Japanese town hit hard by recession

Homelessness is a growing problem in Japan

By the BBC's Charles Scanlon in Nagaoka

Since he came to office last April, the Japanese Prime Minister, Junichiro Koizumi, has been urging patience and self sacrifice.

He warned then that economic recession could deepen and more people would lose their jobs.

He has been as good as his word, but remarkably he remains extremely popular, promising pain today will lead to recovery tomorrow.

And he has been comparing Japan's current plight to the sacrifices of a city in northern Japan more than a century ago.

Deep in the snow country of the north, the city of Nagaoka is having a miserable winter. Once a thriving industrial centre, it has been hit hard by recession.

We're getting nowhere at the moment

Retired civil servant Taro Suzuki

A big local engineering company went bankrupt in November and the ski resorts in the mountains behind the city are virtually deserted.

The mayor, Tami Omori says the city is proud of its past, and the prime minister's interest. But people are more concerned with their current problems.

"We weren't hit as badly as the metropolitan areas when the economic bubble burst in the 1990s, but the recent crash in demand for IT products has really hit us hard, and we can no longer rely on public investment, because the government is cutting back on spending," says Mr Omori.

Jobless reality

Nagaoka faced famine 130 years ago after being destroyed in a civil war.

A neighbouring province helped out with the donation of 100 sacks of rice. But the food was not distributed. After a furious row, the city elders decided to sell the rice, and use the money to found a school - an investment in the future.

The days of the job for life are over

Prime Minister Junichiro Koizumi has adopted the story as an allegory for Japan today. He says people must endure the pain of restructuring for the sake of a brighter future.

But not everyone in Nagaoka is happy with the comparison.

"It sounds fine as a national slogan, but the reality is different," says Tajikowa Yoshinori, who lost his factory job last year. "I'm looking for a job at the moment, and it's very tough.

"Even people with jobs are getting paid less, and there's less overtime."

Retired civil servant Taro Suzuki says it is hard to see what the politicians have achieved.

"We're getting nowhere at the moment," he says. "Mr Koizumi is popular, and we always say it's important to sacrifice, but actually no one wants to be the person on the receiving end.

"The problem is that people always try to protect what they have."

Worse to come?

Unemployment in the city is close to the national figure of 5.6% - a record high for Japan. A chain reaction of bankruptcies is pushing it ever higher.

Other companies in the region are shifting production overseas where the business climate is more favourable.

Mr Koizumi is genius of the compromise

Yoichi Masazoe, ruling party MP

Nippon Seiki is one of the strongest enterprises in Nagaoka. It makes instrument panels for cars, part of the great Japanese export drive.

But the company is being squeezed by tougher competition and low demand. Even here, employees face wage cuts and uncertainty, says factory floor manager Kohei Inamata.

"We've seen companies around us laying off workers, and that makes us very anxious," says Mr Inamata. "If things continue like this, we'll find ourselves in the same position as others."

The Japanese used to call it a "golden recession". It existed on paper, but ordinary people were not being affected.

That has all changed now. There are warnings of a full-blown financial crisis in the spring, as banks crumble under the weight of non-performing loans from moribund companies.

Ruling Liberal Democrat Party MP Yoichi Masazoe says the government will be forced to abandon its tough policy of budget cuts and restructuring.

"Mr Koizumi is a genius of the compromise," he says. "In the performance and in appearance he's very, very tough guy, and he says 'well, without reform there is no growth'.

"But you have to be careful what his message brings. For example, he said, to cope with the financial pressures, or expected financial pressures, he would do all the means, all the tools to stop it.

"That means he has already changed his policy."

Mr Koizumi's appeal for stoicism may have struck a chord with the people of Japan, but the reality is proving even harsher than expected. The prime minister knows he has to alleviate some of the suffering if his popularity is to last.