Fourteen lissom teenage girls are sobbing on stage. They are the members of Japan's most famous girl group, Morning Musume, and tonight two of their number are leaving their ranks. Ai Kago and Nozomi Tsuji stand side by side in their frilly red prom dresses, clutching large bouquets as if they were security blankets. Their cherubic faces are contorted with grief and streaked by tears.
The two girls are known as the Twins and their kooky personas have made them firm fan favourites since they joined the group four years ago, aged 12. As the other girls line up one by one to blubber heartfelt tributes to their departing colleagues, a saccharine melody is piped in over the PA. The 13,000-strong crowd at Tokyo's Yoyogi Park stadium offer consolation through strangulated roars. The instant formalities are completed, the girls break into song, lifting their spirits by harmonising on a bouncy little number called 'I Wish' whose lyrics brim with naive hope. By now, the venue is aflame, shimmering with the light of thousands upon thousands of red-and-blue coloured glow sticks being hoisted up and down in unison. The atmosphere is so thick with excitement you could choke on it.

This is not a bizarre pantomime staged for the edification of the audience. The tears and joy are real. The girls have formed a sisterly bond through years of tireless performance and promotional work. The development of their adolescent lives as part of the group has been so meticulously documented for public consumption that their fans identify with them wholly. But Morning Musume's fans are not run-of-the-mill teenyboppers. They are Japanese men in their late twenties and thirties, basking in the ardour of girls young enough to be their daughters.

In the world of pop, Japan is a Neverland where the national obsession with youth has been rigorously commodified into a peculiar brand of entertainment: a luminous teenage daydream in which doe-eyed Lolitas and prettified Fauntleroys frolic at the behest of omnipresent Svengali figures for the delectation of audiences. To the outsider, its mores might seem alien and bizarre but the mechanics of its industry are oddly familiar. Indeed it seems as if many of the marketing techniques used to sell Western pop acts from the Spice Girls through to Britney Spears and Girls Aloud have been taken wholesale from Japan: the re-branding of girl group members as bikini-clad glamour models; the search for new talent through reality TV-style auditions; the introduction of sister and brother acts to established groups. All these have been proven as methods to generate hits in the East for decades. Japan holds sway over the second largest music market in the world. Its sphere of influence extends over much of Asia.

Morning Musume - whose name translates literally as 'Morning Girls' (or 'daughters') - are the central figures in an extended family of girl groups and singers known as Hello!Project, comprising around 45 girls aged between seven and 22. The girls are constantly reshuffled into new permutations in order to feed the J-pop market's insatiable demand for fresh looks and faces. Each group has its own specific look, theme and sound. There is Country Musume, made-up of rural girls from Japan's northernmost island, Hokkaido, and Coconuts Musume from Hawaii. EcoMoni, a duo dressed in 'water' and 'tree' shades, were given one oddly-titled song, 'Help! EcoMoni Cool Off the Hot Earth', to protest against global warming. The entry requirements for Mini-Moni were that all members had to be under 150cm tall. Apparently designed to appeal to both infants and infantilists, this diminutive fab four sang helium-pitched nursery rhymes about taking baths, making cakes and playing scissors-paper-stone. They became the most successful H!P sub-group to date, spawning their own cartoon series, comic books and toys.

With new groups being formed every few months, only the most ardent fans can keep track of who is in which act. Since their launch in 1997, Morning Musume themselves have been through no less than six line-ups, shedding members at their yearly graduation concerts and taking on new ones through televised auditions. In the process, their number has ballooned from five to 16. None of the original members appears in the current generation, the seventh, which contains 10 girls.

Despite the emotional send-off at their Yoyogi Park show, the twins are not leaving for good. Aibon and Nonno (their fan nicknames) have already been relaunched as a new singing-duo called W (Double-U) and have released an album. Earlier in the same show they even performed their peppy new single, 'Aa Ii Na!' (Ah, How Nice!), backed by the Hello!Project Kids, a junior wing of budding idols (aged between seven and 10) all dolled-up in their school uniforms.

