Japan confronts potholes on easy street

This little city not far from Tokyo used to be famous for its hot springs and views of the ocean. Now Atami is an ideal place to see Japan's recession expressed in something other than statistics.

Empty, bankrupt resort hotels line Atami's short corniche. An apparently homeless woman fiddles with her shopping bags in a tiny public park. The hallways of the city's Japanese-style inns are dark and cold, so owners can save on utility bills while they fret over their empty rooms.

In telling ways, Atami's turmoil is a microcosm of the muddle over what to do about Japan's recession - a quan-dary that is paralyzing the world's second largest economy and stalling the recovery of Asia. While some people cling to the wealth-creating formula of recent decades, others argue that new realities demand fundamentally new approaches.

"Japanese people have money," insists Seiichi Uzawa, whose gracious hillside inn was once patronized by the brother of Japan's crown prince. "Even in a recession there are those who can afford to go to a hot spring and have some leisure. If we do things right we can attract them."

"I'm sorry to disagree," counters Hiroshi Iwamoto, the head of a shopkeepers' association. "What I think is necessary is not to come up with ideas from the existing system, but to find out what is wrong with Atami."

The two men sound a bit like the pundits on national television, who argue endlessly over whether Japan's national economy needs wholesale reform or just more time to get over a decade of stagnation.

In Atami, the debate gets down to details like wake-up times. In traditional Japanese inns, early-to-bed and early-to-rise are guiding principles. So is eating sumptuous meals prepared on the premises. But younger Japanese increasingly want other options. The shopkeepers accuse the innkeepers of alienating potential customers by sticking to tradition.

The innkeepers' and hoteliers' retort is that the shopping districts are still mostly closed on Sunday. The merchants insist on preserving time with their families - and the discussion drags on.

Mr. Iwamoto says Atami is in a "vicious circle" in which residents blame each other. Mr. Uzawa concedes that inn owners have maintained a regal attitude toward the town's other businesspeople.

About 80 percent of the city's economy is linked to tourism, and Iwamoto wants officials and businesspeople and to stop adding more festivals to the long list of touristy celebrations and analyze what people might want. "Unless we reconsider what we are doing, nothing will get better."

Atami boomed with Japan's economy. When the bullet train came in 1964, a town that was once a distant spot for rich folk was now a 50-minute ride from Tokyo. Corporations discovered it was ideal for hot-spring getaways, Japan's equivalent of the company picnic. In the 1960s and '70s, many Japanese were just beginning to take a break from the massive effort required to clean up the rubble of World War II and begin rebuilding the economy. A night in Atami was an early reward.

But as the 1980s dawned, the city's fortunes began to suffer as Japanese started taking vacations overseas and other domestic resorts grew more competitive. To create new appeal, the town built a 1,300-foot white-sand beach, but it hasn't reversed Atami's decline.

Worst of all, says one cab driver, Atami lost the glamour provided by artists and writers who favored the town early this century. "There's no way to get that back," he sighs, pulling into the near-empty parking lot of Atami's best museum.

When stagnation hit Japan in the '90s, Atami got into deeper trouble as companies cut spending and individuals stayed home. Hotels are closing and residents are looking elsewhere for a livelihood.

City officials are forthcoming about their predicament even as they bemoan Atami's reputation as a dying town. They kick around ideas for turning the city into a resort that caters to Japan's growing proportion of elderly people or in trying to meet all desires by billing the city as a leisure "department store." Akira Mizutani acknowledges his burdens as planning division director, but says, "We can do anything with this little city," apparently imagining a future bright with possibility.

They might take a cue from Kaori Enchi, a dental hygienist from Tokyo. She's been to Atami at least 10 times, she says, and plans on returning. "It used to be so expensive, but things are so bad here that they've been lowering prices."

The echoes of the nation's situation are everywhere. Like Mr. Mizutani and his colleagues, Japan's economic managers stress the nation's assets - wealth, industriousness, and a capacity for concerted effort - without being able to come up with a convincing plan for reform and renewal.

Economists and officials constantly agonize over how to get consumers spending again. In one of the most expensive countries on earth, perhaps they too will heed Ms. Enchi and start encouraging companies to lower their prices.