Sexy and smart: one sector that won't be left behind: Japan's massive sex industry has shifted from bricks-and-mortar deflation to Internet elation -

IKE IT OR LOATHE it, the sex industry in Japan is big business. And despite the rickety economy, it's getting bigger. A recent survey by Takashi Kadokura, an economist with Daiichi Life Research Institute Inc., found that the Japanese market for what is rather quaintly called the entertainment trade fuzoku sangyo, swelled to a tumescent [yen] 2.37 trillion in fiscal 2001, up from [yen] 1.7 trillion a decade earlier.

This figure does not include "virtual sex"--Japan's huge sales of adult magazines, rentals and sales of porn videos and DVDs and the burgeoning market for Internet porn. And let's not forget receipts from the country's 40,000-odd love hotels.

Put together, the buying and selling of sex and related services in the world's second largest economy is worth more than the GDP of many smaller countries.

As the sex business expands along with the service sector it becomes increasingly integrated into the mainstream economy, earning billions for blue-chip firms like NTT and increasingly becoming a source of direct and indirect tax revenue for the government.

Why does this industry seem immune to the problems that have kept Japan on the economic disaster pages of the world's newspapers for over a decade? The truth is: It isn't.

As a stroll around the licentious pink heart of Tokyo's sex industry, Kabukicho, or the "soaplands" district of Yoshiwara confirms, many operators of sex clubs and massage parlors have resorted to the same deflationary price-cutting approaches practiced by other businesses.

More noticeable than the stagnation and decline of some areas of the sex trade, however, are the vitality and innovation that characterize the industry as a whole. Despite its murky image and legal problems, thousands of new businesses have sprung up in the last five years, offering all the eye popping lechery that money can buy.