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A Chill Wind for Japan's Snow Country

By Brian Bremner To escape the inferno that is Tokyo this time a year, my wife and I packed up the kids recently and made a beeline for the mountains. We headed for Niigata Prefecture, on the central island of Honshu. Bounded by Sea of Japan and rugged mountain ranges, Niigata is a fabled bit of rural Japan in more ways than one.

For ordinary Japanese, this is Snow Country. Starting around October, Siberian winds blast across the Sea of Japan, dumping prodigious amounts of the white stuff well into the spring. The place is beautiful during the winter, and its hot-spring resorts and ski slopes are attractive tourist destinations.

In the political world, Niigata is better known as Tanaka country. That is, as in the former and late Liberal Democratic Party Premier Kakuei Tanaka and his daughter, Makiko, Japan's blunt-talking Foreign Minister. Over the decades, it has benefited greatly from public-works largesse. In fact, a Soviet-style bit of statuary honors the senior Tanaka in front of one of the prefecture's several bullet-train stations.

ROUGH ROAD. Now, though, that era is fast coming to a close, thanks to the fiscal austerity programs of the current Premier Junichiro Koizumi aimed at erasing Japan's monstrous government debt. If team Koizumi succeeds is weaning the country off its public-works habit and diverting more government spending back to Tokyo and Osaka, a political base the LDP desperately needs to court, Niigata and other rural provinces are in for a very rough road ahead.

The political realignment under way in Japan will probably mean an end to wealth transfers from the cities to rural areas, a practice that has been the Japanese norm for years. Tanaka was the master of the politics of wealth redistribution -- or, less euphemistically, doling out pork.

He ran a prosperous construction company during World War II, made lavish campaign contributions to the forerunner parties of the LDP to ease his way into politics, and won a seat in the Diet in 1947. Later, he rose through the ranks of the LDP and eventually grabbed the premier's chair in 1972.

One of Tanaka's first policy crusades was something called Nihon Retto Kaizo Ron, or the remodeling of Japan's archipelago. Government spending and easy credits were used to bankroll dams and bridges, bullet-train lines, and new factories. The spending spree, plus an LDP-mandated ultra-loose monetary policy, coincided with the 1973 oil shock, and Japan experienced a huge surge in inflation.

STILL REVERED. Tanaka resigned in 1974 and then became embroiled in the Lockheed bribes-for-contracts scandal, though he managed to play a big role in Japanese politics behind the scenes until he passed away in 1993. The era of Japanese-style pork-barrel politics would live on until Koizumi arrived this April.

I asked our innkeeper, a fine fellow who took my family fishing and let my daughters raid his potato patch, whether the Tanaka name still meant anything to the 2.4 million souls that call Niigata home. He insisted the name is still revered, though nobody expects his daughter to deliver the kind of goodies that propped up the regional economy, or at least its construction companies, as in the past. After all, she's a Cabinet member of the "reform without sanctuaries" LDP under Koizumi, so forget another bullet-train line in Niigata.

In fact, he made it clear that his inn and family farm, where he grows rice and assorted vegetables, is barely scraping by. The outlook for Niigata, I asked? He responded by simply saying, "Fukeiki," which basically means very tough times. Sadly, he's probably correct -- at least for the foreseeable future.

NEW THINKING. Outside of skiing and hot springs, Niigata has a portfolio of decidedly Old Economy industries: rice production and forestry; chemical, metal, and oil refining; and sake and furniture manufacturing. Not exactly the stuff of dramatic regional growth.

In the old days, government spending was vitally important to Niigata, but it will be less so going forward. The good news is that regional governments are starting to get serious about developing economic-growth strategies that play to their strengths, instead of passively waiting for the next round of spending from Tokyo. Attracting fresh investment from Japanese companies and foreign players will take time, but it's the best way forward for Niigata and rural Japan.

Foreign investors, like Ripplewood Partners in New York, are snapping up resort properties in southern Japan, and Western investment banks are even buying golf courses at fire-sale prices. It's time for Niigata to forget the past and start promoting itself as "Snow Country -- A Helluva Place To Do Business." Bremner, Tokyo bureau chief for BusinessWeek, offers his views every week in Eye on Japan, only for BW

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