S A P P O R O    

May 1998

FRIDAY night in Susukino, and the entertainment district of Sapporo seems as lively as ever. Red-faced sararimen totter from bar to bar. Neon signs blaze out from buildings advertising the night’s attractions and immodestly clad young women hand out leaflets promoting some of the seedier ones. It is hard to imagine that Sapporo, the capital of Hokkaido, the northernmost of Japan’s four main islands, is where the country’s economic troubles have hit hardest. Yet appearances deceive, and Hokkaido is indeed a victim of Japan’s strange recession.

“The problems are hidden under the table,” says Masatoshi Kanazawa of the island’s chamber of commerce. Every day, he says, while some new ones open up many more of the hundreds of bars operating in Susukino close down; the mama-sans who run the hostess bars complain that business is down by a third or more.

People’s reluctance to go out and spend as much money on entertainment as they used to reflects fears for their jobs. In the latest financial year, measured by value, some 10% of the record number of Japanese companies that went bust were in Hokkaido, even though the island accounts for only 4.5% of the country’s entire GDP. Although recent figures are not available, Hokkaido’s unemployment rate is generally reckoned to be well above the average Japanese rate, which has now climbed to 3.9%. Across the island, more than three applicants are chasing every vacant job, about twice the national average.

Traditional industries on the island once relied on natural resources. But many of the old firms have faded away. While some timber and paper factories are still operating, only one coal mine remains open. Agriculture is now the island’s main industry, and dairy farming is its most competitive business. With a fifth of Japan’s arable land, Hokkaido is the country’s food basket. The shelves on Tokyo’s supermarkets are incomplete without a selection of Hokkaido camemberts. Yet proximity to Siberia means the island suffers from severe weather. Snow blankets the farms for half the year. Though the weather attracts skiers, around which a tourist industry has been built, there are no other large, growing industries to provide work: less than 2% of Japan’s manufacturing industry is based in Hokkaido.

To the accompaniment of baroque recorder music piped through the building, Tetsuo Shimokawa, the chairman of Dogin, a local bank, blames poor communications with the rest of Japan for the island’s woes. Despite a tunnel between Hokkaido and northern Honshu, Japan’s main island, connections to the country’s industrial heartland are poor. During the years of rapid economic growth, the government built transport links west of Tokyo, to Osaka and beyond. Air travel is expensive. Over-regulated airlines mean that it costs more to fly from Tokyo to Hokkaido than from Tokyo to Los Angeles.

With little private investment, some 30% of the island’s economy depends on government spending, much of which goes on public works. This mainly benefits the bloated building industry, which in the past has soaked up workers unable to find other jobs. But when the government started to cut spending a year ago, the effects on Hokkaido’s economy were severe.

Then came another blow. In November the island’s main bank, Hokkaido Takushoku, from which some 60% of Hokkaido’s companies had borrowed, collapsed under the weight of bad loans made to building and property companies. The bank’s failure has triggered a string of bankruptcies across the island. A third of these failures were building companies. More firms are likely to fold. Mr Shimokawa worries that many will find it difficult to get loans from other banks, which are now being “very careful” about screening borrowers and applying stricter credit controls.

The government’s latest plans to plough more money into public works will help Hokkaido in the short term. But the government cannot afford to keep paying companies to pour concrete over the island for ever. The local man from the Ministry of Trade and Industry waxes lyrical about companies gaining strength through adversity. He wants to develop agricultural industries and biotechnology. There are moves to reduce transport costs by, for example, cutting landing fees at Sapporo’s airport. In August, as a result of deregulation, a new airline will start ferrying passengers between Sapporo and Tokyo at half the present fare.

It will take time to wean Hokkaido off government handouts. “We’re used to being taken care of by Tokyo,” says Hideo Ideta of the Hokkaido Economic Federation. He, like so many Japanese nowadays, looks to history for inspiration. In Hokkaido, the past hero is an American, William Clark, who was responsible for raising the island’s farming to international standards. Clark’s most famous advice to the students at the agricultural college he ran was, “Boys, be ambitious!”—words that are as pertinent now as they were more than a century ago.