Section 2
Japan’s changing local economic structure and competition and partnership
with East Asian economic agglomerations
【Key points】
1. Dynamism of East Asian economic agglomerations
The trend toward convergence of economic standards in East Asia has been paralleled by the
growth of economic agglomerations. China’s economic growth, for example, has been
accompanied by the physical concentration of industry along the coast. Strong economic
agglomerations are also emerging in Malaysia and Thailand.
Inter-cluster competition and partnership is also developing. Fierce competition is beginning
to change the industrial rankings of East Asian cities.
Japanese and other foreign companies are moving into East Asian agglomerations, with their
activities deepening ties between Japanese and East Asian economic agglomeration. These ties
are in turn creating horizontal specialization among agglomerations, which are themselves
becoming increasingly specialized.
2. Transformation of Japan’s industrial structure and changing economic agglomerations
The change in Japan’s industrial structure parallels the change in local economic structure.
In the postwar years, Japan has experienced two turning points in terms of industrial and local
economic structures, and is currently entering a third cycle. Since the second cycle, the transfer
of economic activities has been occurring not just within Japan, but has reached offshore to East
Asia in particular. This trend has encouraged the growth of economic agglomerations in East
Asia.
The offshore shift of Japanese corporate operations in the second and third cycles has also
prompted change in Japan’s local economic structure and also in relations with East Asia. NIEs
are becoming increasingly competitive in those industries located in Japanese metropolises,
eroding Japan’s traditional competitiveness. In the case of China, however, he old paradigm is
beginning maintained and strengthened. More specifically, Chinese development to date has
centered around those industries located in local Japanese cities.
3. Characteristics of Japan’s economic agglomerations and inter-cluster ties
Japan’s economic agglomerations are characterized by their high level of diversity. In other
words, they are not single-industry agglomerations, but rather comprise numerous industries and
companies clustering primarily in metropolitan areas to form heterogeneous economic zones.
They are also marked by the upward trend in this level of diversity. Such diversity contributes to
the spread and promotion of knowledge among agglomerations and sustained growth at the
−19−
point of industrial structural transformation. By comparison, East Asia’s economic
agglomerations are strengthening their industrial specialization as they grow.
Japan also stands in close geographical proximity to East Asia, which places Japan in a
better physical position than Europe and the United States in terms of deepening relations with
the various economic agglomerations developing in East Asia.
Having the most advanced economic structure in East Asia places Japan in an excellent
position to develop ties with East Asian economic agglomerations in terms not only of
geographical location, but also stage of development. Japan’s challenge will be to develop
attractive economic agglomerations focused on the benefits of diversity and to form flexible ties
with East Asian economic agglomerations.
1. The dynamism of East Asian economic agglomerations
(1) Trends in key East Asian economic agglomerations
(a) Geographical agglomerations of industry in China
(i) Chinese growth powered by coastal areas
In recent years, China has emerged as the “world’s factory ”, seizing top world production
share for many products. This growth has been underpinned by the development of the coastal
area (eastern China). The foreign affiliates which account for approximately half of China’s
imports and exports have concentrated their China operations in the Pearl River and Yangtze
Deltas1 along the coast, from where they are powering the development of eastern China. Figure
1.2.1 shows the share of these two areas in the direct investment absorbed by China as a whole.
As their combined share comprises roughly half of total investment, they are obviously
receiving the bulk of foreign direct investment in China. Where the Pearl River Delta is
characterized by high export dependence, the Yangtze Delta has relied on domestic demand, but
even there the degree of export dependence has been gradually rising in recent years (Fig. 1.2.2).
Both areas have ridden the wave of globalization to strengthen the geographical agglomerations
of industry and lock in economic growth.
At the same time, these agglomerations of industry on the coast are also expanding the
economic disparities between the coastal and inland areas , and between the rural and urban
sectors. China will have to find ways to narrow that gap over the coming years. Here, however,
we look at the dynamism2 of the above-mentioned economic agglomerations in the Pearl River
1
The Pearl River Delta is located in Guangdong Province, while the Yangtze Delta embraces
Shanghai City, Jiangsu and Zhejiang Province.
2
Economic agglomerations form through synergy among economies of scale in the production of
goods and services, transport costs for goods, and the benefits of diversity of goods and people.
“Economies of scale” includes not only the cost reduction accompanying increased scale, but also
−20−
and Yangtze Deltas as key agglomerations driving China’s economic growth.