Unlike the West, where radio has traditionally played the primary role in the promotion of popular music, television is J-pop's natural medium. Music is just one facet of the career of a Japanese pop star (variously referred to as 'idols' or 'talent'). Not only do Morning Musume churn out records (at least four singles and an album a year without fail) but their faces swarm across TV screens every week in serialised dramas, pop shows and even their own Sunday variety show, Hello! Morning

They appear in commercials selling everything from iced tea to acne cream and desktop printers; jingles later turn up as album tracks. But it doesn't end there. Morning Musume also star in their own movies and stage musicals and even have their own football team, Gatas Brilhantes, and sports festival. Everything is filmed for eventual release on CD or DVD. The Hello!Project stable averages one release a week.

It's a ruthless money-making machine turning over more than £50 million a year in record sales alone. If proof were needed of its effectiveness, one only has to take a look at Morning Musume's male fans, the otaku, whose fetishistic devotion marks them out as a breed apart not only from regular music fans but also from the mainstream of Japanese society. It's estimated that the sale of merchandise to the otaku market in Japan - which covers everything from pop groups to manga and animé - is worth ¥290 billion (£1.5bn).

Pre-show, the concourse outside Yoyogi Park is teeming with otaku. They while away the hours in mini-encampments that provide respite from the sweltering summer heat, cooling themselves with fans printed with the smiling faces of Momusu members. Some have travelled hours to get here. One group of lads came nearly 500km from Kobe, in south-west Japan. The mini-stereo on the ground in front of them is blaring out a tinny version of Morning Musume's single, 'Joshi Kashimashi Monogatari' (The Story of Noisy Girls) and the trio mime along, throwing shapes into the air as if communicating in some arcane semaphore. They are imitating the complex dance steps and hand jives that the group perform in their videos.

A large marquee housing the merchandise stand is the top draw on the concourse. The biggest sellers are large cellophane-wrapped glossy photos of each band member, packaged like trading cards and sold as a lucky dip. The cannier fans lay out their photo collections on the ground attracting crowds who barter for rare photos to complete their sets or simply swap up for more popular members.

The hardcore Otaku stand in huddles dressed in brightly-coloured long coats (happi) and headbands(hachimaki), a uniform derived from the organised cheering sections (called oendan) who dominate the bleachers at Japanese baseball games with their rowdy chants. The Morning Musume otaku serve much the same purpose. Their headbands are customised with the names of their favourite band members. Six by four photos (protected in plastic sleeves) of the girls are pinned to their coats like medals.

One fellow with a round friendly face hands over a business card that reads 'Ai-Risa Club Leader', signifying that his sole mission is to promote the charms of Momusu's Ai Kago and Risa Nigakii. His black happi is wrapped around his bulky frame like a dressing gown. Sown on the back, in an arc that runs across his shoulders and down the seams of the coat, are several hand-crafted sunflowers made of cloth. In the middle are two rows of huge round badges of Aibon that date her physical growth from the time she joined the group up until the present day.

Takeda paid ¥38,000 (about £200) to get into tonight's show. The best seats sell for more than twice that because tickets are hard to come by. The concerts all but sell out through applications from the official fan club before the public even gets a look in. Hirano had to bid for his at auction using his mobile phone. Now it hangs around his neck in a laminated holder like a prized backstage pass.

He attends the graduation concerts every year but can't remember much about them because he's usually so overcome with emotion. 'I scream and cry so much that I lose my mind and it feels like I'm about to pass out,' he tells me. 'But it's the only opportunity I get to really let go. That's why people come here, to go crazy - scream, shout and drool over their favourite girls.'

What the girls themselves think of their drooling followers became something of a talking point in fan circles last year when audio footage was leaked of unguarded backstage comments made by Momusu's Rika Ishikawa (nicknamed 'Charmy' for her seemingly unshakeable beatific countenance). 'Look at them,' she shrieked, referring to fans in the front row. 'Grown-ups screaming like that! I can't believe it. So stupid!'

