In May 2015, Chuokeizai-sha will publish a book that I authored and edited, Designing Regional Revitalization [Chiiki Sōsei no Dezain].

I chose the term chiiki sōsei (regional revitalization) for the title rather than the more provincial-sounding chihō sōseii (regional/rural revitalization) since the book also covers issues in metropolitan areas like Tokyo and Osaka. In this article, I would like to discuss some of the more important themes from the book.

The Paradox of Wealth

Japan’s population is expected to shrink to 87.74 million by 2060, a decrease of 41.1 million people from the peak in 2004.

Some believe that the people of Japan will be able to maintain their level of affluence despite the population decline if there is an increase in GDP per capita. If regional consumption falls below the level required to sustain service industries, however, banks, convenience stores, supermarkets, gas stations, hospitals, and schools will close. Services will disappear from the region, starting with high-order service functions. This is the “paradox of wealth.”

The Rising Birth Rate in Central Tokyo

In 2013, the birthrate for the three central Tokyo wards—Minato-ku, Chuo-ku and Chiyoda-ku—surpassed the birthrate for all 23 Tokyo wards. A drop in land prices triggered a population return to the city center, the construction of apartment buildings in coastal areas and on land once used for company housing and factories, and the opening of public and private nurseries. Thanks in part to these developments, Chiyoda-ku’s birth rate showed a greater increase than any other Tokyo ward, rising 0.21 points from the previous year to 1.15 . This birth rate may still seem low, but it is higher than the 1.09 birth rate of Sapporo.

Birth rates may continue to rise in metropolitan areas where local governments are financially strong and there are many offices for large companies that actively support child-rearing.

The Crisis in Hokkaido and the Tohoku Region

As of 2013, the Japanese prefectures with the four highest birth rates are 1) Okinawa (1.94), 2) Miyazaki (1.72), 3) Shimane (1.65), and 4) Nagasaki (1.64). All four prefectures are located in western Japan. Meanwhile, Hokkaido’s birthrate (1.26) is lower than that of Kanagawa, while the birth rates in Miyagi (1.34) and Akita (1.35) are about the same as that in Chiba.

Birth rates could be raised about 0.3 to 0.5 above their current levels by increasing child allowances and developing a supportive environment for child-rearing. In such a scenario, birth rates would rise up to about 2.0 in western Japan, led by prefectures in Kyushu and Okinawa, allowing these regions to escape Japan’s natural population decline.

On the other hand, birth rates in Hokkaido and the Tohoku region would remain between about 1.6 and 1.8, preventing them from breaking out of the population decline. The “disappearance of local communities” Hiroya Masuda has warned about may start in the villages and provincial cities of Hokkaido and the Tohoku region.

The “Choosing the Future” Committee established by the government has set the population target for 2060 at 100 million. This seems like a fairly difficult goal to achieve. Japan’s birth rate can be raised further, however, if the vacant residential properties, abandoned fields, and sites of demolished factories, schools and company housing that result from depopulation are put to appropriate use, a supportive environment for child-rearing is fostered, and support systems for child-rearing are enhanced.

Land no longer in use due to vacant houses and stores, closed factories, abolished schools, etc. must be repurposed to promote residence in the city center, develop support facilities for startups and disaster parks (parks equipped for disaster response), and create beautiful urban and rural landscapes.

Reverse Sixth Sector Industrialization

Attention has been focused on sixth sector industrialization as the trump card for regional revitalization. A typical example is local curry dishes, which can be found in every prefecture throughout Japan for a total of over 400 varieties.

For agricultural revitalization, we should not rigidly adhere to sixth sector industrialization and local production for local consumption. We must build stable large-scale production systems that can handle business with large-scale companies like fast food chains, supermarkets, and food manufacturers. Companies like Kentucky Fried Chicken, Ohsho, Ringer Hut, Mos Burger, Freshness Burger, Kagome, and Nippon Ham are starting to shift toward using domestic foods.

Seven & I Holdings has decided to increase the percentage of local products it offers from the current figure of 10 percent to 50 percent by 2017. It plans to divide the country into nine regions, deploy product developers in each region, and turn 1,500 of the approximately 3,000 items offered in 7-Eleven stores into local items.

Ito-Yokado has divided the country into 13 regions and is replacing about 40,000 of the 80,000 to 100,000 items sold in its stores with local products.

I call the approach of moving from secondary and tertiary industries to primary industries “reverse sixth sector industrialization.” With the decrease in domestic demand, we should also be promoting increased exports of food and agricultural and marine products.

Industrial Cluster Strategy

It is not fair to compare provincial areas to the Tokyo area or the three major metropolitan areas of Japan and treat them like backward areas with regional disparities that must be corrected. Provincial areas are a part of the developed country of Japan. According to OECD surveys, Japan’s regional (prefectural) per-capita income disparities are low on an international scale.

The role of provincial areas as industrial production bases has been increasing due to the decentralization of factories that started in the 1970s. In 1969, factories in the Tohoku region accounted for 7.8 percent and those in Kyushu accounted for 6.5 percent of factories nationwide. By 2012, those figures had risen to 9.6 percent and 8.5 percent, respectively.

During that time period, the total number of factories in Japan plummeted from 400,000 to 220,000 as a result of the over two-decades-long slump in the Japanese economy and the re-location of factories overseas. The factories that do remain in Japan, however, are large state-of-the art factories, mother factories for overseas factories, and factories with advanced R&D capabilities, despite their provincial location.

Fukushima Prefecture’s output in the medical equipment industry has risen to the third highest level for all prefectures. Olympus endoscopes are manufactured there. This achievement is the result of collaboration among Olympus, Johnson & Johnson, Nihon University’s College of Engineering, Fukushima Medical University, the Fukushima prefectural government, the Ministry of Education, Culture, Sports, Science and Technology, and local companies. The “East Kyushu Medical Valley” (Oita and Miyazaki Prefectures) comes in after Fukushima as the fourth biggest production center for medical equipment. Meanwhile, Toyama Prefecture produces the third highest output for pharmaceuticals.

In 2013, Japan’s trade deficit for medical equipment expanded to 770.3 billion yen, while its trade deficit for pharmaceuticals expanded to 2,947.6 billion yen.

Japan’s provincial regions are not backward areas with disparities that need to be corrected. They are hubs for promoting economic development and innovation in Japan.