Low subsidies, aging plague rural Japan

YUBARI, Japan --When the last coal mine in Yubari closed down in 1990, city elders thought pumping tax money into an amusement park, hall of fossils, ski resort and robot museum would keep this remote snowbound town of 13,000 people afloat and on the map.

More than a decade and a half later, Yubari is still in the headlines -- but for all the wrong reasons.

Instead of drawing the coveted tourists, the investments bankrupt the city and drew nationwide ridicule. They also forced an already downtrodden backwater to embrace a severe cost-cutting scheme to lay off half the city's employees, slash public salaries, shut down schools and even padlock public toilets.

Mayor Kenji Goto is quick to concede city fathers went overboard with some of the ideas that left Yubari buried in a half-billion dollars of debt. Yet Yubari, and countless towns like it, are also hapless victims, he insists.

Japan's aging population and new efforts to stanch a long-unquestioned flood of public subsidies are turning swaths of the country's hinterlands into destitute ghost towns. The result is an increasingly sensitive rift between the booming big cities that have ridden Japan's economic revival, centered on gains in high tech industries and manufacturers that can compete globally, and the rural areas left behind.

"If it continues like this, the gap will keep getting bigger," Goto says. "We can't say it's a recovery for the whole country if only the cities are prospering. We don't feel the economy is improving at all."

One look at Yubari proves Goto's point.

Chest-high snow barricades the doors of the shuttered shops lining a deserted downtown wedged between two mountains. Forlorn billboards for movie classics like "East of Eden" advertise the town's now-defunct film festival.

Just up the valley lurk the roller coaster, Ferris wheel, robot museum and other tourist traps that were envisioned as saving the city. Long abandoned because of lack of funds, the projects now lie under blankets of winter powder.

Troubles began for Yubari, in Japan's isolated far north, when its mining industry gasped its last in the early 1990s.

Then-Mayor Tetsuji Nakata, tried to reinvent the town under the slogan "From Coal Mines to Tourism." In came countless taxpayer-funded projects, including two hotels, a coal museum, golf course and museum of steam locomotives. Not to mention the so-called "Melon Castle" that makes muskmelon liqueur.

There was even an international film festival, which later won tribute in Quentin Tarantino's hit movie "Kill Bill" in the form of its Japanese schoolgirl assassin, Gogo Yubari.

Yubari was one of many towns around Japan riding the gravy train of government money. A year earlier, a town in western Japan famously spent $833,000 in Tokyo tax money on a gold brick as an ostentatious municipal investment.

There was plenty of money to go around. Japan's economy was on a roll back in the 1980s and early 90s, and politicians in Tokyo found it easy to win local votes by doling out plentiful cash and pork barrel projects that created jobs.

Things unraveled with Japan's slump in the early 1990s. Japan was still the world's second-largest economy but soon had the biggest public debt in the industrialized world.

Then the spigots were turned off.

By 2005, public spending nationwide had dropped to about 4.8 percent of gross domestic product, down from about 8.4 percent in 1996, according to Masaaki Kanno, an economist with JP Morgan in Tokyo. Outlays for construction work, for example, tumbled to 20 trillion yen. In Yubari, special allowances for coal mining towns and mountain villages were among those lost.

"There are no other options for the government but to cut subsidies. Japanese today want a small government," Kanno said. "That's a reality the local economies have to adjust to."

The streamlining and deregulation helped create a leaner economy that pulled Japan out of more than a decade of doldrums. Big cities like Tokyo, Nagoya and Osaka are now leading the comeback, with improved job markets and land prices. But in the outskirts good times are a distant memory.

Property values are falling, unemployment is higher, incomes are lower and people are leaving in droves. All but eight of Japan's 47 prefectures saw their populations shrink in 2005.

Yubari, which had 120,000 people in the 1960s, is now forecast to have only 7,000 in 16 years.

Among those reconsidering the future is Chisato Narita, a 42-year-old mother whose husband was laid off by the Melon Castle in November. She makes ends meet by working at a gas station.

Both are worried about the outlook for their 7-year-old son in a town with little left to offer.

"I'm not mad at the city, but I wish they would have realized the problems sooner so it wouldn't be so drastic," said Narita said. "We don't want to leave, but we'll have to see what kind of city Yubari becomes."

About 41 percent of Yubari's citizens are 65 or older, compared with 20 percent nationwide. For the rest of the country, Yubari offers a window into a grim future of spiraling demand for social services against a dwindling tax base. It's a sober reminder that Japan can't take a more prosperous tomorrow for granted.

Reality has finally sunk in, and Goto aims to launch an 18-year revival campaign April 1 that is nothing short of merciless by Japanese standards.

For starters, the city plans to halve the number of public employees to around 150, and hand pay cuts of between 30 percent and 70 percent to those who stay.

The town's hospital will be downsized to a clinic, 11 schools will likely be consolidated into a handful and the town library closed. The city will also hike taxes and charge more for buses, sewage services, garbage pick up and use of the municipal public bath. Snowfall already has to measure 6 inches, instead of 4 inches, before it's plowed off the streets.

Yubari is also selling or outsourcing management of around two dozen tourist sites, including the plethora of museums, the Melon Castle, the ski resort, hotels, the amusement park, golf course and a cycling road.

"You can't compare today with the past," said Yubari-born barmaid Kyoko Bando, 64, who runs one of the few remaining taverns. Once a place where raucous young miners packed the house, Night Spot Grace sits empty most nights except for the monthly Beer Party, which draws a crowd of elderly karaoke fans.

"I never imagined Yubari would come to this," Bando moans.

Reverberations are being felt as far away as Tokyo, where the gap between urban and rural Japan is becoming a political liability for Prime Minister Shinzo Abe in a country that long prided itself on egalitarianism.

Abe campaigned for more balanced growth before taking office last September, but little has improved.

Some lawmakers are pushing for new measures to make it easier for towns to manage their debt or regulate the establishment of big shopping centers that drive small-time rural retailers out of business. Others want to require troubled towns to take stricter restructuring measures before qualifying for handouts.

While Yubari's case is testing the central government's resolve in breaking the bailout habit, Abe has so far stood firm against suggestions Tokyo share responsibility for its plight.

"Lots of other cities and villages are also doing their best," Abe recently told parliament. "It's necessary to fundamentally change the predisposition to waste money."