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Page last updated at 22:51 GMT, Wednesday, 18 March 2009

Washington diary: Japan's recession

By Matt Frei
BBC News, Tokyo

Living in America one gets used to the exuberant despair of the economic crisis.

A factory in Tokyo's Ota ward
Small factories are suffering in the downturn

Entire neighbourhoods ravaged by the cancer of foreclosure, the feverish ructions of the stock market, the high-pitched protests of politicians channelling popular anger, the low pitched moans of Wall Street titans who claim to be more sinned against than sinning.

Japan, by contrast, suffers quietly, stoically.

The land of the rising sun has, after all, been in it for the long haul.

Here, the bubble burst as long ago as 1990 and the Japanese economy has been as flaccid as a half-inflated airbed ever since.

Before the burst, the Nikkei (Japan's share index) had reached a dizzying 39,000 points, Japanese shoppers trawled the world for Gucci and Louis Vuitton - how we miss them now! - and the large patch of land which housed the Imperial Palace and its gardens in the centre of Tokyo was worth more than the entire economy of California.

Lost decade

The excesses of the bubble era are a distant memory, dimly and guiltily remembered like a frat party that resulted in too much fun, too many indiscretions and a mind-numbing hang-over.

These days, the Nikkei is languishing around 7,000. Property prices are down about 80% in the capital and you will be hard pressed to find Japanese shoppers fighting over handbags in Florence or Rome.

Japan had just emerged from its so called lost decade - the 90s - when it was pummelled by what is commonly referred to here as "the Lehman shock".

Matt Frei in the BBC World News America studio
Japan is a country almost uniquely torn between post-modernity and deep-rooted tradition

The decline of recent months has felt like a particularly cruel punch in the stomach.

The country had already paid for its past irrational exuberance.

It had been wearing the hair-shirt of abstinence for most of the 90s.

There were no sub-prime loans here. Credit card debt is virtually unknown in a culture that still clings to crisp bills of cash.

The Japanese had been scrimping and saving for years. With interests rates at zero they had been stuffing money under beds and into safes.

I came here in 1998 to do a story about the brisk trade in household safes, because no one really trusted the banks to look after their money.

Ironically, Japan has been punished because it is good at producing things like cars, computers and cameras that other countries want to buy, or rather wanted to buy.

Exports are down a staggering 47% on last year, which is devastating for an economy that relies on them.

Toyota, the car giant, had never had a year in the red until 2008.


But it is not just the big names that are suffering. Small companies employing less than 300 employees form the backbone of the Japanese economy. They employ 70% of the workforce and they have been going to the wall by the hundreds every week.

We spent a day in the Ota ward in Tokyo. This warren of tiny factories, "mom and pop" workshops and miniature residential houses is typical of Japan.

The narrow streets are meticulously clean. Beautifully manicured trees stand next to ubiquitous vending machines. The tofu seller pulls his cart through the ward every Wednesday blowing his trumpet.

Despite flat-screen TVs, broadband wi-fi connectivity and cutting edge technology, the place feels like an ancient village steeped in conservative ritual. Flowerboxes with geraniums adorn workshop fronts humming to the sound of electronic chainsaws and hydro-hammers.

Sign outside a cyber cafe in Tokyo that allows people to stay overnight
Cyber cafes offer a cheap place to sleep for the unemployed

Mr Iino loves the Beatles and wears round John Lennon specs. He grew up above the one-room factory where he and four other employees now make metal joints and hinges for sophisticated glass-cutting machinery.

They are skilled craftsmen, masters of a niche market. The atmosphere in their workshop is almost reverential, the attention to detail intense, yet graceful. The four workers dance around each other in this tight space like acrobats in a space station.

They bow deeply when we arrive, briefly interrupting what had turned out to be a very busy day. An order had just come in.

"Had you come the day before, you would have found us all idle and smoking," Mr Iino admitted. "Business has collapsed," he added.

"I have never seen anything like it. I have no idea how we will cope."

I asked him if he will have to lay anyone off. The other workers listened in silence. One of them, a friend from junior high school days, smiled faintly.

"That will never happen," Mr Iino said quietly. "We are all family."


His resilience is admirable and I am not sure whether this tightly-knit family business culture is a strength or a weakness.

It means that companies like his are far less flexible when it comes to weathering the storm.

On the other hand, they can also call on each other more easily to make sacrifices, like putting up with lower wages in hard times or working shorter hours.

In Ota ward alone there are almost 5,000 such small factories. Some 1,500 have already disappeared - who knows how many more will follow?

Japan is a country almost uniquely torn between post-modernity and deep-rooted tradition.

The images are everywhere.

Shoes placed carefully outside a booth in a cyber cafe where people are allowed to stay overnight
Overnight guests at the cafe leave their shoes outside their booths

Kimono-clad geishas waiting for the bullet train in Kyoto while twittering on a bluetooth phone.

Sushi bars near the Tokyo fish market, where the knife-wielding chefs greet you like travellers from a distant age, where credit cards are not accepted but where the Nikkei scrolls electronically above the fish counter.

Hotels and restaurants in which you have to take off your shoes and put on slippers, but where the toilet cleans itself (and you) with a digital automation that can be, frankly, intimidating and invasive.

It does not help that the instructions are only written in Japanese.

The most poignant place I have seen all week is the cybercafe in Walabi city on the outskirts of Tokyo.

Mr Sato, the dapper owner, who used to be in real estate, will not just give you a computer and a quiet room for an hour. He will also sell you soap, shaving equipment, towels and food.

Cyber homeless

On the floor, pairs of slippers have been carefully placed in front of tiny booths.

When you turn down the piped jazz, you can hear snoring.

Of the 68 coffin-sized, airless, windowless booths, 60 are permanent homes.

Peek over the top and you can see washing hanging up to dry, teddy bears and family photographs.

The tenants are commonly referred to as "cyber homeless".

Most of them are unemployed or partially employed, but manage to scrape together the $500 (£358) a month it costs to live in one of the booths, a fraction of what they would pay for even the cheapest hotel room in a place like Tokyo and preferable to sleeping rough.

They can use the address of the cybercafe when applying for jobs, thus escaping the stigma of being homeless.

It is a clever idea, but this is still a place of quiet despair, intense loneliness and the personal shame of collective economic failure.

It is just one of the many Japanese responses to a global crisis.

Matt Frei is the presenter of BBC World News America which airs every weekday on BBC News, BBC World News and BBC America (for viewers outside the UK only).

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