If anything, however, the fact that Morning Musume inspire such slavish idolatry should be laid at the door of their creator, a 37-year-old singer turned star-maker from Osaka who goes by the name of Tsunku. He planned it that way from the start.

In publicity shots, Tsunku looks like a man whose vanity has got the better of him. He affects a boyish tilt of the head, his bleached orange hair is teased into spikes, age and sex are airbrushed by make-up. He looks like a manga Michael Jackson. He signs his name with a Mars symbol, a little flourish to affirm his masculinity.

Morning Musume were formed in 1997 when Tsunku and his band Sharan Q held auditions on the Asayan TV programme to find a new female singer. As a boon to the five losers, Tsunku issued a challenge: if they could shift 50,000 copies of a song produced by him under their own devices in four days, he would agree to become their full-time producer.

The five were filmed performing PAs in record stores and baseball stadiums, hawking the CD on street corners, at school, to family and friends. And somehow they achieved their goal. Their debut single, 'Morning Coffee', turned the fresh-faced girl group into an instant sensation. The song featured lilting Sixties-style harmonies and a sly lyric that suggested the beverage in question was almost certainly post-coital - 'Hey, I'm so happy/ My heart is pounding/ Because you said /Let's drink morning coffee together'. Subsequent singles (for which three more girls were added) confirmed their appeal and in a short time Morning Musume became Japan's biggest-selling girl group.

'It was just after the [economic] bubble burst,' Tsunku said in a recent interview of the circumstances that surrounded the group's debut. 'People were no longer interested in one another's welfare. Before, men used to spend money on women (and vice versa) but afterwards people just spent money on themselves. There was nothing to lose oneself in, nothing to go wild about. I just saw a gap in the market and threw a ball right into it. Morning Musume made the audience want to spend money on them.'

Tsunku developed a different kind of bubble. A kind of feel-good service industry fronted by the Morning Musume girls. But one gets the feeling that his real forte was an ability to tap into the psyche of the Japanese male. The way Morning Musume are lined up in group photos makes them seem interchangeable with the shining faces of the girls advertised on the illuminated hoardings outside the hostess clubs in Kabukicho, Tokyo's red light district.

Acting as Svengali, manager and father figure, Tsunku's influence over the group is apparent at every level. Outside of the studio, 'The Producer' (as he is often referred to) keeps in contact with his charges via email and videotaped messages. Working alongside session musicians and arrangers, Tsunku writes and produces virtually all the music that comes out of the Hello!Project stable himself (a staggering 100 to 200 songs a year), personally coaching his young charges in the studio to get the performances he wants. Every release bears the legend 'Produced by Tsunku'. More often than not, he also contributes backing vocals, his rough baritone acting as a counterpoint to the chipmunk chorus of girls.

As pop music, the Hello!Project sound borders on the avant-garde. Designed to adrenalise the audience, Tsunku's rapid-fire productions sound like an incongruous mash of 50 years of music history. One song careers improbably through power rock, disco and Eastern European folk song. Riffs are shamelessly recycled from both Western and Japanese pop.

Tsunku's music (and J-pop in general) descends from long-held traditions. The pre-eminent forms of kayo-kyoku (literally 'popular song') in Japan for the past century have been children's songs and an indigenous folk-blues called enka. The latter began as a form of protest speech set to music but is now more comparable to the French chanson. Western scales were first introduced into Japan around the end of the 19th century and used as an educational tool for children. After the Second World War, the flood of primarily American youth culture caused another seismic shift in the emphasis of Japanese music.

The history of J-pop is marked by distinct periods. The 1950s and Sixties were dominated in quick succession by rokabiri (rockabilly), eleki (electric) and 'Group Sounds' - a wave of warbling, home-grown beat combos in mop-tops and tailored suits directly inspired by the Beatles; the Seventies and Eighties by the rise of the Idols; and the Nineties to the present day by the Producers.

