The anime cartoon industry is an important economic and cultural feature of modern Japan. Many in the West may wonder what the attraction of the quirky anime characters actually is. But anime is big business, its domestic sales and worldwide exports contributing billions of yen to Japan's economy. But, as Adrian Brown discovered, a storm is building over the once-booming anime industry
REPORTER: Adrian Brown
It is a freezing Sunday morning in Tokyo - just 5 degrees Celsius - but an orderly crowd is gathering among the grey, concrete towers. Some have been queuing here since dawn.
MAN ON LOUDSPEAKER (Translation): Visitors to the Tokyo International Anime Fair, join the end of the queue to the far left.
Finally the doors open and these patient fans are ushered in to the wonderful world of anime. Tokyo's International Anime Fair is the largest event of its kind. Today alone there are 130,000 visitors. Many come dressed as their favourite cartoon characters, a hobby known as 'cosplay'.
WOMAN: I think it's awesome.
REPORTER: It's very distinctive, isn't it?
WOMAN: Very distinctive. Oh, you have your eyes too? Very nice - contacts.
REPORTER: The eyes match the hair?
This stylised cartoon animation emerged in the mid-'60s and has been exported around the world. Anime depicts big-eyed male and female heroes who look like children or teenagers but often engage in adult levels of violence and sexuality, usually in some apocalyptic or futuristic setting. In Japan, cuteness sells and life definitely imitates art. Anime is a $2-billion-a-year industry that's helped define Japan as a cultural trendsetter.
REPORTER: From Australia. From Australia TV.
The fans might be cheerful, but behind the scenes anime is in big trouble. In a suburb in the north of Tokyo I found out why. This is A-Line Productions. Three years ago the owner, Kazumori Hashimoto, noticed a new trend. It began with a fall in TV advertising revenue, which soon meant less money for making anime. Instead of more than 100 different programs being broadcast each week, there are now less than 50.
KAZUMORI HASHIMOTO, A-LINE STUDIO OWNER (Translation): We can't make what we want to make. To keep the business going our products must sell. The industry is geared to where demand is - which is the obsessive fan market, not the general public. That's the trend I worried about most.
Hashimoto's studio is faring better than most, though, but the industry's troubles are taking a toll on its workers, like 21-year-old Yuichi Namiki. Yuichi works in almost monastic silence. It's painstaking work that requires precision and intense concentration, and he does this for up to 12 hours a day, six days a week. Most animators are paid per sketch and the fee has barely changed in 30 years.
YUICHI NAMIKI, ANIME ARTIST (Translation): If I can work a bit harder, draw faster and increase the speed I turn out drawings and work longer hours, I think I can manage.
Yuichi tells me he earns about $900 a month - not enough to rent a room in the world's most expensive city so for now he still lives at home.
YUICHI NAMIKI (Translation): I want to live alone. But if I don't have enough work I can't pay my expenses and I'll probably have to quit. It'll be hard.
Yuichi's bedroom is a shrine to anime. The shelves are lined with hundreds of DVDs and the cartoon magazines, known as 'manga'. Despite his tough introduction to the industry, he still enjoys anime - especially the girls.
YUICHI NAMIKI (Translation): If you ask me, I love watching anime with pretty girls. And drawing them too. That's the sort of anime I like. I have favourite facial expression, hairstyles and body types. I sometimes get paid to draw them all. I'm so excited when that happens.
REPORTER: In lots of the pictures the girls always seem very innocent.
YUICHI NAMIKI (Translation): I like girls with a slight smile. I like them to have a subtle expression.
The reason for the industry's falling revenue is simple - the internet.
Well, this a cartoon called 'Fairy Tail'. It only appeared on a Japanese network just a few hours ago, but already online I am able to view it, access it from one of the innumerable illegal sites that have been set up in Japan. And it's that illegal downloading that is hurting the anime industry.
Anime's other big threat is Japan's shrinking population of children - new viewers are harder and harder to come by - so anime has had to change its target audience, according to the industry chief, Toyoo Ashida.
TOYOO ASHIDA, INDUSTRY CHIEF (Translation): With the declining birth rate the target of animation production has moved towards young people and adults who grew up watching animation. We now produce anime specifically for those people. So we were able to expand our target audience and our market, but to meet the shift in the market we developed late-night anime.
The new animation Ashida is coyly referring to is anime porn. Graphic comic books can already be found in any Japanese convenience store, but anime porn comes in forms that escape the rules covering photos and live-action videos, even when children are depicted sexually - one chilling online video game, called 'RapeLay', lets players choose victims of any age - and a growing number of animation studios are turning to porn to survive.
REPORTER: So the pictures of the little girls, that's what sells?
KAZUMORI HASHIMOTO (Translation): It's kind of the soft-core genre, as we call it in Japan.
Hashimoto's business has so far avoided anime porn. He's worried the trend is turning off the general audience.
KAZUMORI HASHIMOTO (Translation): It's been putting a strain on the industry. With the economic downturn our market has narrowed and the industry is slack. We're not producing much aimed at a general audience.
Tokyo's municipal government is pushing for tighter rules, but they still won't amount to an outright ban on explicit illustrations of minors. Toyoo Ashida says the industry has no appetite for new legislation.
TOYOO ASHIDA (Translation): Neither the government nor any institution should directly restrict freedom of speech.
Back at the anime fair, I can see no trace of the industry's darker side. The college that trains many of Japan's aspiring animators accepts that some of those former students are now producing porn. It's an embarrassing subject for one of its teachers, but he concedes he would not stand in the way of others who want to do the same.
TAKASSHI MATUZAWA, ANIMATION TEACHER (Translation): It's a difficult issue. It's up to the viewer. Different people have different values. It really is a very difficult issue.
REPORTER (Translation): Supposing one of your students is joining a studio specialising in soft-core anime, how would you feel about it?
TAKASSHI MATUZAWA (Translation): Well, if the student is fully aware of what he's getting into and still wants to do that sort of work I wouldn't stop them. But if I find a student of mine wondering about joining a studio specialising in that sort of genre, I'd ask the student if he's absolutely sure.
Worse still, Japanese anime is facing a gigantic new threat - China. Chinese animation companies tripled their presence at this year's fair.
NAOTO MORI, CHINA PAVILION, SPOKESMAN (Translation): The Chinese Government supports the animation industry. It's built 30 animation bases or anime factories in the country. The number of children in Japan is in decline with the low birth-rate. Our domestic market isn't getting any bigger. We're looking to China as our new market.
The spokesman for the China Pavilion, Naoto Mori, says they'll soon be the biggest player.
NAOTO MORI (Translation): I don't think China will get to the top for a while. It has a lot more to learn. But in the near future it's possible China will rise to the top.
Already much of the grunt work of animating is being farmed out to China and Korea, but the industry brushes off suggestions that foreign competition poses a real threat. Instead they're confident that a new boom will emerge in time.
KAZUMORI HASHIMOTO (Translation): We've been working with Koreans for more than 30 years. They haven't managed to copy us in the things that are original to the Japanese. I'm not too concerned about it.