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TOKYO (Reuters) - Across from a noodle shop in a Yokohama suburb, Hisayoshi Teramura's inn looks much like any other small lodging that dots the port city. Occasionally, it's even mistaken for a love hotel by couples hankering for some time beneath the sheets.
But Teramura's place is neither a love nest nor a pit stop for tired travelers. The white and grey tiled building is a corpse hotel, its 18 deceased guests tucked up in refrigerated coffins.
"We tell them we only have cold rooms," Teramura quips when asked how his staff respond to unwary lovers looking for a room.
The daily rate at Lastel, as it is known, is 12,000 yen ($157). For that fee, bereaved families can check in their dead while they wait their turn in the queue for one of the city's overworked crematoriums.
Death is a rare booming market in stagnant Japan and Teramura's new venture is just one example of how businessmen are trying to tap it.
In 2010, according to government records, 1.2 million people passed away, giving the country and annual death rate of 0.95 percent versus 0.84 percent in the United States, which is also the global average.
The rate of deaths is on the increase. Last year, there were an extra 55,000 dead and over the past decade, an average of 23,000 more people have died each year in Japan.
Annual deaths are expected to peak at 1.66 million in 2040 as the bulk of the nation's baby boomer generation expires. By then, Japan's population will have shrunk by around 20 million people, an unprecedented die off for a nation neither at war or blighted by famine.
Although two decades of economic malaise has weighed on incomes, a tradition on splashing out on ceremonies means the Japanese still pay an average of 1.2 million yen on flowers, urns, coffins and other funeral expenses. It adds up to a market worth a whopping $21 billion a year, or twice what Americans spend annually on funerals.
"There's been a rush into the market," says Teramura, who founded cemetery developer company Nichiryoku 45 years ago. Even Japan's second biggest retail chain, Aeon, rail companies and the nation's biggest farmers association, Japan Agriculture are getting into the business, he notes.
Teramura, 71, decided a decade ago to widen his business beyond graves to funerals and he opened Lastel last year.
Behind its flower box framed windows, hidden away from mourners, is an automated storage system. It stores and chills encoffined corpses, delivering them through hatches and into a viewing room, day or night, whenever friends and family come to pay their respects.
Building new urban crematoriums to deal with the surge in bodies is near to impossible because nobody wants the furnaces in their back yard, explains Teramura. That not-in-my-backyard crowd is forcing cities to make do with the facilities they have, even as the body count mounts.
In Yokohama, the average wait for an oven is more than four days, driving up demand for half-way morgues such as Lastel.
"Otherwise people have to keep the bodies at home where there isn't much space," says Teramura. It also provides a captive audience to which he can market his other funeral services and wares.
Joining Teramura in the funeral rush are a slew of new entrants, some of them refugees from a shrinking wedding industry.
Entry to the industry is easy. There are no licenses or mandatory qualifications. All any wannabe funeral director needs is an office and a telephone. Flowers or coffins are easy to order and ceremonial halls, hearses and monks are all for hire.
In the United States, by comparison, most funeral entrepreneurs need to study for three years, including a stint as an apprentice before regulators consider handing out a license.
In a recent poll of 2,796 funeral industry related firms, Japan's Ministry of Economy Trade and Industry (METI) found that a third have been in business for a decade or less.
It's becoming a wild west market in some ways, attracting the honest operators and the not so reputable too.
"People tend to leave things to the funeral director and some people take advantage of that. So instead of a 100,000 yen coffin you may end up with a 1 million yen cask," Teramura says.
A lack of official oversight and a wealth of cash transactions also makes it a magnet for full fledged mobsters, or yakuza, say some industry players.
A niche that the yakuza have slipped into is as brokers who introduce funeral homes to hospitals, said one funeral director, who declined to be identified. That role alone can pull in millions of dollars in commissions.
Just how fast the industry is growing is hard to ascertain.
METI in 2005 said there were 4,107 companies employing 49,079 people. Across the street at the Ministry of Internal Affairs and Communications, officials say there were 6,606 firms in 2006, supporting a workforce of 72,046.
Yoshiatsu Mitsuhashi, who is in charge of compiling the METI survey, said that growth may even understate the pace, because the ministry changed the way it gathered data.
"It probably does indicate that the number of operators is rising, but we don't really know," he admits.
Tokyo-based Yano Research Institute said companies positioned to succeed may be former wedding organizers able to respond to growing demand for personalized services on a tighter budget -- changes that have roiled the bridal industry already.
Yano predicts the funeral market will be worth 1.96 trillion yen by 2015.
One former wedding organizer trying his hand at the death industry is Takayuki Nakagawa. In 2002, he founded Urban Funes, which offers customized theme funerals from a converted wedding chapel in a Tokyo suburb.
For recent events, Nakagawa has asked his staff to collect discarded fruit and vegetable boxes for the funeral of a greengrocer. For another, he asked them to come up with a fitting send off for father and husband who for four decades had blown half his salary on booze and gambling.
"People are less bothered about following customs," says Nakagawa in his offices above the hall where workers were arranging flutes and other memorabilia as part of a final farewell for a middle-aged woman.
To make money Nakagawa, who has no qualifications as a funeral director, says he keeps his operation lean, outsourcing whatever he can. Within five years he wants to do 3,000 funerals a year, compared with 900 in the last 12 months.
"The places that are struggling are those with a lot of facilities," says Nakagawa.
Those include mutual associations known as gojokai, set up to collect monthly fees from members, meant to pay a chunk of funeral expenses when they pass on. Those funds combined amount to more than 1.7 trillion yen, according to the industry association that most are members of.
Over-exuberance during Japan's Shangri-La bubble years meant they invested much of that money poorly in golf memberships, event halls and real estate, leaving many teetering on the brink of failure two decades on.
The Japanese government is pushing for the industry to consolidate, cajoling stronger operators to absorb weaker ones. A round of funeral fund failures will allow investors to make at least some money for their distressed assets, Nakagawa reckons.
"We aren't ordering them to combine, but encouraging them to act in order to avoid problems for consumers," explains an METI official in charge of overseeing the associations. "It's difficult to give a timeline for when this issue will be resolved," he adds.
As for Lastel's Teramura, he's pushing ahead with expansion plans.
He pulls out his mobile phone and shows a picture of an office building he just bought in another Yokohama neighborhood. When he has finished renovating it will be his second Lastel, with room for 40 bodies, more than double the first.
He refuses to divulge, however, exactly where it is in case any NIMBY neighbors get wind of what he is up to and try to kill his latest corpse hotel.
Editing by Michael Flaherty and Lincoln Feast