No figure looms larger over J-Pop than Johnny Kitagawa, the founder of the Johnny & Associates talent agency which manages the biggest names in Japan. 'He's one of the pioneers of the entertainment business in Japan,' says Teruzane Utada, father and manager of pop star Hikaru Utada. 'But he only handles boys, and that's very special.'

Kitagawa has had a monopoly on the creation of boy bands in Japan for 43 years. It's been said that a call by him to Japanese TV stations (threatening to pull his acts from their schedules) is enough to squash the ambitions of rival talent agencies. His acts are so pervasive that they are referred to by the generic term 'Johnnys'. Their image is so tightly controlled that pictures of the band don't even appear on their official websites. This zone of secrecy even extends to Kitagawa himself.

He never does interviews or appears in public with his acts. Only a handful of photos are known to exist of him. Although he is believed to be in his early seventies, even biographical details are hard to come by. His official history reads like myth.

Hirosu 'Johnny' Kitagawa was born in the US and educated in California before going to Japan in the late Fifties. While working at the American Embassy in Tokyo, he saw a group of boys playing baseball in Yoyogi Park and asked them to form a group under his management, naming them after himself. (Another version of the story is that they were already signed as a musical group to another manager but poached by Kitagawa.)

The Johnnies debuted in 1962 at the Western Carnival, a week-long annual music festivalin Tokyo's Nichigeki Theatre where pompadoured greasers played the newest styles. Authorities were so worried about the influence of rokabiri and eleki that they tried to stop teenagers attending the shows.

There was no such fear that the Johnnies would ever corrupt anyone. Kitagawa's model wasn't rock'n'roll but Broadway musicals like West Side Story. His genius was to turn youth music into a mass-marketable commodity by mixing it with slick dance routines. He was certainly the first impresario in Japan to form an all-male vocal pop group and possibly influenced the way Western boy bands would be formed and marketed. His first real success came in 1968 with Four Leaves, a group of teenagers on the cusp of manhood whose breezy look and sound caught the public imagination and set the tone for Johnny's bands to follow.

Kitagawa recruits boys as young as 10 into a pool of talent known as Johnny's Juniors. The Juniors debut as back-up dancers to established groups, thereby making fans familiar with their faces before they are launched as groups in their own right. Sequestered in a special school run by the talent agency, they undertake a rigorous programme of training in singing, dancing, acting and acrobatics. It has also been suggested that Kitagawa takes a keen personal interest in their tutelage.

In 1988, former Four Leaves singer Kita Koji published a 12-volume diary (entitled Dear Hikaru Genji) that took the form of an open letter to the most popular Johnnys act of the time, a roller-skating boy band. In it, he alleged to have been raped and coerced into a long-term sexual relationship with Kitagawa. The boy band boss was said to operate a system of patronage, promoting the careers of idols in return for sexual favours.

In 1996, the rumours returned when Hiramoto Junya, a former member of Johnny's Juniors, published All About Johnnys, which collated the experiences of other former idols. In his book, Junya says that the Johnnys acts all lived in a communal apartment rented for them in the centre of Tokyo. He claims that Kitagawa shared their living space, insisted on washing their backs at bath time, and slept among them in a large dormitory.

In 2001, Shukan Bunshun, a weekly newspaper mixing scandal with serious reporting, also printed a series of sensational articles, describing Kitagawa as the 'monster of the showbiz world'. Questions were raised in Parliament during a meeting of the Committee for Child Protection as to whether Kitagawa was in fact simply using his talent agency to groom young boys for his own devices. There were no findings against him but the story made headlines across the world.

