The western Pacific island of Guam has faced a string of economic setbacks. Its tourism industry has been hard hit by Japan's long economic slump, natural disasters and the September 11, 2001, terrorist attacks on the United States. However, global tensions may give a boost to the U.S. territory's economy.

Guam's financial situation has been heading downhill since the early 1990s, when Japan's economy began to sink.

The Japanese account for about 90 percent of the tiny U.S. territory's tourism industry. John Anderson, a businessman and host of a popular Guam radio show, said that, until the early 1990's, Japanese prosperity led to the joke that the construction crane was Guam's official bird, as new hotels were built to accommodate the tourists flocking to Guam's beaches and golf courses.

"Guam's economy, for a period of about nine years, in the late '80s, and leading up to and including, I think, 1991, was the fastest growing economy under the U.S. flag, anywhere in the country - double-digit growth, double digit job creation," Mr. Anderson said.

Now, things are different. Mr. Anderson said, in the past year, a quarter of his radio station's advertisers have gone out of business, as Guam's economy has fallen apart.

The reason: Japan has endured four recessions in the past 12 years, cutting sharply into Guam tourism business.

The problem has been made worse by several massive typhoons that have battered the island in the past decade, as well as a major earthquake. In addition to scaring away tourists, the disasters caused hundreds of millions of dollars of damage.

Guam suffered again after the September 2001 terror attacks on the United States reduced tourist travel worldwide.

At the same time tourism was contracting, Guam saw its Number Two revenue source, the U.S. military, shrink. After the Cold War ended, the federal government cut the number of troops on the island by about half, to around 10,000. As the troops left, so did many civilian jobs.

Some people say the island's government made things worse by continuing to hire workers, and build unnecessary projects, even as tax revenue shrank.

Now, the Guam government is facing a fiscal crisis. It can barely meet its payroll, or pay its electricity bill.

John Salas is a former local senator and ex-president of the University of Guam. "We've eaten all the richest foods. We've eaten all the best foods, and we just came back from the doctor and the doctor says, 'you've got heart trouble.' We have now a choice of dieting and getting back our health, or dying. Right now, the government has gone to a 32 hour work-week, and there is the threat of a payless payday," Mr. Salas said.

War with Iraq and tensions with North Korea may offer Guam some temporary relief from its problems. Last year, the U.S. government decided to base several submarines at the island, adding about 600 military personnel to the island's population of 160,000.

And this month, the military temporarily moved 24 long-range bombers and about 2,000 crew members to Guam. They are there to deter North Korea from escalating the dispute over its nuclear programs.

It is possible more troops will arrive. The United States faces pressure to reduce its bases in Japan and South Korea, and some of those troops could be moved to Guam permanently.

"This is American soil. So you don't have to worry about a lot of the diplomatic clearances, or negotiating the rights to over-fly a country," Colonel Joseph Mudd, the commander of the 36th Air Base Wing at Guam's Andersen Air Force Basehe, said.

Ironically, the Guam government lobbied throughout the 1980's and early 1990's to reduce the military presence. The local community thought the land the bases occupied could be used more profitably for tourism. In addition, there was a strong nationalist movement among the island's dominant ethnic group, the Chamorros, who opposed the bases.

Despite that push to reduce the bases, Guamanians are known as fervent U.S. patriots. The island, which is 5,500 kilometers west of Hawaii, came under U.S. control during the Spanish-American War in 1898. The Americans were driven out by Japan in 1941, but returned to free the islanders from the brutal Japanese military in 1944.

Senator Salas sees no conflict in being both a Chamorro nationalist and American flag-waver. "And I was really sad when the military left, but the military left because the attitudes on Guam were basically anti-military. That has changed, and we are now welcoming the military with open arms," he said.

Polls show 80 percent of the island residents support the military presence. In the past three years, U.S. military construction on Guam has exceeded $300 million with more money on the way.