Hope Fades in Japan’s Rust Belt

In the prime of this tiny island in Japan’s Inland Sea, the workday began like a crescendo of cicadas in song, as thousands of hammers pounded nails into the hulls of wooden ships.

In later years, as iron replaced wood, the cacophony grew even louder. The islanders were the premier producers of Japan’s domestic fleets of cargo ships, tankers and dredging vessels. “It was noisy, yet it was prosperous and thriving,” said island historian Hitoshi Fujimoto, 73.

Today, the sounds of prosperity have given way to near silence. Only three active shipyards remain--just one-quarter the number even a decade ago, and one-tenth the number that ringed the island two decades ago.

“It’s quiet and lonely now,” Fujimoto lamented, “too quiet and lonely.”

The island’s special shipbuilding high school is now shuttered, along with the movie theater, bowling alley and scores of shops and restaurants. Only about 10,000 people remain from a peak population of 30,000.

This is the heart of Japan’s rust belt, or as close to a rust belt as Japan gets. The industrially ravaged area includes Hiroshima, a 20-minute ferry ride away, home to struggling Mazda Motor Corp., and Kitakyushu, where steel once was king.

Much as Flint and Fort Wayne and Youngstown were laid low by wrenching industrial change in the 1980s--in part by Japan’s then-great export machine--now scores of towns and cities here have been decimated.

Japan’s heavy industries--steel, chemicals, automobiles and shipbuilding--fell victim to changing economic tides, including a chronic national economic malaise, a stronger yen that makes exports more expensive, and cheaper labor and production costs overseas.

For example, Japan’s shipbuilding and repair industry in 1997 employed just over one-third of the 208,000 workers it did in 1970, and nearly 10,000 fewer than just a decade ago. Japan’s giant steel industry has shed about 160,000 workers from its payrolls since 1980, about 42% of the steel-related work force.

In Kitakyushu, 125 miles south of Osaki Kamijima, 100-yard-long slabs of red-hot steel still shoot like bullet trains through the aging Nippon Steel plant. Yet while the sprawling factory’s belching smokestacks and hulking factory still dominate the city’s skyline, employment has plunged to 4,300, one-tenth its peak.

For the most part, the jobs have not been supplanted. “Replacing these heavy industries is the most important issue Hiroshima and other manufacturing-dependent [regions] have to tackle,” says Kazuki Sasaki, general manager at Hiroshimabank Research Institute. “Many people are debating the future possibilities, such as nursing care and information technology.”

For all their woes, these Japanese cities hardly resemble hard-hit towns in America’s Midwestern Rust Belt of the 1980s: health care is paid by the government; relatively few Japanese are homeless, starving or on welfare; and the majority of people across this country seem to be maintaining a middle-class existence.

For Americans who travel to Japanese cities that are labeled as economically hard-hit, such as Hiroshima and Kitakyushu, and see what appear to be thriving commercial centers and restaurants, the conclusion could well be: “Flint should have it so good.”

Even Osaki Kamijima, while a shadow of its former self, would hardly bring the word “despair” to mind.

Among the reasons: The labor force of these industries was older when the economic decline began in 1990. Japanese workers, with the world’s highest savings rates, had salted away plenty of money to buffer them during tough times.

“Value-wise, Japanese are almost socialistic people,” said Minoru Makihara, chairman of Mitsubishi Corp., one of Japan’s largest companies. “We still have a lot of savings, so you don’t see that [bad] effect.

“But there is a slow, slow, continuing decline,” he noted.

As economic stagnation drags on and the nation opens its economy to outside competition, such industrial stalwarts as Nissan Motor, Mitsubishi Motors and Nippon Telegraph & Telephone have ordered the elimination of tens of thousands of jobs.

Smaller Companies Bear the Brunt

Yet, for all the headlines, most employees at these blue-chip companies are not feeling the direct pain. The bulk of the cuts by big companies will come from attrition and reduced hiring, rather than outright layoffs.

Instead, the pain is borne by workers from the smaller companies, where layoffs are not verboten. They include the small, privately held shipyards here, as well as suppliers that sell to major manufacturers such as Mazda and Nissan. Many folks in these industrial food chains talk openly, and painfully, of being “restructured.”

There’s the 52-year-old taxi driver in Kitakyushu who, until two years ago, delivered huge coils of steel for a supplier to Nippon Steel. When the taxi driver, who asked not to be named, found himself out of a job at age 50, he went to the unemployment office known as Hello Work but found no positions available for someone his age. As a taxi driver, he earns half the $40,000 salary he once collected. His wife holds a part-time job as a supermarket cashier to help make ends meet. They scrape by in one of the most expensive countries in the world, but the driver lamented: “Now I can’t save any money. And I have to be frugal and patient when I shop.”

