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Until recently, recession in Japan has been largely invisible. In the city centres, shopping is still a serious pastime; and in the entertainment districts, corporate hospitality still sends the grey-suited and the red-faced reeling into the streets in high spirits. The economic downturn has been evident mainly on the financial pages of the newspapers: in stories of banks failing and of government bail-outs and of plans to stimulate the economy that somehow never seem to work.

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Now the Asian contagion has escaped the printed page and is infecting real people who turn up in unexpected and embarrassing places. In Japan's second city, Osaka, it is impossible to travel far these days without coming across the bright blue plastic sheeting that protects a new army of the jobless and rootless from the autumn rains; and which will soon be their only shield against winter frost and snow.

The blossoming of the blue encampments becomes ever more noticeable on the approaches to the infamous Kamagasaki District. For decades this has been home to Japan's largest community of day labourers, supported by a rudimentary welfare system and by voluntary groups, many of them Christian.

Sister Sharon in the playground, now a haven for homeless adults

Sister Sharon, an American nun of the Daughters of Mercy of St. Vincent de Paul, does much of her relief work in a small park, once a children's playground, in Kamagasaki. Now the jungle gyms and the swings support shelters and are festooned with laundry; and at the centre is a feeding station where thousands of free meals are served by volunteers.

Twice daily a line of men, stretching far down the street and around the park, shuffles past, each one receieving a bowl of zosui (rice and vegetable porridge) in a plastic bowl. For most of them this meagre ration is the only regular nourishment.

"This is it," says Sister Sharon. "There's nothing else for them to eat." She says one man told her that his friends had starved to death, and that he was the only one of his group of day labourers left alive.

Sister Sharon has worked in the area for a decade, but in the last two years she's noticed a change. Kamagasaki's population is ageing rapidly, as more and more men come into the area after losing regular jobs or seeing their businesses go bust. One man in his mid-60s, says he came to Kamagasaki after losing jobs in the restaurant trade and then as a security guard. He was addicted to pachinko, or Japanese pinball: his wife divorced him and his family disowned him. From February to October, he was homeless.

"I was worried about what would happen if I became sick - what would I do then? I was afraid I would die there on the streets," he says. He now lives at the Deai-no-ie, a local shelter for the elderly and home to 70 men, who sleep on the floor, packed close together.

Squalor and disillusionment at the Kamagasaki labour exchange

To understand Kamagasaki and its troubles, one must rise before dawn and visit the labour hiring centre that occupies a sprawling concrete yard beneath elevated railway tracks that are the boundary between Osaka's prosperous business and shopping centres and a different world. By 6.00 a.m. on a fine day, there are several thousand men milling about waiting for work. Agents of the construction companies arrive in vans and trucks and select the number of labourers they need for the day.

At the height of the building boom in the late eighties, 8,000 men were hired each morning. Now, even on a sunny day, when working conditions are ideal, fewer than 2,000 will be wanted. Those rejected face a dismal search for shelter. When work was plentiful, labourers could pay for rooms in Kamagasaki's 200 flophouses.

Today these establishments with their sadly pretentious names - Ritz, Hilton and Paradise Inn - are mostly empty, as day labourers cannot even afford the modest Y1,000 (about �5) they charge for a night's accommodation. The men are reduced to sleeping rough and their number has helped to swell the ranks of Osaka's homeless from 3,500 to 10,000 in just two years.

By 10 a.m. anyone who has found work has long since left the Labour Centre; and on wet days many of the men remain beneath the railway arches, sleeping on the concrete floors or huddled in groups playing cards. As the day goes on, the scene becomes increasingly squalid: the floors fouled with pigeon droppings and littered with waste paper, empty cans and broken glass; and the smell of poverty, compounded of cheap food, unwashed bodies and the bad breath of sake drinkers, grows more oppressive.

Father Honda shaves the head of a homeless protester

But Kamagasaki is now moving out of the margins of Osaka life and into its centre, thanks to the efforts of a turbulent priest, Father Honda. With the full support of his Bishop, this fiery Franciscan has organised a permanent demonstration of the homeless right in front of City Hall. Outside the grave, granite portals of the Mayor's office, a rag-taggle army of jobless maintain their twenty-four hour presence. They have lashed their blue plastic sheets to the trimly pruned cherry trees and there they camp, to greet the officials as they arrive and to lobby them as they leave. The glum faces that run the gauntlet of the demonstrators suggest that the establishment is not amused.

Father Honda leads from the front. He is often on the steps of City Hall, wielding electric clippers, administering severe haircuts and beard trims to his troops. He wants them to look their best, to give the public as little reason as possible to dismiss them as derelicts and down-and-outs.

He also wants a public works programme to generate jobs while the recession lasts. He points out that even according to official figures, more than 700 men died on Osaka's streets last year, mostly during the winter. He is determined it will not happen again. "It's impossible to understand in a society (that is) so developed economically," he says. He adds that TB in Kamagasaki has reached more than thirty times the national average, and approaching Third World levels. Undernourished men sleeping in the open are especially vulnerable.

The fate of this and other similar areas - like Sanya in Tokyo and Kotobuki-cho in Yokohama - is generally ignored by the Japanese media. Kamagasaki only hit the headlines after the area exploded violently in 1990, in the worst urban rioting in Japan of the last 20 years. More than 200 people were injured in protests over suspected collusion between yakuza gangsters and the police.

The disturbances hardly helped the Japanese public's view of the area; generally unsympathetic to the homeless, most people assume that their plight is the result of fecklessness or sloth. This public indifference or ignorance means there has been little political incentive for the government to take notice of what is still a small, if embarrassing, minority.

Prof Kagami knows Japan must face up to the problem soon

More widely, the plight of the poor of Kamagasaki raises questions about public provision for social welfare, which has generally been left to the private sector and to families. Professor Nobimitsu Kagami of Sophia University says that Japan will eventually have to create a better social safety net in the face of the sharp rises in unemployment which he forecasts. But change could be slow. "So far, Japanese government, politicians, even corporate executives kept believing there's no problem, or if there is one, we could always grow out of it," he says. "I think that mentality hasn't really changed yet."