OSAKA, Japan (AFP) -- As a post-war baby boomer in the world's second-largest economy, 60-year-old Isao Matsumura should be looking forward to spending his twilight years in comfortable retirement.

Instead he is queuing up for a night in a cold and cramped homeless shelter in Kamagasaki, a small ghetto of poverty just a short walk -- but a world away -- from the bright neon lights and packed shopping malls of downtown Osaka.

While other Japanese baby boomers dream of a new car, an exotic holiday or a life on the golf course, the most Matsumura can hope for is that he sees the day when he qualifies for enough welfare benefits to pay for his own apartment.

Over 1,000 homeless people in search of somewhere to sleep line up every night in Kamagasaki, a depressingly run-down area in Japan's second city that is the closest thing that Asia's largest economy has to a slum.

Others prefer to live in ramshackle homes of cardboard boxes and blue plastic sheets crammed into the public spaces still open to them. Nearby children's playgrounds are padlocked and parks are surrounded with barbed wire.

The western city of Osaka is home to Japan's largest homeless population and locals say you can measure the health of the economy by the length of the nightly queues in Kamagasaki, the country's biggest day laborers' district.

With the economy in the midst of its longest expansion since World War II, the line is shorter than it was during the 1990s on-off recessions.

But there is another reason why it is shrinking: like the rest of Japan, the country's homeless population is rapidly graying, making it even harder for those on the streets to survive the harsh conditions.

"Homeless people are ageing and many are sick. So the number of those on welfare is increasing very rapidly," says Kazuo Furuya, head of the welfare division at the Osaka City Government.

"These people can pass away quite early. Since many work on construction sites, they damage their bodies and they look a lot older than they really are," Furuya explains in downtown City Hall.

Almost 20 percent of the Japanese population is now aged 65 or older, posing a major challenge for the nation's debt-laden public finances.

Homelessness was largely unknown in Japan until the economic bubble burst in the early 1990s, after which many parks become dotted with blue tarpaulins.

In the last official survey three years ago the number of rough sleepers in Osaka was about 6,600, out of 25,000 across Japan. The average age then was 55.

Now local authorities believe the number has dropped below 5,000 thanks to a stronger economy and efforts to help people move off the streets.

"Since 1999, around 6,000 people were able to move from sleeping rough into real homes," says Sen Arimura, who works with day laborers at the Nishinari Labor Welfare Center in Kamagasaki.

He says life has improved in recent years for the over-65s, who receive social welfare payments from the Osaka authorities.

"At the same time, it is essential to understand that the situation has only improved for older day laborers -- those aged above 65 years. The situation for those aged between 55 and 65 has not improved one bit," Arimura adds.

Every day before dawn in Kamagasaki another queue forms as hundreds of day laborers wait for vans to arrive offering casual work, mostly on construction sites, for about 10,000 yen (83 dollars) a day, or more for the hardest jobs.

That's enough for food and a night in a local flophouse where about 1,200 yen (about 10 dollars) buys a room with heating, television and a fridge.

For those too old for such physically demanding work, however, comforts are often an unaffordable luxury.

Many of Osaka's homeless prefer to sleep in city parks, although they are not always welcome.

Just last month some 500 officials and guards forcefully evicted nine homeless people and tore down their makeshift homes from Osaka's Nagai Park in preparation for the Athletic World Championships at a stadium there in August.

The Osaka city government says it has built extra shelters and centers to help homeless people find work but many appear to prefer the freedom of living in parks or under bridges.

As well as the cold winters, life on the streets has other dangers -- in March two teenage boys were arrested for burning to death a homeless man in his makeshift shelter in Himeji in western Japan.

Many homeless accuse the city government of taking an unrealistic view of their precarious lives.

"These people don't know a thing about reality," says Yuji Yamauchi, a 56-year-old homeless man whose landmark legal victory last year acknowledging a park as his address was overturned last month by an appeal court.

"They come swooping in and think that by putting us into centers we can find work easily within three to seven months. It's easy for them to tell us when they have their stomachs full," says Yamauchi.

"They would think differently if they were in our position. We are over 55 years old. At this age do you think we can find jobs like young people in their 20s fresh out of college?" he asks.

These days, however, not all Japanese want to follow in their parents' footsteps with a job for life, and there are concerns about the future of young casual workers or those who are financially dependent on their parents.

"Once they no longer receive support from their parents these people will very certainly go on the streets. I think they will be the next big problem," says Arimura at the Nishinari Labor Welfare Center.

While Japanese are sometimes criticized as being unsympathetic to the plight of the homeless, polls show a growing number are concerned by an apparent widening of the "rich-poor" gap.

Many homeless are doubtful their lives will improve.

"Nothing is going to change," Matsumura said wearily, before heading to the homeless shelter where a narrow bunk bed and a packet of dry biscuits awaits him.