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There is one bright spot in this otherwise gloomy picture: anime. In contrast to the independent films, whose self-conscious artistic inventions do not attract a mass audience, anime have been top grossers for more than a decade. Innovative and visually striking, anime shared the lead box-office spots with foreign films for most of the 1990s. They tackle taboo subjects rarely seen in mainline film, such as war crimes and unethical business practices. The Heisei Badger War (1994) vividly depicted modern environmental destruction.

One could argue that independent films and the repetitive products of the Big Three filmmakers are both irrelevant to modern Japanese cinema. Porn and anime are overwhelmingly where the money and the audiences are. Japanese anime are the industry's most profitable export item. Those by the renowned producer Miyazaki Hayao (the director of 1997's hit Princess Mononoke, the highest-grossing Japanese film ever, and The Heisei Badger War) rise to a very sophisticated artistic level, yet unlike independent films, they are loved by the public – not only the Japanese public but young people worldwide.

Yet, as great as their success has been, even in anime we can see the telltale marks of stagnation. For one thing, anime never developed technically: while Japanese studios continued to paint pictures on celluloid with skills little changed from the 1930s, Pixar and Disney were inventing brand-new digital technology with dazzling visual effects that amazed the world in Toy Story, A Bug's Life, and Fantasia 2000. Furthermore, nothing can disguise the fact that in the end anime are essentially a children's medium. The really big hits, such as Pokemon and Sailor Moon (a favorite of the early-teen girl set), have none of the intellectual or aesthetic appeal of the famed works of Miyazaki Hayao – they are simply cute screenplay for little kids, and their very success underscores the vacuum at the adult end of the spectrum. In his closing years, Kurosawa sighed in an interview, «There is no hope for Japanese film companies. They have to be destroyed and rebuilt... The people accept only films they can understand, and what they can understand are only films with cats and dogs in them, not the modern world.»

Cinema provides a superb window into Japan's modern troubles, because all the patterns that afflict other aspects of national life come together here. One is monopoly. Three large companies-Toho, Toei, and Shochiku-have controlled most of the theaters and monopolized the business. They are shackled by the same seniority system that rules the rest of corporate Japan, with the result that producers prefer to work only in-house or with established directors with whom they have long-standing ties. In contrast to the frenzied telephone calling and «pitching» of new ideas that goes on in Hollywood, a deathly calm rules in Japan's studio offices.

We can sense the dead hand of bureaucracy weighing upon cinema: for decades, zoning rules made it hard to build theaters in suburbs and newly grown «bed-towns.» Cinemas did not benefit any branch of officialdom-so they haven't been built. In contrast, pachinko is a huge source of income for the police, whose retired officers run pachinko associations. (The police also profit massively from prepaid pachinko cards through their ownership in the card finance companies.) Therefore every tiny village and hamlet must raise a pachinko parlor.

Monopoly bred boredom among the public, and this actually had some good results in that the Big Three ceased to rely on their own products and started to buy independent films and put their own logos on them. This has been one way that independents break through. The other way is to find motion picture houses that are unaffiliated, and quietly these are increasing. After 1996 the number of movie theaters began to grow, for the first time in half a century, as American-style multiplexes entered big-city suburbs. Most of these, however, have foreign backing, such as Warner Bros., so it remains to be seen what these new theaters will do for the domestic industry.

By the end of the century, the Big Three were quietly running out of money. The budgets of Japanese films ran to a few million dollars at most, a scale of magnitude smaller than Hollywood's. In 1997, Shochiku reached the point where annual receipts from its entire movie division totaled only ¥3.4 billion-approximately $30 million, which would hardly produce one modest Hollywood feature. By 2000, Shochiku had given up: it sold its famous studio complex at Ofuna, fired most of its production staff, and retired from filmmaking, keeping only its distribution licenses. The Big Three had become the Big Two. As funds dried up, technological advance in film simply ceased. There were few inventive minds to spur innovation and no money to pay for it.

In 1995, I helped prepare the English subtitles for a Shochiku film, and I visited the famous Nikkatsu studios where so many of Japan's postwar films have been produced. I felt I'd stepped into a time tunneclass="underline" machinery decades old, cameramen standing on old orange crates to get height, piles of wires snaking over earthen floors, almost no computerization, no advanced lighting techniques – all in an aluminum Quonset hut.

There are other problems besides lack of money and outmoded technology, notably the degraded environment. The cities and countryside are so changed that it is difficult to produce a film with a beautiful backdrop, which Kurosawa complained about in his last days. When he directed the van Gogh episode in his Dreams (1990), he had to scour the entire country to find a site with no modern buildings or electric pylons where he could reproduce a French cornfield. Most other directors don't have the time, the budgets, or the obsessive perfectionism of Kurosawa, so they make do with painted backdrops, close-ups of leaves and running water, well-manicured temple and shrine grounds – hence the stilted, artificial quality of most recent Japanese films that take place in a natural setting.

While Japanese film was slowly sinking into quicksand, the rest of the world did not stand still. The contrast with the popular success of Chinese filmmaking in recent years could not be more striking (although when we speak here of China, we are combining three very different societies: mainland China, Taiwan, and Hong Kong). Chinese films not only won awards from international juries but packed audiences into theaters worldwide. Ang Lee's 1993 The Wedding Banquet received an Oscar nomination and racked up global profits. Chen Kaige's Farewell, My Concubine took top prize at Cannes in 1994 and was named best foreign film in polls of Los Angeles and New York film critics.

In contrast to Japan's focus on the under-sixteen market, Chinese films appeal to adult audiences at three levels: high, middle, and low. There are the grand historical dramas by Chen Kaige; the domestic comedies of Ang Lee; and action thrillers by Jackie Chan and John Woo. Chinese society, with all its injustices, offers rich ground for the cinematic imagination. Japan's controlled modern life seems to offer little room for either grand drama or action thrills. If there is any hope for Japanese film, it lies in comedy, as is evidenced by the fact that the two most internationally successful Japanese films of the past fifteen years, Tampopo and Shall We Dance?, were both comedies. When a director like Suo takes Japan's bland society for his springboard, as he did in Shall We Dance?, there are rich comic possibilities. Unfortunately, very few directors are able to make Suo's leap. As Nagasaka has written, «The same narrow, insular, and complacent attitude that explains Japan's response – or better, the absence of a response – to the gulf war can be seen in the repetitive and unadventurous products of this country's motion picture industry.»