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Monday, March 6, 2006
Oita's example can give clues on how to close rural gap
Japan's overall economic conditions are steadily improving, but the large gap between urban and rural areas is often cited as a serious problem. While business is brisk in Tokyo and other big cities, rural parts of Japan still lack the vigor.
Of the major areas outside of Tokyo, the Chubu region -- with Aichi Prefecture at its center -- has been widely known for its good performance. And when one turns to the Kyushu region, Oita Prefecture stands out for its brisk economic activity.
For example, the current industrial output in Kyushu as a whole is about 5 percent higher than the 2000 figure, but the output in Oita Prefecture is nearly 30 percent above the 2000 level. This is also reflected in the employment data. While the effective ratio of job offers to applicants in Kyushu stands at a dismal 0.71, the figure in Oita is much better at 0.96.
Behind this remarkable performance are aggressive corporate investments in Oita.
According to a recent survey by the Oita office of the Development Bank of Japan, capital investments by companies in major manufacturing sectors, such as electrical machinery, precision instruments and transport equipment, alone have reached 400 billion yen. The study shows that the overall benefits of such investments on Oita's economy are estimated at nearly 800 billion yen.
The latter figure takes into account the overall economic output and is different from gross domestic product, which focuses on added value. But the 800 billion yen is roughly equivalent to 18 percent of the prefecture's GDP. These investments have created 28,000 jobs, accounting for about 5 percent of the prefecture's employed people.
Major Japanese firms like Canon, Nippon Steel and Toshiba run manufacturing operations in Oita. Canon plans to build a new digital camera lens plant in the prefecture to cope with rising demand for digital single-lens reflex cameras. Aggressive investments by these big companies will naturally bring large benefits to the regional economy.
Why do the companies choose Oita of all the places in Kyushu? Good local environment and business infrastructure alone do not seem to be the answer. More importantly, administrative authorities in Oita have taken the initiative to lure the companies to the prefecture, and their efforts are bearing fruit.
As Japan discusses reform of the way expenditure and revenue are managed in an integrated manner, the fiscal strategies of local governments have become a key point of interest. Each local government should start presenting its unique policies -- particularly on taxes and infrastructure building -- to attract corporate investment. This way, the benefits of large corporate investment will far outweigh the lost revenue from tax cuts and the cost of infrastructure spending.
Yoshio Nakamura is an acting director general of the Japan Business Federation (Nippon Keidanren).