Figure
1.2.1 Trends in direct investment received by region
(Share of total: %)
(Total value of direct investment:US$100million)
50
250
45
Pearl River Delta (left scale)
40
200
Pearl River Delta(right scale)
35
Yangtze Delta(right scale)
30
150
25
Yangtze Delta (left scale)
20
100
15
10
50
5
0
0
90
91
92
93
94
95
96
97
98
99
00
01
(Year)
Notes:1. 2001 data is for the first quarter.
2. Data is on a performance base.
Source:China Statistical Yearbook, China Monthly Statistics ( National Bureau of Statistics of China)
Figure 1.2.2 Export dependence trends in the Yangtze River Delta and the Pearl River Delta
(%)
100
Pearl River Delta
80
60
40
Yangtze Delta
20
All China
0
92
93
94
95
96
97
98
99
Source:China Statistical Yearbook ( National Bureau of Statistics of China)
the effect of the various externals. See Krugman, Venables and Fujita (1999) for details.
−21−
00
(Year)
(ii) Economic agglomerations in the Pearl River Delta
The Pearl River Delta is a strip of land with a radius of some 100 kilometers stretching from
Hong Kong in the east to Macao in the west around the mouth of the Pearl River in southern
China. It contains the industrial cities of Shenzhen, Zhuhai and Dongguan. Adjoining Hong
Kong, development of the Pearl River Delta began early, with Shenzhen, Shantou and Zhuhai
named as China’s first special economic zones in 19793. Particularly since the introduction of
China’s reform and open-door policies, the area absorbed foreign investment to develop into a
huge, world-leading electronics industry agglomeration, producing copiers, printers and
computer parts.
The first companies to move into the Pearl River Delta were from Hong Kong. They
developed a commissioned processing formula which combined the area’s low costs with Hong
Kong’s distribution, trade, sales and finance functions. As of the late 1980s, the rapid
appreciation of the yen began to attract Japanese companies to the area. In 1990, the effective
removal of the ban on Taiwanese corporate investment in China led Taiwanese companies to
initiate investment in the delta through Hong Kong and Fujian Province, which sits on the
opposing coast. US, European and South Korean companies then swelled the ranks, while local
companies began to develop, creating the beginnings of an agglomeration centered around the
parts industry. The Pearl River Delta has become an attractive prospect for companies looking
to locate somewhere with low-cost, high-speed parts procurement, featuring not only lower
labor costs than other East Asian agglomerations, but also the above-mentioned parts industry
agglomeration.
The development of the Pearl River Delta agglomerations has been fueled by foreign
investment, and as such, the area is characterized by extremely high export dependence (Fig.
1.2.2). Excluding Hong Kong, which has become a hub for intermediary trade, most of these
exports are directed at US and Europe. In terms of imports, however, the area has an excess of
imports with Japan, Taiwan, South Korea and the ASEAN 4, with imports from Japan and
Taiwan particularly abundant. Parts in particular therefore seem to be imported from East Asia
and assembled, with the finished products exported to the US, Europe and elsewhere (Fig.
1.2.3).
3
Apart from the Pearl River Delta, Xiamen in Fujian Province was also designated as a special
economic zone at the same time.
−22−
Figure 1.2.3 Composition of Pearl River Delta and Shanghai traiding partners(2000)
US$11.1 billion
US$9.4 billion
US$25.4 billion
100%
US$29.4 billion
Other
ASEAN4
80%
Singapore
Taiwan
60%
South Korea
40%
Hong Kong
Japan
20%
Europe
US
0%
Exports
Imports
Exports
Pearl River Delta
Imports
Shanghai
Source: Statistical Yearbook of Guangdon (Guangdong Statistics and Information Bureau)
Shanghai Statistical Yearbook (Shanghai Municipal Statistics Breau)
(iii) Growing presence of the Yangtze Delta
China’s other great production hub alongside the Pearl River Delta is the Yangtze Delta, the
area embracing the lower reaches of the Yangtze River, including Shanghai, Jiangsu and
Zheijiang Province. As exemplified in the old proverb “If Jiangsu and the Zhejiang region
prosper, all China will also prosper”, this was traditionally a highly productive agricultural
region, while commerce and industry also flourished. Not only is transport convenient, but the
Yangtze Delta is also home to Shanghai, an enormous consumer market. Since Shanghai was
designated as an open city in 1985, many foreign affiliates have established themselves in the
area. The foreign companies moving into the area are distinguished by their strong focus on the
domestic market and the comparatively large number of large-scale investors in capital
equipment. The Yangtze Delta, however, has yet to reach the level of the Pearl River Delta in
terms of parts industry agglomeration, and many foreign companies operating there opt for fullset production designed around in-house manufacturing.
