TOYAKO (Japan) - THIS hot-spring resort in the mountains of northern Japan is bracing for next week's Group of Eight summit but there is a sense of unease with police deploying in force in the normally quiet town.

Banners flutter in the breeze to greet world leaders but residents of the town feel less welcome as police from across Japan descend here amid fears of a terrorist attack.

'In this rural town, you rarely see police. Now if you threw a stone, it would hit a policeman,' Mr Takahiro Ano, 33, said with a grin on a break from grazing his beef cattle.

Some 21,000 police are being deployed in Toyako and other areas for the July 7-9 summit, which will involve leaders of eight industrial powers including US President George W. Bush as well as heads of another 15 invited nations.

Toyako, sitting on the rim of doughnut-shaped Lake Toya at the foot of volcanic Mount Usu, has only 10,700 residents. The summit itself will take place in an isolated hilltop hotel.

Mr Ano also runs a bar where he said the number of customers has tumbled nearly 40 per cent in the past month.

'With this many policemen patrolling in the town people don't feel like going out and drinking,' he said. 'It's ridiculous to get excited and hype up the summit.'

Hotel workers also said tourism has decreased out of concerns that police may restrict activity as the summit approaches.

'When I was driving into town, police motorbikes happened to cruise ahead of me and police cars behind. It was like I was in a motorcade,' said a restaurant manager. 'This is the world's safest town now.'

Riot police buses cruise the streets, with locals playing gateball near a row of parked police patrol cars.

'I want to say 'A summit? So what?'' said a worker at a souvenir shop who gave only her first name, Yumi.

'It's a nuisance instead. Police are everywhere, questioning people and checking cars,' she said. 'I know it's their job but it's unbearable that they are watching me.'

She was also sceptical of the Japanese government's drive to showcase environmental protection at the summit, noting that roads in the area have been completely rebuilt.

'People are preaching about the environment but what they're doing isn't ecological,' she said, despite a G8 promotion badge on her chest saying 'Love Earth.'

But those working in tourism said that, like an Olympics, the summit can sell the town's name as a resort.

'It's undoubtable that tourists are shunning this place now,' said Mr Yoshitaka Kaneyoshi, 73, who offers pleasure boat rides on the lake.

'But we should be grateful to the police. If a terror attack happened, the world would think this is a dangerous place,' he said.

He hopes that the summit will boost tourism in Toyako, which was shunned by visitors after Mount Usu last erupted eight years ago.

But for now, an entire camping site has been occupied in nearby Toyoura by nearly 70 olive-green tents and 30 vehicles of the Ground Self-Defence Force, Japan's de facto army under the pacifist constitution.

'Police are in charge of security. We are providing meals and other logistical support for our personnel involved in helicopter transport,' said Major Masakatsu Yamamoto, who heads the unit at the site.

Police are also on alert in the ski resort of Rusutsu, where the official media centre is located.

Mr Akimitsu Sasaki, 44, who works for an agricultural cooperative in Rusutsu, said he had never seen so many police cars in his life.

'We have planted flowers for the summit but the event has nothing to do with us. Media people aren't reporting about us anyway,' he said. -- AFP