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Thursday, 30 January, 2003, 17:37 GMT
The Japanese business conflict
Here's the short diagnosis on the Japanese economy - a tepid recovery threatening to slip back into recession.
With the second largest economy on the planet apparently doomed to permanent stagnation, Japan's efforts to revitalise its economy are taken less and less seriously in the world's other financial capitals.
But not everyone has given up on Japan. Some enterprising foreigners believe there's still money to be made, but they've been accused of being vultures.
As the debate continues, times are getting tougher for the ordinary Japanese worker.
Tim Collins runs Ripplewood, an investment fund that specialises in turning around deadbeat companies.
He sees opportunity where others see financial ruin.
Ripplewood is bringing American management techniques to a business culture that shuns risk, and he believes Japan has huge untapped potential.
"We found businesses that were buried in a mountain of soot, but once you clear away some of that mess, they really respond very well," he said.
Ripplewood bought struggling record label Nippon Columbia and has also stepped in to pick up the pieces of one of the most spectacular business failures of recent years.
More than $2bn were poured into Japan's Seagaia resort complex containing the Ocean Dome, the world's largest indoor water park, but it collapsed with vast debts.
The running costs for the Ocean Dome were huge and it lost money from the start. The new managers have closed it down while they ponder how to fill hotel rooms.
Tim Collins resents charges that they got the property on the cheap after they paid 4% of what it cost to build.
"It was grossly mismanaged so we bought it for a bargain price, but it is an enormous amount of work," he said.
Ripplewood's most controversial buy was the failed long-term credit bank which was nationalised and then sold off by the government.
The Shinsei Bank has upset rivals by focusing on profits in a cosy government-protected sector.
Politicians were infuriated by its refusal to bail out insolvent but well-connected companies. But chairman, Masamoto Yashiro, says the old practices will lead Japan to ruin.
"Should we continue the same practices as tried in the past ten years, getting nowhere, slowly going down the hill?" he asks.
Vested interests are fighting back against the foreign funds.
A media campaign has denounced them as 'hagetaka' - vultures preying on the corpse of a weakened Japan.
The friction is all part of a raging debate about Japan's future.
The country's vast accumulated wealth has enabled it to postpone badly-needed structural reform, but time is running out.
The outlook is grim on a snowbound construction site in Fukushima, northern Japan.
Most of the workers there have had their wages cut and are concerned for their jobs.
Over the years, the Japanese construction industry has grown into an elaborate safety net for surplus workers, but Japan can no longer afford such a luxury.
The government is cutting back spending on public works which have been used to keep the economy ticking over during twelve years of stagnation.
Chief economy minister, Heizo Takenaka, wants to cut out dead wood to make industry more competitive, but some worry he'll do more harm than good.
Eisuke Sakakibara, a former deputy finance minister, doesn't thing Mr Takenaka is the right man to make the changes that are needed.
"What they say they are trying to do is fine, but the way they are doing it is clumsy and wrong," he argues.
The workers of Fukushima are trying to make the best of their predicament through retraining.
Construction companies there are sending hundreds of workers back to school to learn how to look after old people as care for the elderly counts as a growth industry in rural Japan, one of the world's most rapidly ageing societies.
Japanese companies are gradually adapting to changing circumstances, but for many the process is too slow.
Masamoto Yashiro said the time has come to focus on profits - somewhat of a novelty in the cosy, clubby world of Japanese finance.
His bank refuses to prop up companies that can no longer service their debts, but he doesn't know whether the government has the will to follow through with its reform plans.
And as life slowly gets harder for ordinary Japanese, hopes for a long term revival are fading.
Mr Sakakibara said the aggressive, painful restructuring of the type carried out in neighbouring South Korea doesn't appear to be on the cards.
"Korea was a debtor country, we are a creditor country, so we could survive like this for another five, six years," he said.
"That is a Japanese problem. We don't have a sense of prices, we are rich."
Political resistance and the power of vested interests have helped put the brakes on reform.
Without an external shock, the political system may be incapable of delivering the changes needed to revitalise a stagnant system.
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