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Yoshihiro Matsumoto knows that sinking feeling. It comes over him like a bad hangover every morning at 5 o'clock when he and his wife head out to a large, chilly warehouse next door. He climbs up a loft, pulls out a 2-m-high bundle of blue-green straw called igusa, carries it downstairs and dumps it in the hopper of a weaving machine where it will be made into tatami mats. The Matsumotos have worked in Kagami, on the southern island of Kyushu, for three generations; it was igusa that turned a poor country backwater into a modern middle-class town, one of the wealthiest farming communities in all of Japan. The farmers had a nickname for their prized crop: Blue Diamond.
Today igusa is, well, straw. The farmers in and around Kagami ply an anachronistic endeavor propped up for decades by protectionism. When Japan was booming, the government thought it could have it all. Farmers, who traditionally voted for the long-ruling LDP, were shielded from competition from imports; Japan's consumers shouldered ridiculous bills for homegrown farm products. Today, thanks to the weak economy and the wrenching opening up of Japan's markets, tatami prices are half what they were 10 years ago. Farmers can't pay off the loans they were once encouraged to take. "Thirty farmers have committed suicide the past four or five years," says Yoshiharu Takahama, a town assembly member.
In the relentlessly confident 1980s, the tatami makers of Kagami sent a delegation to teach Chinese farmers how to raise igusa and weave tatami. "I had a slight feeling of dread," admits 33-year-old farmer Yasushi Furushima, who visited China a few years afterward. "But their quantity wasn't very good." China, of course, caught up fast: today, its exports account for more than two-thirds of the tatami market in Japan. In a last ditch measure to protect its farmers, Japan last year slapped import duties on Chinese tatami, along with leeks and shiitake mushrooms, other endangered cash crops. Bad move. China retaliated by putting tariffs on Japanese cars, air conditioners and mobile phones, businesses worth $700 million annually — seven times more than the farm products Japan was protecting. (The two countries began meeting last week to hammer out a settlement.)
The farmers' rut is a small one compared to that of manufacturing, the heart of the Japanese miracle. Yahaba, a town of 21,000 north of Tokyo, was once an electronics boomtown, home to an Aiwa compact-disc factory and six other manufacturers. In January, loss-making Aiwa shut down the plant — and all of its factories in Japan. "People working there, at first, said, oh, this won't affect us," says Genkichi Kon, who operated a snack shop inside the plant. "But gradually, one by one, people were restructured [translation: fired]." Two other factories have also closed. "People in our town are spending their savings for their everyday life," says Yahaba mayor, Mitsuro Kawamura, echoing a trend the government reported in January: the jobless are now dipping into their savings accounts to make ends meet.
Across the archipelago, manufacturers big and small are cutting salaries, asking workers to job-share and shuttering facilities. A decade ago, fewer than 20% of manufacturers had operations overseas; today the number is 35% and climbing. In most cases, the jobs are moving to China. All the parts for Sony's market-leading PlayStation video-game console and its final assembly take place there. In fact, of more than 1,000 companies surveyed by the Japan External Trade Organization, 42% said they are considering shifting some or all of their manufacturing operations to the mainland. Labor is cheap, of course. But also, according to Tadashi Matsumoto, senior vice president in charge of manufacturing for Toshiba Corp., Chinese workers "are more highly motivated and harder working compared to the Japanese."
Ouch. "I couldn't accept it as reality, I couldn't believe it was happening to me," says 54-year-old Tsuneo Tokoro, who lost his job last spring when his factory — where he had worked for 37 years making water faucets — shut down. "But if companies like mine can't go to China to make things, then they will go broke." Masami Sato, 36, who left his electronics company in Yokohama after 16 years and is now training to be a health-care aide, says he will be earning half of his previous salary in his new job. "None of my experience can be utilized," he says. "I am starting from scratch."