase Japan's role in world affairs, such as in UN peacekeeping or making a compromise on rice in the Uruguay Round trade talks.