An hour north of Kitakyushu city by bullet train, Mazda, now controlled by Ford Motor Co., has been pruning its supplier ranks and demanding lower prices--which it increasingly finds by going overseas. Mazda says it now purchases 15% of its components from foreign firms, up threefold. That means jobs lost in Japan.

A glance at today’s robust American industrial belt offers a reminder that hard times needn’t be forever. And the best Japanese manufacturers are nothing if not resilient. One need only look to local Kitakyushu success story Yaskawa Electric Corp., which quickly evolved from a maker of motors used in Kitakyushu’s coal mines into one of the world’s largest producers of industrial robots.

But it will be years before Japan recovers and its economy takes on a new shape. And whatever the outcome, the future doesn’t look bright for supplanting the dwindling jobs in these manufacturing and raw materials industries.

Unlike the U.S., where software and telecommunications entrepreneurs have become the corporate deities, Japanese tend to be risk-averse: Venture capital and bank loans are hard to come by for starting new businesses, and onerous layers of regulations and high costs stifle the fleet-footed. Failure carries an onerous social stigma. There is a lot of talk about deregulating and promoting information and services, but the reality is, change comes painfully slowly, at least by Western standards.

Instead, Japan looks to industries such as health care--which will grow along with the burgeoning elderly population--and hopes to regain lost ground in its technological competitiveness.

Kitakyushu is among Japan’s most aggressive cities in trying to redevelop its image and its livelihood. It is modeling itself after Pittsburgh, once the center of the U.S. steel industry, which successfully reincarnated itself into a center for health care, education and other fields.

Like Pittsburgh, Kitakyushu has cleaned up most of the thick haze of pollution that once blanketed the city with clouds of seven colors, and is expanding its port and airport. Scenic mountains ring its attractive harbor, and the city no longer feels like such a company town.

It is pinning its future on foreign trade and businesses like the new “Eco-Town” that has arisen half a mile across the harbor from the 98-year-old steel plant.

In Eco-Town, a consortium led by Nippon Steel is recycling plastic bottles into heavy-duty fabric for work clothes and hats worn by steel workers and city employees. Another building pulls reusable parts out of scrapped photocopiers and fax machines. Factories to recycle old cars and major household appliances are soon to open.

“We’ve sowed some seeds that have sprouted, and a few leaves have come out,” said Hidetoshi Yoshimura, Kitakyushu’s assistant manager of industrial policy. “Now the harvest depends on how government and companies can cooperate.”

Struggling to Turn a Profit

But such ventures seem a poor substitute for the economic heft wielded by the heavy industries. As it is, the complex plans to employ only about 500 workers at most. And profits are in doubt: Even a spokesman for Nippon Steel, the main equity owner in the project, laments that recycling is often more expensive than using new materials.

“In the past, all companies had to do was take orders from large companies,” said Masato Yanai, an economics professor at Kitakyushu University. “It’s difficult for small companies; they know how to make, but not what to make. “

And how much work will come to outposts like Osaki Kamijima is dubious. Meanwhile, the island tries to make do with ships.

While Japan still has 63 shipbuilders, only five or six are globally competitive, said Peter Boardman, an analyst with Warburg Dillon Read. Those don’t include Osaki Kamijima’s few remaining shipyards, which sell smaller vessels to Japanese customers, not foreign companies.

On a recent blustery winter day, a dredging ship filled with sand moved across the harbor of the island’s main town, Kinoe. The island’s yards built hundreds of these types of ships, which haul limestone and sand used to build Japan’s tunnels, highways and landfill projects.

Now, the island’s abandoned limestone yards attest to the new economic reality: Industrialized Japan is in need of fewer such materials, and they are cheaper offshore.

Stores once surrounded the limestone yards and buzzed with shoppers, but they have long since closed. So have most of the subcontractors that depended on the shipyards for business.

Just six ships were built on the island last year. As the next small town, Higashimo, comes into view on a tour around the island, five cranes hover over the still-operating Matsuura shipyard, but there are no ships under construction.

Groves of trees groaning with ripe persimmons and tangerines bespeak the few profitable enterprises on the island these days. Though the town made an effort to develop its tourism business, it wasn’t successful.

Tomiko Masumoto, owner of Umishizu restaurant near the ferry pier, replied simply, “Dame”--meaning “no good”--when asked how business is these days. “Since the shipbuilders aren’t building anything, the economy’s no good,” she said while dispensing bowls of hot noodles.

In its heyday, the island’s 5,000 children would walk to school in long, noisy rows.

“The kids playing outside were so loud that the neighbors shouted for them to be quiet,” said historian Fujimoto. “Now, people don’t hear children’s voices anymore. It’s a big change.”