Government Initiatives

Tsurugajo Castle in Aizuwakamatsu, Fukushima

Thus far in our series on examining Japan’s rural revitalization, we have discussed energy revitalization as well as efforts to resolve Japan’s real estate challenges. In this piece we will focus on initiatives undertaken by the Government of Japan to spur growth and invigorate rural areas.

The root cause of Japan’s slow but constant rural decline is depopulation. Official statistics reveal that Japan’s population peaked at roughly 128 million in 2010. Although the exact number is debatable, estimates by the National Institute of Social Security and Population Studies put Japan’s population at 107 million by 2065. We think that is optimistic, but what is indisputable is that the loss will have dire economic, social, political, and cultural consequences.

The root of depopulation is obvious: Japan’s birth rate is among the lowest in the world with the Ministry of Health, Labor, and Welfare reporting the birth rate at 1.34 in 2020. Therefore, counting on an expanding domestic population to provide workforce labor is a fanciful dream. A declining domestic workforce, an aging population, and tight restrictions on immigration limits options.

Japan’s leaders know this. What are they doing about it? As the Japanese population declines, what is being done to reverse the trend? What would encourage young, ambitious Japanese to continue living in rural areas? On the flipside, what might motivate young urban Japanese to move to the countryside?

Let’s take a look at a few policy undertakings that, while well intentioned, are not yet having dramatic impact. Underlying all initiatives is the need for Japan to increase its self-reliance through self-sufficiency. 

Targeting Rural Areas

Setting depopulation aside for a moment, a number of programs have been launched to revitalize Japan’s countryside with the hope of enticing people to embrace rural living. While few initiatives single out repopulation per se, most encompass multi-faceted targets to attain economic growth. One such effort is in the enormous New Tohoku program launched by Japan’s Reconstruction Agency, an invigoration program encompassing the entire Tohoku region devastated by the massive earthquake and tsunami in 2011, and the site of the notorious Fukushima meltdown.

The New Tohoku initiative is a collaboration among NPO’s, universities, as well as both the public and private sector intended to resurrect areas impacted by the triple disaster. The first goal, clearing the land of debris, was followed by the need to reconstruct entire villages, towns and even large sections of cities – a massive undertaking that is still ongoing.

Even if achieved, rebuilding does not resolve the issue of luring evacuees and industry back to these regions so as to establish sustainable communities long-term. According to the Reconstruction Agency, whereas nearly 470,000 people were displaced in 2011, less than 30,000 remain in “temporary” housing today. This is good news. Yet even though the agriculture and seafood industries have largely been restored as radiation safety concerns have abated and land has been cleared of debris, 340,000 people left the region entirely. One suspects most are not coming back. 

Tohoku’s revitalization is unique among Japan’s struggling regions as it has a huge, multi-faceted disaster to manage on top of population decline. Rebuilding will be a decades-long effort and throwing money at it is key, but this only goes so far nationally. It is true that the government has spent over ¥40 trillion on recovery efforts since 2011, with ¥13 trillion going to constructing permanent housing and rebuilding infrastructure in tsunami-affected towns. However, a lot of these initiatives encompass spending massive amounts of government funds to rebuild communities that people are simple not returning to. And that is just Tohoku. How about other regions of Japan?

Expanded Government Efforts

Japanese leaders know they have a problem on their hands. Where and how can long-term economic growth be maintained? One response was a key part of the late Prime Minister Abe’s Three-Arrow initiative. Commonly referred to as the Regional Revitalization Plan, the intent was to stimulate growth nationally through monetary easing (from the Bank of Japan), fiscal stimulus (via government spending), and structural reforms (including regional revitalization). The Japanese government’s strategy is consistent: support at the national level must be accompanied by determined regional efforts. Central to this idea are various councils on Regional Industrial Competitiveness which form a base for initiatives attempting to consolidate and streamline decision-making. 

How does it work? Through collaboration. Part of the goal is to entice new investment through private finance initiatives (PFI) and public-private partnerships (PPP). PFI’s are given infrastructure concessions while PPP’s offer private sector business opportunities. This combines with additional efforts such as the government’s National Strategic Special Zone program. The zones aim to enhance economic growth by implementing regulatory reforms, thereby promoting the idea that there is no place better to do business than Japan. 

Business-friendly regulatory programs such as offering tax incentives for projects carried out jointly by the central government, local governments, and the private sector are meant to send that message. As of April 2020, over 100 reforms are thought to have incentivized 350 projects. But it is hard to measure the overall effectiveness of these programs.

Additional help comes from Japan’s Regional Revitalization Law, which went into effect in 2016. It provides government subsidies for local revitalization projects, again through tax incentives, to private sector organizations that donate funds for local projects. It sounds good on paper. But who will carry out the work? And will young families be enticed to leave urban areas?

People and Data

The Regional Revitalization Support Program offers participants a chance to try country living with financial incentives of ¥4,800,000 Yen per person as resettlement offsets. Japan’s Ministry of Internal Affairs and Communications also seeks to establish municipal panels that provide additional options to draw more applicants to their regions. But with a 2024 participant target of just 8,000 people, one wonders how impactful the program can be.

Another challenge comes from having accurate data from which regional decision-makers can reach the right conclusions. Japan’s government created the Regional Economy and Society Analysis System (RESAS) as a way of better providing big data in a timely manner. RESAS analyzes regional scenarios and helps set realistic development targets which support public and private sector entities to make more fully informed strategy decisions. Additionally, in an effort to lure new talent, the Internal Affairs and Communications Ministry has initiated a campaign to encourage urban residents to relocate to rural areas. These efforts should collectively help fill the data gap existing between and among many players pertaining to regional economic, demographic, and financial issues.

This is the third article of a six-part series on Japan’s Rural Revitalization. Together with each article, we’re also discussing each topic on Japan Unleashed, Parthenon Japan’s new official podcast.

Future Opportunities

All of these efforts are a big step in the right direction, but can these initiatives be maintained or even fully realized? To be truly impactful, localities and regional governments must better synthesize available services easily offered in urban areas. High quality health care facilities (clinics, hospitals, assisted living) and top-level, state-of-the-art schools with well-trained staff remain in short supply in many areas. 

The key to sustained success is sustainability itself. Can Japan attract needed investment, stimulate global talent and obtain needed resources central to achieving sustained growth? There are reasons to be both pessimistic and optimistic. 

Given Japanese decision-maker’s historical propensity to move slowly, how can Japan move more quickly to enact strategies and better prepare for future global competition? Japanese cultural norms including the need to form a group consensus while maintaining human relations can inhibit debate on critical issues and, if nothing else, takes time. In addition, the tendency in Japan among decision-making to be more reactive (vs. proactive) is not helpful. We do not advocate that Japan changes cultural norms, but rather find a way to move forward more rapidly. As Fukushima confirmed, Japanese decision-makers are at their worst in times of crisis. Siloed decision-making and finger pointing is not a preferred strategy when rural Japan is in a crisis in need of speedy solutions.

But all things considered, there is reason for hope. Based on anecdotes and our own personal experiences, young Japanese are more prone to thinking outside the box. Combined with technological innovations, which we will touch on in greater detail in an upcoming article, and non-Japanese who understand Japanese ways, perhaps the future will be more competitive for Japan. We see a glimmer of hope in the potential of realizing a Japan where non-Japanese are embraced more deeply as partners in prosperity.