Kitagawa later sued Shukan Bunshun for defamation and won ¥8.8 million (around £45,000) in damages in a 2002 ruling. There has never been any police action against Kitagawa or the agency, which also stamps down hard on any suggestion of impropriety by its acts. When an 18-year-old member of NEWS, one of Kitagawa's most popular current groups, was picked up by police last month in Sendai for drunk and disorderly behaviour, he was immediately barred by the agency from any public appearances. Pre-recorded TV appearances were re-shot.

While Tsunku has escaped being ensnared in any kind of scandal, Morning Musume haven't been so lucky. When their management company refused to co-operate in a shakedown by organised crime figures, footage of the girls obtained from a hidden camera in the toilet of their production offices was made available on a commercially produced DVD. The video for their next single, 'The Peace', found them dancing around the lower deck of a cruise ship whose walls were lined with urinals and posing for pictures in toilet cubicles.

In Japan, the rationale behind the marketing of pubescent pop stars and adult porn stars is remarkably similar. Tsunku and Japanese pornographer Ganari Takahashi even published a book in which they compare notes on how best to promote the talents of girls in their respective fields. Tsunku used the opportunity to remark that he has no interest in sleeping with any of his charges.

A rite of passage for all Japanese girl idols is to appear in their own photobooks, which will invariably feature a selection of bikini shots shot on beaches in Hawaii (a favourite Japanese holiday destination). Sales of photobooks are so brisk that they have their own charts. Top-selling bikini model Yuko Ogura, a 22-year-old child-woman, even launched a singing career on the back of the success of her photobooks.

Tsunku's Hello!Project is less about selling T&A than a testament to the seduction of innocence and what it blossoms into. A relentless drip-feed of product fosters the illusion of intimacy, affording fans a specular view of their idols' inner lives. They develop an emotional bond with the girls from the moment they are selected to join the group in yearly televised auditions, becoming party to the Pygmalion process. On the TV show Futarigoto, the girls are turned into flesh and blood tamagotchi. Fans watch apparently candid footage of them performing mundane duties at home in quiet moments and sharing their innermost thoughts on camera. But it's filmed on a set.

There's a curious tension between the real-life isolation of the Hello!Project girls and the worldliness they project within their fantasy lives as idols. Tsunku has said that because the girls' lives are so hectic they do not have the chance to experience the emotional turmoil of a normal teenager, developing crushes and falling in and out of love. So he provides it for them in the lyrics, which have a conversational flow that veers from the banal to the profound and which are intended to replicate the interior monologue of a teenage girl; albeit one written by a worldly middle-aged Japanese man.

One gets the feeling that Tsunku's talent would be more appreciated in the West, where there's a tacit admiration for the monomaniacal vision of producer-musicians like Phil Spector, Joe Meek and Serge Gainsbourg. In Japan, the relentless chatter and shrill positivity of the Hello!Project girls is anathema to many, who view the proliferation of their music as noise pollution and their talent as negligible. And yet this, it seems, is the whole point.

Tsunku deliberately selects girls from the auditions who are awkward or insecure. The girls with unconventional looks. The cute ones who can't hit the notes or whose rhythm is slightly off. And through his encouragement, their flaws eventually become the very thing that give them character. Aspects of their natural personalities become exaggerated. Morning Musume elder Mari Yaguchi, a dizzy redhead, is known for her 'Sexy Beam', a dance move that involves her pretending to fire laser beams from her nipples. She was abruptly forced to resign as leader of Morning Musume earlier this year after being photographed emerging from a convenience store with a popular young actor, who turned out to be her new boyfriend. In the fantasy world they inhabit, there is no room for the Morning Musume girls to have real relationships. They must be seen to remain chaste and virginal at all times.

With their record sales in decline - for which, as in the West, illegal downloading is blamed - Morning Musume have become prone to being embroiled in more and more of these seemingly innocuous public scandals, each of which serves to tarnish their carefully cultivated image. Some commentators have taken this as a sign that the public fascination with the group is coming to the end of its cycle. Perhaps as an emergency measure, Tsunku decided to forego TV auditions altogether this year and instead parachuted a new girl into the group, 12-year-old Kusumi Koharu.

