Tupac Amaru rebels take hostages at the Japanese ambassador's residence during a reception attended by about 400 guests. Seventy-four hostages are freed, two soldiers and one hostage killed during the operation. Fujimori makes show of commanding the operation. He reaches the pinnacle of his political support. Fujimori exercise political leadership to settle a festering international problem.
Economy shows clear signs of running out of gas.
Fujimori consolidates political initiative to secure Peru's borders. Fujimori and Montesinos undercut potential political rivals for next general elections with dirty tactics and blackballing. Alejandro Toledo emerges from the candidate pack to challenge Fujimori in the presidential race. Presidential and parliamentary elections are held. Fujimori wins, but must face a runoff with Toledo.