Page last updated at 23:03 GMT, Monday, 31 August 2009 00:03 UK

Hatoyama faces daunting economic task

By Robin Lustig
BBC News, Tokyo

Food bank
Many of Japan's newly destitute are reliant on soup kitchens

Not many incoming prime ministers would envy the task facing Yukio Hatoyama, the man who's likely to inherit responsibility for Japan's deep economic crisis after yesterday's historic election.

After more than half a century of virtually uninterrupted rule by the Liberal Democratic Party, now it is the turn of the Democratic Party of Japan to try to find a cure for the country's chronic economic malaise.

Unemployment is at a record level of 5.7%. Consumer prices fell by 2.2% last month, raising fears of a new deflationary spiral, similar to the one which paralysed Japan for much of the 1990s.

Exports, the lifeblood of the Japanese economy, have collapsed - exports to the US were down by 39.5% year-on-year in July; to China down by 26.5%, to the European Union down by 45%.

So how will the new government get the country out of the mess? The Democratic Party says it will cancel unnecessary and costly infrastructure projects, slim down the country's bloated bureaucracy and invest in areas like environmental and medical technology, which party leaders say they have identified as the growth areas of the future.

Japan, once the home of the world's most remarkable economic miracle, has embarked on a new, but highly uncertain, chapter in its history

But when I met Masao Watanabe, chairman of Japan Pure Chemicals, a small but highly specialised company that develops the chemicals used to coat materials in integrated circuits, he told me he wants the new government to adopt a cautious approach.

Too much change too fast is not what the country needs, he says. Like many Japanese entrepreneurs, he is nervous of what change can mean.

Most of Japan's economic activity is in the hands of men like Mr Watanabe, who run thousands of small and medium-size companies, many of them supplying the needs of the major multi-nationals like Hitachi, Toyota and Sony.

At the electronics giant Panasonic, they are investing heavily in environmental technology, using their know-how to develop what they call an eco-house, which eventually will be able to produce and consume all the energy it needs without contributing to the emission of carbon gases. This, they say, is the future.

Soup kitchens

So Japan is changing. But the change is already leaving thousands of victims in its wake.

Men who once had jobs for life - the "salarymen" whose companies provided for their every need - are now out of work, or on short-term contracts.

I met a 48-year-old former junior manager who lost his job after 18 years with the same company.

Unemployed "salaryman"

He would no give me his name, and he would not be photographed. He has not dared tell his parents or his neighbours that he has no job. Only his wife and son know.

Labourers who built the steel-and-glass high-rise buildings that dominate the Tokyo skyline are now destitute - thousands of them are living on the streets.

At one soup kitchen alone, I saw more than 300 men waiting patiently, sitting cross-legged on the ground, for a local charity to provide their one hot meal of the day: rice and meat, served in plastic bowls.

So the challenge now for the Democratic Party is both to revive the economy and find a way to provide basic welfare benefits for the homeless and unemployed.

Japan's national debt is already approaching 200% of GDP, the highest ratio in the world; borrowing more will not be easy.

The Democratic Party has never served in government before and has yet to spell out how exactly it intends to find the cash to do all the things it has promised to do.

Japan, once the home of the world's most remarkable economic miracle, has embarked on a new, but highly uncertain, chapter in its history.

Robin Lustig has been reporting from Tokyo on the Japanese Election for BBC Radio 4's World Tonight programme.

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