Hot spring resorts escaped Japan's economic downturn, which began in 1991. The number of onsen increased 20 percent in a decade, evolving into the single biggest slice of Japan's huge domestic tourism industry, according to government statistics. Today, more Japanese towns rely on onsen-based tourism than on car factories for their financial livelihoods. Top government officials recently labeled onsen expansion as vital to boosting domestic consumption -- still a big concern as Japan's economy emerges from its slump.
Activist groups have set out to tighten Japan's hot springs laws and force thermal spas to post their ingredients, both natural and artificial. "This fraud has undermined the public trust, and the economic and emotional damage to the nation will take some time to overcome," said Tomino Hirano, head of an onsen watchdog group and a noted travel writer.

Toru Tsuzuki's spa for years added white dyes to some of its baths to simulate the milky color of Shirahone's natural springs. "We have sinned," he said.
(Anthony Faiola -- The Washington Post)
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Nowhere is that more clear than in Shirahone, an ancient resort village about 120 miles northwest of Tokyo nestled dramatically amid the jutting cedar forests of the Japanese Alps.
The Shirahone public bath, which once lured 19,000 people a month, is now shuttered, awaiting further reviews by authorities after the Weekly Post magazine published photos of a city employee adding dyes to the water under the headline: "Shirahone spa was colored! Don't be fooled by the onsen boom!"
The milky color was a byproduct of natural minerals that had been in Shirahone's hot springs since time immemorial. No one is quite sure, however, why some of the springs began to lose their ancient color -- no scientific tests were conducted on the water to determine this. Some of the water sources did remain milky, while others went clear.
The shame of the scandal has cast a pall on all the townspeople, most of whom lowered their heads and spoke softly when asked about the situation. Privately, several business owners admitted that most of Shirahone knew about the secret white dyes, which began to become obvious almost a decade ago when several of the local water sources began spitting up clear water instead of the normal milky brew.
After their plot was exposed, embarrassed town officials withdrew advertising nationwide and destroyed thousands of pamphlets and posters promoting the doctored baths. At Ebisu-ya soba noodle shop, the owner, Toshio Saito, said he had furloughed one full-time waitress and a couple of part-time staffers because business was down. Inns, which typically charge $160 or more a night, are reporting cancellations and occupancy rates that have dropped by as much as 50 percent. They have also received letters and e-mails from furious clients, including many demanding refunds. "People had became so fond of that milky water -- it just cried out, 'I'm healthy! Come here and bathe!' " said Kazuyoshi Sato, a taxi driver. "It's such a shame it had to come to this."
The inns are trying to recover with an "honesty campaign," posting the ingredients of their baths and tapping mainly those remaining hot springs still producing the natural milky white water.
Tsuzuki, the son of the former mayor, hasn't given up yet.
"We know it will take some time, but we hope people will give us another chance," he said.
Special correspondents Akiko Yamamoto and Sachiko Sakamaki contributed to this report.