Japan: adrift in dangerous seas: the world's second-largest economy is suffering from lack of jobs, a shrinking population, and the biggest debt in the world.

• Author: French, Howard W.

When Tomoaki Isogai graduated from Akirudai High School last March, he didn't have much to look forward to. "I looked for jobs, but I stopped after a month because I could not find the job that I wanted," he says.

Twenty years ago, during Japan's boom years, about 90 percent of the graduates from Tomoaki's school who wanted to work went straight into good-paying, stable, full-time jobs. Now, about half of such graduates drift into part-time, temporary jobs with no benefits.

Tomoaki is not alone in his frustration. Japan's young people, especially those seeking their first jobs, increasingly find themselves victims of Japan's ailing economy.

For 10 years, Japan has stagnated, even as its regional rivals like China and South Korea have enjoyed impressive economic growth. Seven ineffectual Prime Ministers paraded in and out of office, their chief strategy seemingly to wait out Japan's dismal downturn.

A CALL FOR REFORM

Junichiro Koizumi, a mop-haired politician known as an innovator, emerged as a contender for Prime Minister with his stirring calls for reform. "Without pain, there can be no gain," he grew fond of saying. Japan, he promised, would soon undergo "structural reform with no sacred cows."

Koizumi (pronounced koy-ZOO-mee) won an unusual popular vote to become president of the governing Liberal Democratic Party (LDP), and was elected Prime Minister by Japan's parliament, or Diet, in April 2001.

Many Japanese felt that enduring a little more suffering was a small price to pay if it would put Japan back on the path of economic growth and competitiveness that it had experienced from the end of World War II through the late 1980s.

But in the nearly two years since Koizumi took office, Japan has seen precious little reform, and the economy continues to suffer steady, alarming decline. Unemployment, officially 5.5 percent, is at the highest rate since World War II. Economists say the real figure is probably higher, because the government doesn't count as many as 2 million people who have become discouraged from seeking work.

"People who follow the economy closely long ago stopped having faith in statistics like these," says Richard Katz, an economist who specializes in Japan. "There are a great many more unemployed people than anyone is admitting."

SOARING DEBT, PLUMMETING BIRTHS

Japan does not feel like a country in crisis. The streets of its cities are immaculate. People are fashionably dressed. Trendy restaurants overflow with guests all week long. And Japan still boasts the world's second-largest economy (after the United States).

But Japan is also the industrialized world's most indebted nation. Women are flooding the job market, yet...