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Lehman fallout hits Japan's vulnerable elderly

TOKYO- Thousands of miles from Wall Street, the collapse of U.S. investment bank Lehman Brothers is causing anguish in a small Japanese town, where the loss of $1 million in public funds threatens lifelines for the elderly.

Last year, the social welfare council in the small town of Higashi Matsuyama, 50 km (31 miles) north of Tokyo, switched more than a quarter of its investment funds from government bonds into Lehman's corporate bonds in the hope of boosting returns.

Reassured by the A+ rating from Standard and Poor's, they were little concerned about the risks.

"We were in a blind panic when we learned about Lehman's bankruptcy," city auditor Kaoru Takemori told Reuters in an interview last week.

"We realised we had probably lost our million dollars. We didn't know who to talk to, we wondered if we should beg our stockbroker or complain to Lehman.

"But either way, the money was not coming back. We wondered how we could apologise to taxpayers."

The daycare centres and home helpers the committee funds are now pinching pennies by travelling to homes by bicycle instead of driving, fixing broken wheelchairs themselves and turning off the daycare centre's lights at 5 p.m. sharp.

"I don't want to change my job, because I like what I do," said 53-year-old elderly-care worker Yoko Nakajima after a bike ride to a client's home, where she prepares and serves meals.

"But riding a bicycle in the rain is really hard."

Cutting corners is unlikely to fill the gaping hole in the budget for long and the city faces the prospect of layoffs and cutbacks in services to its growing number of elderly next year.

Japan is the world's most-rapidly ageing country, with 40 percent of the population forecast to be over 65 by mid-century, while medical and welfare costs are spiralling.

In the 1990s, the central government gave Higashi Matsuyama $3.7 million as part of a national scheme aimed at having local municipalities finance their own elderly care services by creating investment funds.

City officials could be held responsible for the financial disaster and forced to compensate the social welfare committee, Takemori said.

"If someone pays us back at least some of the money, we can get through next year without staff cuts. If not, we will make cuts," he said.

Higashi Matsuyama is not the only town in Japan suffering from Lehman's collapse. In Hitachi, 150 km north of Tokyo, a struggling shopping mall closed its doors this month after losing its funding, pulling the plug on dozens of businesses.