By Thomas Wilson, Mari Saito, Minami Funakoshi and Ami Miyazaki

WARABI, Japan (Reuters) - Mazlum Balibay paves Japan’s roads, digs its sewers and lays its water pipes – all for a country that doesn’t want him.

Balibay, 24, is a Kurdish asylum seeker who fled to Japan more than eight years ago after he said his family was persecuted by Turkish security forces who tortured his father. He has since been on provisional release from immigration detention, which means he is barred from working while the immigration authorities consider his application for asylum and could be detained again at any time.

But the ban hasn’t stopped Balibay from providing the muscle on a slew of public works projects funded by a government that refers to people like him as “undesirable.”

“Japan bans us from working, but everyone knows that without foreigners this country’s in trouble,” said Balibay. “Construction jobs won’t get done. There aren’t enough workers and young Japanese can’t do these jobs. The government knows that better than anyone.”

Two of Balibay’s brothers have also worked without permits on government projects around Tokyo, laying asphalt and digging sewers. Reuters also spoke to more than 30 Kurds on provisional release who are working illegally on private sector projects, mainly in demolition.

Japan’s deep reluctance to take in migrant workers is now clashing with the reality of a shrinking population and the nation’s worst labor shortage in more than two decades. In a country that jealously guards its cultural uniformity, politicians are loath to consider lowering the barriers to immigration even as the proportion of retirees grows and the working-age population declines.

Prime Minister Shinzo Abe told reporters at the United Nations in September that Japan should address its demographic problems by putting women and the elderly to work before considering immigration.

Masahiko Shibayama, a lawmaker and special adviser to Abe, told Reuters that there’s “an allergy toward the word ‘immigration’” in Japan. “People are worried about public security. They worry that foreign workers would eat up Japanese jobs,” he said.

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But the combination of strict immigration laws and a shrinking work pool has spawned a black market in labor, especially in the construction sector where Balibay and his brothers work. In manufacturing, it has also created a growing dependence on asylum seekers: Reuters reported last year how the maker of Subaru cars was enjoying a boom driven in part by its reliance on cheap laborers from Asia and Africa who were seeking refugee status in Japan. [nL1N10800E] [nL4N16F2JM]

Japanese business leaders want the government to rethink its immigration policy. Of 259 major Japanese companies that responded to a Reuters poll in October, 76 percent said they support opening up the country to blue-collar migrants.

With work getting underway for the 2020 Tokyo Olympics, demand for labor is set to jump further, according to Hitoshi Ito, an executive at Kajima Corp., Japan’s second largest construction firm by sales. That’s why the industry “desperately wants” foreign workers, he said.

AN AGONIZING CHOICE

Balibay is part of a community of some 1,200 Kurds who live in Warabi and Kawaguchi, drab blue-collar suburbs north of Tokyo where cast iron foundries dot the streets and gang-related crime is prevalent. The area has been dubbed “Warabistan” by locals because of the high number of Kurdish immigrants living there, nearly all of whom are asylum seekers. They inhabit a legal twilight zone, locked in lengthy struggles with an immigration system that recognized just 27 people as refugees last year.

As of December, Japan had 13,831 asylum applications under review. That is small by the standards of Europe, where there were more than a million asylum applications pending at the end of April, as refugees sought haven from troubled lands such as Syria and Eritrea. But it’s a record number for insular Japan. According to the latest available data, at the end of 2015 there were 4,701 people on provisional release in Japan. Of those, community groups estimate about 400 are Kurds living in the Warabi area.

Justice Minister Mitsuhide Iwaki, who last week stepped down as part of a cabinet reshuffle, declined to answer questions about Reuters’ findings that asylum seekers on provisional release are working on government projects. Naoaki Torisu, a Justice Ministry official overseeing work permits for foreigners, told Reuters: “Regardless of whether it’s a public works project or not, it’s undesirable for people on provisional release to take part in prohibited activities. We want them to stop doing that.”

Most Kurds on provisional release work without contracts, are paid in cash and can be laid off without warning. They don’t have national health insurance, often leaving them with an agonizing choice when they or family members fall ill – go into debt or forego medical treatment.

Balibay is the main breadwinner in an extended family that includes his mother, two of his four brothers, a sister and her husband, and their infant son. He earns about $2,500 a month – not enough to cover the family’s expenses.

The family says its unpaid medical bills amount to several thousand dollars. Last year, Balibay’s seven-year-old brother Deniz was hospitalized with pneumonia. That cost $5,500.

'I STILL DREAM ABOUT IT'

Balibay was in his early teens when he first picked up a shovel on a building site. “I wanted to go to school, but we didn’t have the money,” he said, speaking in fluent Japanese. “I’d be standing in a ditch and see the kids going to school. I thought it would be great to have money, to be able to have fun like them.”

He traces his family’s decision to leave Turkey to his father’s arrest in 1999 on charges of aiding members of the outlawed Kurdistan Workers Party (PKK), including transferring funds collected in Japan to the group. (Turkey, the European Union and the United States consider the PKK to be a terrorist organization.)

Court documents reviewed by Reuters show that Mustafa Balibay and five other Kurdish men arrested along with him were acquitted in 2000.

“When I was seven, soldiers tortured my father before my eyes,” Mazlum told a refugee adjudicator last March, according to interview transcripts. “I still dream about it.”

That experience ultimately led his family to seek refuge in Japan. Over several years, Balibay’s parents and five of his siblings left Turkey.

A Japanese psychiatrist diagnosed Mustafa Balibay in 2008 with post-traumatic stress disorder and depression caused by torture, according to a medical opinion submitted as part of Mustafa’s asylum application. For years, he took anti-depressants, sedatives and painkillers. The walls inside the family’s apartment are pockmarked from where Mustafa lashed out during his frequent nightmares.

