Japan's weak economy hits home

Prime Minister Junichiro Koizumi hopes a free-trade pact with Singapore will pull his country out of recession.

When the glass pot on Yuko Ohira's electric coffee maker cracked during dishwashing the other day, she found an old steel pan to take its place.

Until just a few months ago she would have immediately ordered the 5,500-yen (US$45) replacement pot without much thought.

But with the New Year's economic indicators threatening to make Japan's sagging economy even worse, getting used to an ugly makeshift coffeepot is one of the small lifestyle changes that are becoming more common for this middle-class household of nine.

Newsstands are filled with magazines predicting massive layoffs and corporate failures this year. Even the greetings in New Year's cards contained prayers for the strength to persevere instead of the customary optimism about the future.

The sputtering end to years of Japanese expansion and the government's inability to turn things around is hitting Japanese families such as the Ohiras, core supporters of Prime Minister Junichiro Koizumi and his plans to restructure the country's economy.

Mr. Koizumi's eight-month-old government promises to curtail the bureaucracy, strengthen Japan's social safety net, and foster new industry. But because many bureaucrats and rival politicians are against Koizumi's plans, a dip in his 70-percent-plus approval rating could be fatal.

Indeed, money is tighter than ever at the Ohira house because the family-run contracting business, which thrived for decades here near the center of Japan's ancient capital, is drying up. The mainstay business of building and remodeling homes is faltering, so they have started importing building materials and are paring expenses from their three-person staff.

Still, the Ohiras say the cost of educating three kids and caring for two grandparents in their 80s is rising as the government tries to trim its own budget.

"Things have never been so tough,'' says Hiroshi Ohira, sitting in the kitchen of the family home, a structure dating back a century, one that's seen Japan's wartime destruction and decades of postwar growth.

To cope with the slow economy, the family shelved plans to expand their business and refurbish the home where Mr. Ohira and his two brothers grew up. Instead, they've boarded up half the house to cut heating and maintenance expenses. The TV remote is bandaged with masking tape instead of being replaced.

The cutbacks might not seem like much during a global recession and at a time when images of Afghan refugees appear on most Japanese TV news shows.

While laborers, dropouts, and others on the fringes of Japanese society have been squeezed for years, the sacrifices of the Ohiras show the country's doldrums are hitting working families too.

"Things are getting bad for the majority of people for the first time," said Shigenori Okazaki, an analyst at UBS Warburg, a financial services firm. "The New Year is going to hurt."

Unlike American consumers who are pressured by credit-card debt or losses from investments made in the dotcom stock boom, the Ohiras's problems don't have an obvious cause. In contrast to Japanese who bought property in the late-1980s "bubble" and then saw values fall by 80 percent, they managed to prosper all through the last decade of Japan's economic slump.

Japanese say things are bad and they can feel them getting worse. An Asahi newspaper survey found that more Japanese feel "economic pain" in their daily lives now than ever before.

Japan's jobless rate stands at a record 5.5 percent, meaning 3.5 million are out of work, including 1 million heads of households. Personal bankruptcies, the number of homeless, reports of domestic violence, suicides - all are at record highs.

But a glimmer of hope flickered over the weekend when Koizumi and Singapore's Prime Minister Goh Chok Tong signed a free-trade pact that is expected to remove tariffs on almost all goods traded between the two countries.

Koizumi said in a speech yesterday that the reason Japan's economy has stagnated is that "Japan's previous success had made us complacent," but that reforms were under way to restore financial growth. "I believe the Japanese economy will pick up for sure with the reform so that we can be a locomotive engine again for the regional economy," Koizumi said.

Japan's move was an apparent bid to catch up with Beijing's financial maneuvering.

In November, Japan was left out in the cold when China and the 10-member Association of Southeast Asian Nations agreed to create the world's most-populous free-trade bloc within 10 years, covering 2 billion consumers.

Kyoto, as a city, too, may be better off than many others. Computer company Kyocera, video game maker Nintendo, and Murata Manufacturing are growing, a high-tech business park with 130 businesses is expanding, and the city's universities and research centers remain, despite the nationwide slump. Terrorist attacks overseas have Japanese tourists returning to take another look at Kyoto's temples and gardens, adding at least a temporary boost.

But downsizing and worry about the future is hurting even more. Closure of a Nissan Motor factory in Kyoto and the collapse of a local retailer cut thousands of jobs.

A New Year's survey of local companies by Kyoto's main newspaper found 72 percent expect 2002 to be worse.

Indeed, even the Ohiras - both college graduates who saw their finances improve generally every year since 1971, when they got married and took their last overseas vacation - are worried.

"I don't know what will happen this year, but it's not going to be good," Ohira says.

Material from wire services was used in this report.