HIWA, Japan -- In Sunday's elections, Prime Minister Junichiro Koizumi is betting he can win a mandate to engineer a shift no other leader has dared undertake. His goal: to cut off the decades-long tradition of propping up Japan's declining countryside and channel resources into the nation's successful cities and industries instead.

To achieve that vision, Mr. Koizumi plans to dismantle one of Japan's biggest crutches to its countryside, the huge and unusual post office. It is a vast network of 26,000 offices with 280,000 public employees, plus $3 trillion in savings and life-insurance deposits. The deposits typically are funneled into public spending projects that have boosted rural economies.

That system long has been a boon to remote villages such as Hiwa in the mountains of western Japan. Hiwa's 600 residents are mostly elderly, and many of them get around on electric wheelchairs. Its only industry is rice farming.

Hiwa has benefited from many public-works projects through the post office, such as a new tunnel and a smooth road partly connecting the village to a neighboring town -- even though there is hardly any traffic. When the weather is bad, the local postmaster pampers residents by withdrawing their cash from the post-office bank and delivering it to their doors.

"It would be tough if the post office went away," says 88-year-old local Shizue Miura, who walked 20 minutes to the post office recently to withdraw money. Without the branch, Ms. Miura says she would have to travel 10 kilometers to the next village to get her money from a different branch.

Mr. Koizumi says bitter medicine is the only way for Japan to survive. The country's central government stoked rural economies for more than three decades with road and bridge projects, trying to haul up the countryside to city levels of prosperity. The attempt to invigorate the floundering rural economies failed. The spending added to snowballing national debt, which is now 163 percent of gross domestic product, the highest level among major industrialized nations. In the U.S., national debt is 66 percent of GDP, according to the Organization for Economic Cooperation and Development.

So Mr. Koizumi is withdrawing support for villages like Hiwa. Since taking office in 2001, he has promoted a small-government recipe for Japan, slashing subsidies to the regions. "They said there's no money anymore," says Katsumasa Miyake, who leads policy planning for the prefecture government of Shimane, where Hiwa is located. "Part of the process of putting the national finances right is that the regions have to suffer."

Mr. Koizumi is betting Japan's future on proven successes. That means big cities like the capital Tokyo, which is emerging from the nation's "lost decade" of economic gloom and is bustling with new office and shopping developments. It also includes private-sector corporations, many of which have reported record profits in the past two years, spurred by deregulation and lowered corporate taxes that Mr. Koizumi put in place.

Some economists give Mr. Koizumi high marks. The prime minister's plan for a smaller, more efficient government "is not just good, it's essential," says Robert Feldman, Morgan Stanley's chief economist for Japan.

Mr. Koizumi's attempt to overhaul Japan is crucial to the world's second-largest economy. The country entered a long slump in the early 1990s after its stock and property bubbles burst. When Mr. Koizumi took office, prices of land, industrial products and consumer goods were falling steadily in an economy-shrinking phenomenon known as deflation. Japan's financial system also was jammed with bad loans made during the bubble era.

Since 2003, the economy has brightened, fueled by corporate cost cutting and surging exports to China's roaring manufacturing sector. The economy also has been aided by Mr. Koizumi's policies. Following a bank-cleanup package in 2002, bad loans now are less than half their 2002 total of 52.4 trillion yen ($479.92 billion). Unemployment has fallen to 4.4 percent from a 2002 peak of 5.5 percent. The economy expanded 2 percent in 2003 and 1.9 percent in 2004, and economists are expecting similar growth this year.

Still, Japan's fast-aging population and declining birthrate are causing a long-term decline in the size of the total work force. With fewer workers, the country could find it hard to grow. One solution is to use resources more efficiently so that each Japanese produces more.

Mr. Koizumi called the election last month after failing to pass bills to privatize the post office and has vowed to revive the plan if he wins. In the bills, Mr. Koizumi proposed splitting the post office into four separate and privatized businesses -- one each for mail delivery, banking services and insurance, with a fourth handling employee salaries and managing post-office properties. Postal workers would lose their civil-servant status. The privatization process would have kicked off in 2007, and the post office would have to sell shares in its four companies by 2017.

The bills were rejected largely because of the workings of parliamentary politics. The main opposition Democratic Party of Japan voted against the bills because they favor a different form of post-office privatization. In a crucial swing vote, some rebel Liberal Democratic Party lawmakers also opposed the bills.

Postal privatization has since gained public support because Mr. Koizumi's risky and dramatic decision to call an election over the issue appealed to voters. According to the most recent poll by the daily newspaper Sankei Shimbun, 38 percent of respondents supported Mr. Koizumi and the LDP, compared with just 20 percent for the opposition Democratic Party. If his party and a coalition fail to win a majority of seats, Mr. Koizumi says he will resign, clouding the future of this plan.

All of this leaves provinces like Shimane on knife's edge. The prefecture thrived under Japan's old system. With its local industries -- silver-mining and charcoal -- long dead, Shimane received a steady flow of public-works projects from the central government. The prefecture has two airports, even though it is sparsely populated. Public investment is 15.7 percent of the prefecture's GDP, compared with 2.1 percent for Tokyo, according to the San-in Economics and Management Institute, a research center affiliated with Shimane's biggest bank.

