Just down the road from a cove where thousands of dolphins are slaughtered for food every year in this coastal town in western Japan, a sign reads: "Let's play with dolphins."

In a bizarre juxtaposition, the dolphin-hunting industry here operates side by side with a lucrative trade built on tourists' enjoyment of the live marine mammals that enables visitors to swim with dolphins and watch killer whales perform.

"They (the dolphins) seem so pitiful," said Yuko Egawa, a 49-year-old tourist from Osaka, as she watched fishermen in boats herd a pod of Risso's dolphins into a cove Sunday for their slaughter for the next day's fish market.

After visiting a whale museum that puts on daily dolphin and killer whale performances only a few hundred meters (yards) away, Egawa admitted the thought of dolphins herded in for the kill was unsettling.

"It makes you lose your appetite," said Egawa.

Taiji, a Pacific port town of 4,000 inhabitants some 500 kilometersmiles) southwest of Tokyo, is known as the "Town of Whales".

It owes its existence to a 400-year-old whaling industry that developed because of the Kuroshio current which attracts whales to feed off the marine life it carries to within easy reach.

But this traditional way of life has attracted what locals have called the most vociferous conservationist protests they have ever seen, and even some of them are now questioning the practice.

The town has found itself the focus of unwanted attention after anti-whaling activists took graphic video footage of the dolphin slaughter in seawater turned red with blood and posted it on the Internet last month.

"If you see a living thing being killed, of course, everyone feels the same way," a 70-year-old retired whaler, who did not want to be identified, told AFP, noting some local fishermen opposed the dolphin hunt.

"There are lots of fishermen here who don't want to be seen as people who make their living by killing other living things," he said.

The impact of the global moratorium on commercial whaling imposed by the International Whaling Commission (IWC) which took effect in 1986 has been felt heavily here.

Four decades ago whalers accounted for about half of the towns tax revenues. Today this has dropped to about a third, while the number involved in the hunt has shrunk from a peak of 268 in 1963 to only 36.

Amid the attention brought to Japan's coastal dolphin hunting practices, the country's controversial deep sea research whaling fleet set sail again this month on an annual voyage to the Antarctic Ocean to kill up to 440 minke whales.

Japan argues that the research backs up its claims that whale populations are thriving, and provides data showing whales are consuming valuable fish stocks. Opponents argue it is just commercial whaling in disguise.

Japan stopped commercial whaling in 1988 after withdrawing its objection to the IWC moratorium, intended to regulate the whaling industry and manage stocks.

But it began what it calls "research" whaling in 1987, using a loophole in the moratorium permitting the hunting of whales for research purposes.

Japan kills about 700 large whales a year in the name of research, including animals taken on a summer whaling voyage to the North Pacific which is doubly controversial as endangered sei whales have been part of the quota.

Joji Morishita, deputy director of the Far Seas Fisheries Division of Japan's fisheries agency, dismissed as "ridiculous" charges that the research cull was thinly disguised commercial whaling.

"We are collecting more than 100 items of data from each and every whale we sample," he said, noting that age determinants and stomach contents were crucial to understanding the population, and important for the IWC's scientific committee.

The meat from the research cull -- about 2,000 tons annually, according to the conservation group Sea Shepherd ends up in supermarkets and restaurants across Japan, a practice defended on the grounds it finances future whaling missions.

According to the whaling commission's rules, research whalemeat must be processed and sold, Morishita said. "We are 100 percent following the legal requirements."

Dolphins such as those trapped at Taiji are not covered by the whaling commission's ban. Taiji's quota of 2,900 dolphins out of the nation's annual take of some 22,000, is among the largest in the nation, according to fisheries agency officials.

Nik Hensey, an activist with the Sea Shepherd Conservation Society who has organized protests in Taiji for the past two months, including the cutting of a net trapping dolphins for which two protesters were arrested, said Japan's whaling days should end.

"These are not only unsustainable practices, they are inhumanely cruel, brutal and unnecessary," he said.

And despite the burgeoning dolphin- and whale-watching tourism industry here, which pays whalers about 10 times more for a live bottlenosed dolphin than they get for one sold as meat, local fishery officials said the hunt was vital to the town's survival.

Whalers were once the richest people in town and today are still in the upper crust, said Miyato Sugimori, a senior official in the Taiji Fishery Cooperative.

"It used to be the dream of young women to get married aboard a whaling ship," he said. "But with tougher limits, we have lost a lot of jobs, and youngsters are leaving."

"If we lose this (the dolphin hunt), this town will just be full of grandmothers and grandfathers."