LEADERS of the seven political parties comprising the new coalition Government of Japan met in Tokyo yesterday to begin the process of reaching a consensus on the key issue of political reform. While there is little disagreement on measures to end Japan's ''money-politics'', two broad views on change in the electoral system have yet to be reconciled. One reform measure aimed at money-politics will be a bill to provide for state funding of political parties both in their general activities and in their election campaigns. While this scheme is phased in, another bill will stipulate the abolition of political donations from businesses and trade unions over five years. These measures strike at the way politics developed under the long-ruling Liberal Democratic Party (LDP), during the past 17 years particularly. Popular anger with the regular scandals to hit the headlines in the past few years led to the LDP's loss of power. But internal coalition disagreement emerges when the issue is the reform of the electoral system. One formula is favoured by the Nihon Shinto (Japan New Party) led by Prime Minister Morihiro Hosokawa, the Sakigake (New Forerunner) Party and by the largest party in the coalition, the Socialists. Under this scheme, the present 511-seat House of Representatives elected in 129 multi-member constituencies would be replaced by a house in which 250 members would be elected in single-seat constituencies, while 250 would be selected by proportional representation (PR). As in elections for the Upper House of Councillors, so for future elections for the House of Representatives, with every voter having two ballots, one to cast for a candidate in a constituency, and one to select a candidate from a PR list of political parties. Each political party would submit a national list of candidates for selection according to the distribution of the PR vote, but only parties securing more than three per cent of the total vote would gain any seats. Another substantially different procedure is advocated by the second and third largest parties in the coalition, Shinseito (Japan Renewal Party) and Komeito (Clean Government Party). Under this alternative, 300 members would be chosen in single seat constituencies, while 200 members would be chosen under PR. Each voter would have only one vote for a candidate, but this same vote would also be registered as a vote for the candidate's political party under PR. Evidently Shinseito and Komeito favour the second scheme believing it would hasten progress towards a two-party system, whereas Nihon Shinto and Sakigake probably believe the first proposal offers better protection to smaller parties such as themselves. Whether consensus can be quickly reached will be an acid test of the new ruling coalition. Regarding one other crucial reform, that of redrawing the electoral boundaries for the single-seat constituencies, the politicians intend to wisely pass the highly contentious issue to an independent commission.