Sunday, January 28, 2007

I Follow Intrepid NYT Correspondent Norimitsu Ohnishi to Yubari City in My Role as Gaijin Media Watchdogg, Yo!

In an act of post-modern meta-journalism, the Yomiuri expresses its amazement that Norimitsu Ohnishi makes the front page of the New York Times with his Jan. 27 article, Tokyo Cuts Aid, and Hinterland Withers in Japan, on the dire straits of Yubari, the Hokkaido (former) coal town. The NYT article does not quite due justice to a process that has been going on for a long time, in the case of coal towns for the last half century. Yubari's turn only came a little later than for the others. Still, Mr. Ohnishi's piece had true power, perhaps the reason for making the front page. It is no coincidence that the following piece, minus today's editing, had been sitting on my auxiliary hard disk since last night.

Norimitsu Ohnishi goes to Yubari and tell a story of its woes in the Jan. 27 NYT with "Tokyo Cuts Aid, and Hinterland Withers in Japan". The story portrays a former coal town that dug itself deep into a fiscal hole on generous, post-coal, government handouts, and is now cutting expenditures (e.g.. services, personnel, wages), (trying to) selling off municipal property (tourist facilities), and raising revenue (e.g. taxes, bus tokens, public onsen bath fees) to retire $500 million in public debt over the next 20 years.

Wondering what took Mr. Ohnishi to the middle of Hokkaido in the dead of winter, I follow him there. Unfortunately, I do not have a media outlet paying the bills. Besides, it's cold out there. So I take the easy way out, and visit the Yubari website… (Needless to say, the entire website is in Japanese.)

At the top of the page are: "Newly Arrived Information", "From Yubari City", "Fiscal Rehabilitation and Hospital Reform", "Recruitment Notice of Internal Medicine Doctors", and the "Invitation for Purchase of Municipal Tourism Facilities".

I start with the three items in the "Newly Arrived Information". First up is a Jan. 18 local traffic restriction of indefinite duration due to heavy snowfall. The second, dating back to Dec. 22, is an announcement of a 50% price hike and a cutback in hours, and a new one day a week closure at the local public bath house. Finally, there is a new link to the local fire department website, where I find that this year as of Jan. 17 it has responded to one fire, 27 emergencies (acute illness and the like) and one emergency rescue (falling into pond and the like).

The "From Yubari City" links yield the following information:

(Notice 2006 Mar. 14) The Sapporo Justice Department is closing its Sorachi East Office as of 2006 June 19. Thenceforth, Yubari citizens among other people would have to go to the Iwamizawa Office to take care of their legal affairs.
(Notice 2006 Nov. 11) The municipal government when making payments would no longer notify recipients by mail. As of 2007, you must keep an eye on your bank account statement.

But what's this "Fiscal Rehabilitation and Hospital Reform"? Why single out the municipal hospital? The reason becomes clear when I locate and scan a survey conducted by outside management consultants. The hospital is apparently a mess. It is understaffed by (according to locals) arrogant and incompetent - if underpaid (even at 12 million yen to 250 million yen plus free housing) - doctors, who are leaving if they can. The local people try to avoid it if they can. A part-time doctor last year did decide to go full time, bringing the contingency of residents to five, including a dentist. The rest of the staff is otherwise overstaffed and, compared to the rest of Japanese municipalities, overpaid. The municipal reform plan confirms Mr., Ohnishi's report that it will be downsized to a clinic (as of April, which is the beginning of the next fiscal year), yet the hospital website makes no mention of this fact. The link to the Sept. 6 announcement soliciting internal medicine doctors still remains on the hospital website. (Notice: You must be between 26 and 70, ruling out Doogie Howser and Dr. Ruth.)

And what's this? The plan says Yubari must retire 35.3 billion in 18 years. Apparently, Mr. Ohnishi was no longer in town on a Friday, when the pain was released on Jan. 26. The plan says Yubari has managed shorten the repayment period by two years, thanks to expected help from the Hokkaido prefecture government. Still, there's a huge discrepancy between Mr. Ohnishi's $500 million=60 billion yen and the plan's much smaller figure. Perhaps the Yubari government figures that it can carry a 25 billion yen load indefinitely. Or there's some so-called third sector, off-the-book debt lurking somewhere at least here beyond view. In any case, pain will be felt by public employees, whose numbers will be cut by more than half in three years (bringing them to national per capita levels; Yubari is definitely overstaffed, a carryover from its coal town heydays), and those remaining will see their salaries cut by an average of 40%. They will be encouraged to leave by a precipitous year-by-year drop in retirement benefits if they choose to remain. But at an average of 400 million yen per year, at least they will be doing better than the mayor, who will see his salary drop from 862, 000 per month to 259,000 (and his bonus cut by 80%).

Will this work? I hope so. But then, there's the demographics.

A breakdown of the Yubari population, available on the Yubari website for 1990, 1995 and 2000 (but not for 2005 nor with separate Internet addresses) shows that Yubari has a huge bulge (reflecting its glory coal years) for what would be the 65-74 age group in 2005, a somewhat smaller population at the 55-64 age group, but drops precipitously after that. Another tendency to be gathered from the data is that people tend to leave Yubari after high school, a small number of which come back after they have finished college, where I assume they'd replaced new retirees in the public sector and elsewhere. There is a gradual decline in all age cohort groups, and a somewhat greater decline among the older groups over and beyond what would be reasonably be attributed to natural causes. Presumably, a substantial portion of this decline means some retirees go to live with their children or at a retirement home outside of Yubari.

As a result, Yubari has continued to shrink, at about maybe 3% per year since the beginning of the 90s. It has also been aging steadily and surely, with those who can leave, leaving. The current 65-74 age group will begin dying off, but the 55-64 crowd will be joining it in retirement. This will surely erode the tax base over the years. And those who remain will have less money to spend. Surely the 121,828 residents of Yubari, a disproportionately large number of whom have the vote (courtesy of an aging population), realize this, as they go into the July Upper House election.

Unless the repayment plan has taken this demographic decline into consideration - and governments are notoriously poor at owning up to the fiscal implications of long-term demographic trends - it is hard to see how in the world Yubari will fulfill its revenue goals. And that's before we even begin to consider the financial risks the Yubari coffers will assume on the expenditure end with the twists and turns that the annual debt burden will take, as interest rates fluctuate. The younger residents of Yubari will not be blamed if they decide to vote more quickly than ever with their feet.

How the major political parties will appeal in July to the voters of Yubari, whose story is being replayed in a less dramatic fashion all over Japan, I know not. In the meantime, Rengo, (partly) public sector national trade union and DPJ supporter, chose to make a stand for wage earners Yubari, where the erstwhile bloated, overpaid bureaucracy was being forced to go down on that very day.


ross said...

"Surely the 121,828 residents of Yubari"

I think you added a number 1 in the middle of this figure. About 120k was Yubari's population back at its zenith. Now the statistic lists as 12,828, which, along with having a relatively old population, is why the debt will be difficult to manage.

Jun Okumura said...

Ross: Thanks for pointing out the error. The decimation of the Yubari population is the main reason that the plan justifies/needs a drastic cutback in overhead. My point is that the plan may be glossing over the likelihood that the population and thus the tax base will continue to decline.

Of course they will very likely rely on natural attrition to further downsize the municipal workforce. The arithmetical problem is that they cannot downsize the debt burden.