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Still, the evidence of recovery is at best mixed. One prominent Japanese economist, Johsen Takahashi of the Mitsubishi Research Institute, remains a bear. He does not believe the economy can grow at the 1.75%-a-year rate the government predicts as a minimum for the rest of the decade; but even if it did, that would set average growth for the whole decade at just 1.5%. "We are at a crossroads," says Takahashi. "If we reform through measures like deregulation, we might end up with something like the American economy. But if we don't, we could go the route of Britain, what I call a 'senile state.'"

Despite some possible signs of healing, the scars of the past few years remain. Most companies have cut bonuses, cut overtime pay, frozen salaries and slashed other benefits. University graduates, especially women, encounter what the press has dubbed "the super-ice age of employment." Homeowners who bought at the top of the real estate market in 1991 are stuck with apartments and houses worth a fraction of what they paid. "For working people like me," says Midori Suzuki, a mother of two and a nurse who works full time, "life is getting more and more difficult. I have to work harder and harder to make a living."

One of the paradoxes of Japan right now, reminiscent in some ways of the U.S., is that while some companies are doing well, their workers are not. Thousands of industrial jobs have been lost because of kudoka, which translates as "hollowing out." Giants like Sony and Toyota are investing in China, Southeast Asia, Europe and the U.S. but not in Japan. Currently, for example, Japan imports 2 1/2 times as many television sets as it exports. They are all assembled in Japanese-owned factories in places like Malaysia and Thailand. By the year 1998, Toyota expects that 65% of the cars it sells around the world will be made outside Japan.

Ichiro Otake, 77, can hardly believe what is happening to Japan. He served in the imperial army during World War II and returned to start a newspaper-distribution business in Soma, about four hours north of Tokyo. He retired in 1980, and lives in a comfortable house on a small pension in Iwaki, a pleasant seaside town that used to bustle with small electronics factories. Otake and his wife Mitsuko used to make an extra $900 a month by working a few hours a day at home assembling small parts for CD changers.

Today the little hand press they used is idle, as are most of the factories in town. The work has shifted to China, and Otake has started teaching Go to make some extra money. "There was an upper-house election recently," he says, "and, for the first time, I did not vote. Neither did my friends, who are all very disillusioned. We have no leadership. Japan has lost its way. I don't have much hope."

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