His mental state deteriorated last year as violence flared between Turkish security forces and the PKK in Turkey’s southeast. On December 27, Mustafa went to a park near his home, tied a rope around his neck and hanged himself from a tree.

“He’d been ill for a long time and his condition suddenly got worse,” said Balibay, his voice trailing off. “I was at work and got a call. They said a man had found him.”

Turkey’s Interior Ministry and Gendarmerie did not respond to questions from Reuters about Mustafa Balibay’s case.

ELECTION BRAWL

The family’s asylum claims have all been rejected, and their time in Japan has been peppered with legal battles against deportation orders and detention. Balibay has submitted four asylum applications, including one in August last year. According to Japanese law, asylum seekers can’t be deported while their claims are pending.

Immigration activists say Japan has never granted refugee status to a Turkish Kurd. Government officials would not say if any of the 3,463 Turkish nationals who have applied for asylum since 2008 had been granted refugee status.

The absence of a work permit hasn’t stopped Balibay, two of his brothers and a cousin from working on taxpayer funded projects in the past few years. Balibay flicks through photos on his mobile phone, stopping at images of a road project he worked on last year in Warabi.

Interviews with the Balibays and a review of their payslips show they worked for a company that was contracted to carry out road building, sewage works and demolition by local governments, including Kawaguchi city and Saitama prefecture. The Balibays asked that the name of the company not be made public.

Almost all of Warabi’s Kurds are from villages around Gaziantep, an industrial city in southern Turkey. Starting in the 1990s, they entered Japan on tourist visas, fleeing poverty and violent clashes between the Turkish state and the PKK.

Like Balibay, who has the word “Kurdistan” tattooed on the inside of his right wrist, many Kurds still harbor strong ties to their homeland. Every year in March, the community gathers under cherry trees in a Kawaguchi park to celebrate Newroz, the Kurdish new year.

And while they may be far from the conflict between Turkey and Kurdish militants, which resumed last year after the collapse of a ceasefire that lasted two-and-a-half years, the bitter emotions have been imported to the streets of Tokyo. Last October, Balibay and two of his brothers were injured in a brawl with a group of Turkish migrants that erupted outside the Turkish embassy as Kurds and Turks waited to vote in the country’s parliamentary elections. Balibay suffered a broken nose and cracked ribs. That added more than $2,000 to his medical debts, he said.

Asked how asylum seekers on provisional release, who are barred from working, are supposed to pay for food and shelter, Japanese government officials say that friends, relatives or NGOs should help out. But once out of detention, the reality is that migrants are left largely to fend for themselves. That’s why people like Balibay look for work even at the risk it will land them back behind bars.

Unlike many officials, Kawaguchi mayor Nobuo Okunoki isn’t willing to play policeman. “I’m not going to tell these people they can’t work. Everyone needs to live and they have families to support,” he said.

People on provisional release cannot legally rent apartments, open bank accounts or sign up for mobile phone contracts in their names. They navigate this phantom status by borrowing the names and personal details of relatives and friends with residency permits.

NIGHTLY ESCAPE

They also need official permission to leave their prefecture. The Japanese authorities granted that approval when they needed the Kurds’ help after the earthquake and tsunami that devastated the country’s northeast on March 11, 2011. A group of Kurdish men, some on provisional release, who volunteered to help with disaster relief were given official clearance to make the journey to the worst-hit areas, according to the Japan Association for Refugees.

The Kurdish volunteers – many with construction and demolition experience – headed to Rikuzentakata, one of the hardest-hit areas. The coastal village was swallowed by a 15-meter wave that killed 1,700 people and swept away thousands of buildings.

The volunteers, who were housed in tents, cleared rubble from roads and rice fields, and cleaned up damaged homes, according to the refugee association, which organized the volunteer trips after being inundated with offers of help from asylum seekers.

“I didn’t go there to get anything,” said Mahmut Colak, a Kurdish asylum seeker on provisional release. “I just felt sorry for the people in Rikuzentakata. I knew immigration wouldn’t give me a visa.”

Akinobu Kinoshita, who runs Tokyo-based International Construction Consulting, says there are several dozen Kurdish asylum seekers working on private demolition jobs across the capital that are being run by his company. Most have six-month renewable work permits, but Reuters spoke to several who are on provisional release. Kinoshita said he allows them to work “out of compassion” because they need to make a living.

If workers are caught on his building sites without permits, Kinoshita faces a fine that could run to nearly $30,000 and a maximum jail sentence of three years. The Japanese government said it did not have data on how many employers had been punished for using illegal labor.

Desperate to attract Japanese workers to building sites, the labor ministry has partnered with construction firms to set up a promotional website aimed at persuading young Japanese to work in the industry. The website shows a group of smiling young women in hardhats under a headline that reads: “Women who work in the construction industry are COOL.”

Officials at the ministry concede that the outreach has done little to make the industry more attractive. And with Abe struggling to boost the economy, the ruling Liberal Democratic Party published a proposal on its website in May to establish a system for attracting foreign workers to sectors including nursing and agriculture. But the party gave few details and buried the proposal deep in its manifesto.

The Justice Ministry’s Torisu said there were “no plans” to change the system of provisional release. “People being on provisional release doesn’t change our stance that they should go home,” he said.

Nearly a decade after arriving in Japan, Balibay has little hope he will ever be recognized as a refugee by his adopted country. After 10-hour days on construction sites, he escapes into a world far away, spending his nights watching YouTube videos of young Kurdish men like himself fighting Islamic State in Syria.

"I can’t think about tomorrow,” he says.

(Additional reporting by Melih Aslan in Istanbul. Editing by Peter Hirschberg.)