ZAMA, Japan (AP) _ For more than three decades, this city was known as ``Nissan Town.'' Its sprawling auto-assembly plant was a point of pride, a symbol of Japan's postwar economic miracle.

But at the end of this month, Nissan Motor Co., Japan's second-largest automaker, will close the core section of its facility here _ the first such shutdown by a Japanese automaker since World War II.

In many ways, the closing epitomizes the woes of the Japanese economy, which is struggling to pull out of its worst slump since the war.

Big export companies like Nissan _ the powerful engines that drive the world's second-largest economy _ are in a double bind these days.

At home, the recession has dampened demand, sending domestic profits spiraling down. And overseas, the strength of the yen makes Japanese products ever more expensive, cutting deeply into earnings.

This week, the yen has soared to new heights against the U.S. dollar, reaching its highest levels since the modern exchange-rate system was established half a century ago. In the last three weeks alone, the Japanese currency has appreciated by nearly 10 percent against the dollar.

In Zama, a city of 100,000 people 50 miles west of Tokyo, the pain is palpable.

Nissan was once Zama's lifeblood. In 1992, it accounted for nearly one-fifth of the city's tax base, said city official Yoshinori Kato. That has already fallen off sharply as operations have dried up.

Some Nissan branches at Zama will remain functioning: model designs, research, and machinery and auto-parts production. But the assembly plant _ the facility's centerpiece, which has churned out 10 million cars since 1964 _ will be idled on March 31.

The company says the Zama shutdown is part of a long-term modernization strategy that will ultimately strengthen Nissan.

But the ripples are already spreading beyond the 2,000 autoworkers affected. Toshimasa Magaki owns a two-story, 10-room inn near a railroad station. His earnings have been cut in half since Nissan announced closing plans two years ago.

``This is the worst slump in my business in the past three decades,'' he said. Once the shutdown goes through, he said, he may have to close his hotel.

Mikio Sekiguchi, a taxi driver, said he and his colleagues are already seeing a 10-15 percent dropoff in monthly income, and expect it to get worse. On a recent afternoon, the plaza outside the assembly plant was all but deserted. Guards in blue uniforms kept reporters away, saying the company had declared the area off limits. Most workers walking out of the gate were tight-lipped.

Nissan officials said as of the end of February, nearly 1,000 Zama workers had been transferred to various Nissan facilities.

Before the nation's economy began slowing down five years ago, Japan's automakers plowed profits back into capital investments. But with demand declining and costs climbing, the companies are now under heavy repayment burdens.

Nissan has already embarked on a dramatic cost-cutting drive, and on Monday it said it would aggressively continue that program over the next three years.

The company would not divulge details, but press reports said a new plan called for trimming 7,000 jobs from its 49,000-member workforce through attrition and reduced hiring.

Despite streamlining, the red ink is mounting. In fiscal 1993, Nissan's net losses on a group basis worsened to 86.92 billion yen ($966 million) from 56 billion yen ($622 million) the previous year. Its sales dropped to 5.80 trillion yen ($64 billion) in fiscal 1993, down from 6.198 trillion yen ($69 billion) a year earlier.

Like other companies, Nissan is seeking to move more and more production outside Japan. In 1994, its overseas plants produced 1,059,172 units, up 5.2 percent over the previous year and an all-time record high.

The trend, though, has raised fears that more overseas production could ``hollow out'' the economy and ultimately weaken it.

``The economic recovery that is finally beginning to bloom may die,'' said Tatsuo Yasukawa, chief economist at Sanwa Research Institute, a private think tank.