The party, considered liberal, was founded by Morihiro Hosokawa, a former diet member and Kumamoto Prefecture governor, who left the Liberal Democratic Party to protest corruption scandals. In 1992, the party elected four members to the House of Councillors, including Hosokawa. Although this was a disappointing result for them, in 1993 they were able to capitalize on voter dissatisfaction with the LDP, electing a total of 35 members (including 3 who joined after the election). Hosokawa became Prime Minister leading a broad coalition, but was soon forced to resign.
By 1994, the Japan New Party dissolved, its members flowing into the New Frontier Party (新進党).