Not surprisingly, the attitude of Johnny & Associates to the press is also ambivalent at best. It is made abundantly clear that if the Johnnys front office decide not to participate with an article about them then no promotional material will be forthcoming either.

After months of trying to negotiate access to his groups, Kitagawa's personal assistant, Mr Shirahase, offers a personal invitation from his boss to attend a show featuring Johnnys acts. He gives an assurance that Kitagawa will almost certainly be at the show but will not consent to having his photograph taken under any circumstances.

Johnny's Summary is a yearly summer concert series showcasing the Johnny's Junior groups. It takes places in a large round pavilion on a site next to the Yoyogi Park Sports Arena. The two-hour show, pitched somewhere between a musical, a circus and a magic show, runs twice a day for a month. Its staging is rumoured to cost in the region of £3 million. By any standards, it's an astonishing spectacle, packed with an array of special effects including a hydraulic podium (from which fire, smoke and water spontaneously erupt) and a huge komodo dragon on a crane. Computer graphics swirl around the walls of the tent which doubles as a vast LCD screen.

The show is split into three sections, opening with a pantomime in which the two lead groups, NEWS and Kat-Tun, play eternal rivals in a series of historical set pieces. They dash through the aisles engaged in mock swordfights, getting so close you can smell their scent. And as they pass, girls lurch out of their seats to make a grab for them. Just a brush of boy-band hem on girl-fan fingertips is enough to cause hyperventilation or a spontaneous outpouring of tears.

As part of a series of musical numbers themed around the United Nations, a panoply of perfectly groomed pubescent boys in fanciful costumes illustrating national flags parade across the stage like Vegas showgirls. They swoop over the crowd on wires and perform acrobatic feats on trapezes. At one point, they even frolic half-naked under fountains that sprout up around the edge of the stage, shorts clinging onto their bony little bodies. The show closes with a medley of hits from 42 years of Johnny's bands, accompanied by vintage footage of the original groups.

After the show, Shirahase sidles over. A musty lounge lizard in a worn drape suit, he looks as if he's been with the organisation since the Sixties. 'So you want to meet Mr Kitagawa?' The invitation, offered with a thin smile, comes out of the blue. 'Follow me,' he beckons.

Head down, cigarette in hand, Shirahase leads the way backstage at a brisk pace. His attention remains focused on the phone permanently affixed to his ear even when he jumps nimbly over the thick black electrical cables that track like sleeping pythons from beneath the tent. As he rounds a corner into the production area, he abruptly ends his phone conversation.

'Jyannie-san!' he calls out. A short, elderly man talking to a member of Kat-Tun then turns around and approaches. 'Hi, how are you?' he says, extending his hand. 'Johnny Kitagawa. How did you enjoy our show?' He speaks fluent English with an American accent.

Kitagawa is said to have been blessed with boy-band looks as a young man. Now he resembles someone's elderly grandfather. He wears a woollen polo shirt and neatly pressed suit trousers hiked up to his stomach. Thinning jet-black hair is scraped across his pate. He engages in small talk for a few minutes, seemingly more interested in how his visitor likes Japan than expounding on his own achievements.

'Well, nice to meet you,' he says abruptly. 'I must go. We open another show in Yokohama tomorrow for one of the KinKi Kids. Call me next time you come to Tokyo.' He produces a business card bearing his name printed on imitation wood stock.

There's nothing about Kitagawa's folksy manner in this brief encounter that would suggest he was either the most powerful man in the Japanese entertainment business or its 'monster'. It's like meeting the Wizard of Oz.

The charges of impropriety levelled at him don't seem to have rubbed off on his acts, who continue to dominate the airwaves. Young mothers caught in the fantasy still offer up their sons in droves to Kitagawa in the hope that, should they be accepted, they will be that much closer to the idols they grew up with. In so doing, they sustain the dream of eternal youth from generation to generation.