Hashimoto had become Prime Minister in January 1996 at the head of a three-party coalition, and was returned to office in the general election of November 1996.

Therefore, Hashimoto formed a minority, wholly LDP government (the first since 1993) with the promise of SDP and NPS support when he was elected by the National Diet on November 7.

[1][2][3] Less than a year into Hashimoto's second term in September 1997, the LDP regained a slim majority in the lower house due to defections from, and eventual break up of the opposition New Frontier Party, although the government maintained its alliance with the SDP and NPS.

[7] At the same time, as part of efforts to close the budget deficit, Hashimoto's government raised the consumption tax in 1998, which negatively affected consumer demand and caused a recession at a time of high unemployment.

In the 1998 House of Councillor's election, the LDP lost several seats, leaving the government in a minority.