TOKYO -- While its efficient factories and financial firms have made Japan an economic superpower, this rich country faces a potentially disastrous shortfall in one vital area: The Japanese are not producing enough babies.

Largely because living conditions are downright rotten for many young families, the birth rate here has been plummeting for a decade and this year reached the lowest level ever recorded. Japan's fertility rate -- the number of babies an average woman will bear in a lifetime -- is the world's lowest, according to the United Nations.

In a nation that also has the longest life expectancy, the birth dearth is leading Japan into a jolting demographic imbalance, with fewer and fewer young workers supporting more and more pensioners. That threatens Japan's industrial might and is already straining this Confucian society's traditional respect for the aged.

Government and private-sector groups are seeking ways to deal with the crisis, known here as the "child shock."

But the problem is tenacious because it involves some fundamental truths at the core of modern Japanese life: the failure to turn enormous national wealth into an acceptable standard of living, the relentless competition at school and on the job, and the increasing importance of personal freedom in a society that is suddenly less structured, less regimented, than ever before.

"When the government puts out its ideas for raising the birth rate, I just laugh," said Ryo Ochiai, a childless female executive at Sony Corp. "This is a different Japan now, and for the first time women feel free to tell people in authority, 'My life is none of your business.' "

That presents a sharp contrast to the 1930s, when a government looking toward the prospect of war with the populous United States made large families a sacred obligation.

Responding to the official motto Umeyo, fuyaseyo ("Give birth and build Japan!") with patriotic fervor, Japanese women achieved a birth rates of about 31 births per year for every 1,000 people. There was another big spurt, again with official encouragement, after the war.

Last year, in contrast, Japan's birth rate hit the all-time low of 10.2 babies per 1,000 population. That's about 30 percent less than the current U.S. birth rate of 15.7. The fertility rate fell to 1.57 babies in a lifetime for the average woman, also a historic low. Demographers say a country with a fertility rate below 2.1 for a number of years will face population decline.

The "child shock" has moved some government officials to call for a new "breeding boom" to save the Japanese race from disappearing.

But hardly anyone here believes an appeal to patriotic parentage will work today. For one thing, people are more willing than before to defy the government. More important, the problems at the heart of the "child shock" are too difficult to resolve with slogans.

"People feel so much pressure on the job that they work until 9, 10 o'clock at night," said Kunio Kitamura, a Tokyo obstetrician who closely follows the birth-rate problem. "Then they have another hour and a half home on a train, because most people can't afford a house anywhere near the office. You probably can't get a seat, and the train is full of drunks, singing and throwing up. After all that, who has the strength left to get in bed and make a baby?"

Even people who may have the strength are opting not to have babies. Japan is unusual in that it has one of the world's lowest birth rates even though most contraceptive pills are not yet sold here.

Instead, according to Kitamura, the most common birth control method here is the condom; surveys indicate that more than 70 percent of married men use them. In addition, abortion is available here at low cost, and women often have multiple abortions.

In a country that loves opinion surveys, there are extensive data that help explain the causes of the "child shock."

What emerges clearly in poll after poll is that, because of the cost of housing and education, young couples here tend to think of a baby more as an economic burden than as a bundle of joy.

In a 1987 survey, married couples in several developed countries were asked how they felt about raising children. In Britain and France, more than 70 percent of those polled said raising children was a pleasure; in the United States, 49 percent said the same. But in Japan, only 21 percent said they expected having children would be fun.

Asked why they do not look forward to having children, Japanese wives aged 25 to 34 gave several reasons in a separate 1987 survey.

The most common reply, from 37 percent of the respondents, was that their homes were too cramped and their incomes too small to give a child the kind of upbringing they would like. The average Japanese family still has not benefited much from the nation's global trading triumphs.

Japan's current "land bubble" has made housing prices skyrocket, forcing young families to rent or buy tiny one- or two-bedroom apartments well over an hour from work.

For many couples, housing anywhere is simply not affordable. There has been a growing trend for newlyweds to move in with whichever in-laws have a bigger house. If a child is born, that will mean three generations living in what is likely to be a small two- or three-bedroom house.

Another common reason not to have children -- cited by 30 percent of the poll respondents -- is that the pressure to provide the "right" education is unbearable.

In a country where parents routinely pay $750 or so to send their 3-year-olds to cram schools preparing for the kindergarten entrance exam, where sending a child to public school has become almost a badge of dishonor in some big cities, many potential parents say they do not want to face the private-school rat race.

But that rat race is so central to the spirit of modern Japan that people do not seem to want it ended. This summer, when the cabinet discussed ways to increase the birth rate, Finance Minister Ryutaro Hashimoto was quoted as saying the nation should find ways to de-emphasize the pressure for a prestigious education.

For this, Hashimoto was roundly criticized, particularly by women's groups. They argued that the minister was trying to reverse the increasing numbers of women going to college and into management-level jobs.

Japan has lagged behind the United States in developing ways for women to combine motherhood and careers. It is a common pattern here for a bride to have two children in the first three or four years of marriage, and then never again. This means the mother is still rather young while her children are in school full time, but the society has not found ways to bring these mothers back into the work force.

As a result, many women feel they have to put off having children or else lose careers forever.

To date, government proposals to deal with the "child shock" involve the sort of tax and financial incentives that governments dating back to the Roman Empire have used to encourage bigger families.

The cabinet is considering tax breaks, housing loans, education aid and the like for families with several children. Some local governments are offering cash awards ranging from several hundred dollars to several thousand for each new birth.

But in a survey this summer by the Mainichi Shimbun newspaper, only 30 percent of female respondents said those measures would encourage them to have more children. Similarly, appeals to patriotism seem likely to fall flat.

The Asahi Shimbun, another big national newspaper, recently reported on an exchange at a women's college here in which a professor urged her students, for the sake of their country, to marry and have three or more children.

"But professor," the students reportedly replied, "if you have three children, you'll ruin your figure."