But these projects failed to spark momentum. One airport has just four flights a day. A 20-hectare industrial estate set up near Hiwa in 1997 attracted just one company; the estate now is being converted into a prison complex. Five years ago, a city government built a $60 million bridge to a nearby island with 324 inhabitants. It said it planned to build a fish-breeding center there, but the facility hasn't materialized.

Since Mr. Koizumi took office, the value of public works in Shimane has been cut sharply. In 2004, the spending fell to 109 billion yen in 2004, down 32 percent from 160 billion yen in 2002. It is set to halve again by 2008.

While reducing subsidies to the regions, Mr. Koizumi has lowered corporate taxes and boosted tax breaks for technology investments. In response, more than 760 large Japanese manufacturers surveyed by the nation's Ministry of Economy, Trade and Industry recently said they plan to increase domestic capital investment by 21 percent in the year through March 2006 over the previous year. Foreign companies such as New York drug maker Pfizer Inc. and computer-networking concern Cisco Systems Inc. of California also are increasing their investment in Japan. Mr. Koizumi has "crafted a lot of policies that benefit companies," says Yoshiharu Obata, an official at the Keidanren, Japan's largest business organization.

As Shimane struggles, Tokyo is thriving. Tokyo's land prices began rising this year for the first time in 13 years, while Shimane's continue to fall. Tokyo's population has increased to 12.2 million this year, up 5.2 percent from 11.6 million in 1997. Shimane's population has fallen 20 percent to 749,000, from a 1955 peak of 929,000. A quarter of its residents are older than 60, making Shimane Japan's oldest prefecture.

The migration to cities will likely increase as Japan's population declines and ages, says Hiroyuki Tada, general manager of the Space & Environment Institute, a research institute at Mitsui Fudosan Co., one of the largest real-estate developers. He says more of the younger generation is moving to cities, where job growth is concentrated.

That trend is apparent to Shimane local Toshimitsu Fukushima. The 70-year-old worked for telephone company Nippon Telegraph & Telephone Corp. in Shimane's biggest city, Matsue, where he met his wife nearly half a century ago. He maintained wireless equipment and she worked in the telephone exchange. "Fifty years ago, there were more jobs," he says. "Now there is no need for those kinds of jobs."

All three of Mr. Fukushima's children have moved to the Tokyo area. His son, Masao, 41, works for a big shipping company and plans to spend his working life in the city. He envies high-school friends who stayed in Shimane for their spacious homes with yards, while he lives in a small apartment in central Tokyo. Still, he says, "I couldn't return home to Shimane if I wanted to -- there's hardly any work there."

Shimane voters are split over Mr. Koizumi's plans. In the past, they always delivered an LDP representative to Parliament in Tokyo. This time, postal overhaul has complicated matters.

Mr. Koizumi is refusing to let the rebel LDP politicians who voted against the postal bills stand as party candidates. One of those is Shimane politician Hisaoki Kamei, 65, who now is backed by a small, newly formed party in the western part of the prefecture, which includes Hiwa.

Mr. Kamei's posters call him the "Friend of the Common People." He doesn't like Mr. Koizumi's administration, which he says has widened the gaps between the city and country, large and small business, and the rich and poor. "You have to have public infrastructure that allows people everywhere -- in the cities and the country -- to have the same quality of life," he says. "Otherwise, the countryside is just going to become harder and harder to live in."

Mr. Kamei's opponent, the official LDP candidate, is Wataru Takeshita, half-brother of a former prime minister. Mr. Takeshita initially had opposed postal privatization but changed his mind just months before the vote.

One voter, Kazuharu Shimogaki, is president of a construction company in central Shimane, and did well out of Japan's old system. At its peak in 1995, his company, Shimogaki Construction Co., generated 600 million yen of revenue from publicly funded civil-engineering projects.

Today, such work brings in just a 10th of that amount. Mr. Shimogaki has branched out to new businesses such as growing blueberries, which are popular among Japan's elderly after reports several years ago that the fruit may be good for eyes.

Mr. Shimogaki accepts that the days of big public-works projects are over and thinks it is time to move on and develop new businesses rather than cling to the past. He has decided to vote for Mr. Takeshita as a way of backing Mr. Koizumi. "Japan has come to a turning point," he says.

In Hiwa, many residents aren't as confident. Mr. Koizumi's postal bills provided some funds to maintain the post-office network. But because a privatized organization would have to try to turn a profit, village locals assume those funds were a stopgap to sweeten the bills. Eventually, many believe, branches such as Hiwa Post Office would disappear.

Hiwa Postmaster Chikashi Teramoto, the local postmaster for the past 16 years, won't say which way he plans to vote. The 46-year-old admits to being concerned about the future of the shrinking village. The automated-teller machine at the local agricultural cooperative, the only one in the village besides the one at the post office, is scheduled to disappear next year. After that, without the post office, villagers would have to travel through a 21/2-kilometer-long tunnel to the next village to withdraw their pension money.

"What would happen if a wheelchair battery went dead in the tunnel?" Mr. Teramoto says.

On a recent outing, Mr. Teramoto surveys Hiwa. An elderly couple struggles to gather the first rice of their harvest from a paddy field. He points to a building that looks inhabitable. "That's an empty house," he says. "They've gone to Osaka," the biggest city in western Japan. Further along the road, he points again. "They've gone to Hiroshima," the nearest sizable city.