A broad range of companies have established themselves in the Yangtze Delta, from textiles,
miscellaneous goods, food products and other consumer goods to high-tech areas such as
semiconductors and laptop computers. The bias is also not solely toward manufacturing; many
companies belong to the services industry. For example, in Shanghai, which has achieved a
remarkable level of economic growth, the policy of turning the Pudong District into a central
financial district has boosted the presence of the financial business. Shanghai already has
−23−
securities, futures, foreign currency, gold, and even diamond markets, securing its position as
China’s leading financial center.
In terms of the inflow of direct investment, where the Yangtze Delta traditionally stood in
second place to the Pearl River Delta, both areas recorded roughly the same levels of investment
in 2000, and a turnaround in the first quarter of 2001 saw the Yangtze Delta begin to take the
lead (Fig. 1.2.1).
Of particular note is the northward shift of Taiwanese companies, the second greatest
investors in China after Hong Kong. In recent years, Taiwanese companies, and particularly
major computer manufacturers, have begun investing in southern Jiangsu Province (Suzhou,
Kunshan, Wujiang, etc.). Since 2000, around half of Taiwanese direct investment in China has
gone into this region (Fig. 1.2.4). This trend among Taiwanese companies suggests rapid growth
in the parts industry agglomeration in the Yangtze Delta which formerly lacked the depth of the
Pearl River Delta.
(%)
Figure 1.2.4 Trends in Taiwanese direct investment in China by region
(US$ million）
60
12,000
Jiangsu share
Guangdong share
50
10,000
40
8,000
30
6,000
Direct investment value (right scale)
20
4,000
Zhejiang
10
2,000
Fujian
0
0
91 ∼96
97
98
99
00
01
（Year)
(First half)
Note: Direct investment value is on an approvals base
Source: Cross Strait Economic Statistics Monthly (Taiwan Institute of Economic Research)
South Korean companies, on the other hand, seem to be heading south. Around half of
Korean investment in China goes into the area on the coast of the Yellow Sea close to South
Korea, while the three northeastern provinces also receive a substantial amount (Fig. 1.2.5). In
addition to geographical proximity, this area has many Korean speakers, which is an enormous
merit in terms of management and securing a labor force. Recent trends, however, reveal greater
investment in the Yangtze Delta, which is now attracting greater attention from Korean
−24−
investors.
Figure 1.2.5 Trends in South Korean direct investment in China
(Unit: US$ million)
1989-92
1993-96 1997-2000 Cumulative total at July 2001
Investment in China
378
4,476
2,721
8,222
Northeast China
117
1,072
386
1,849
(31.0)
(23.9)
(14.2)
(22.5)
Heilongjiang Province
34
170
66
273
Jilin Province
14
197
113
336
Liaoning Province
69
404
202
933
Korean Autonomous Prefecture
0
301
5
307
Yellow Sea coastline
198
2,249
1,247
3,938
(52.4)
(50.2)
(45.8)
(47.9)
Tianjin
21
482
462
1,056
Beijing
36
377
181
610
Hebei Province
15
74
22
115
126
1,316
582
2,157
Shandong Province
Yangtze Delta
22
913
843
1,871
(5.8)
(20.4)
(31.0)
(22.8)
Shanghai
7
406
228
668
Jiangsu Province
12
432
398
895
Zhejiang Province
3
75
217
308
Pearl River Delta
32
112
159
322
(Guangdong Province)
(8.5)
(2.5)
(5.8)
(3.9)
Note: Figures within parentheses represent share of national total (%).
Source: Nakazawa (2001), ROK Ministry of Commerce, Industry and Energy
Japan has strong trade ties with the Yangtze Delta. Data on trade with Shanghai, the heart of
the Yangtze Delta, show that Shanghai accounts for approximately a quarter of total exports and
imports with Japan, which is Shanghai’s largest trading partner (Fig. 1.2.3). However,
Shanghai’s huge domestic market means that while its level of export dependence is higher than
the national average, it is relatively low compared to the Pearl River Delta (Fig. 1.2.2).
(b) Malaysian electrical and electronic industry agglomeration: Penang
Malaysia was comparatively quick to industrialize among the East Asian countries,
particularly in the electrical and electronic machinery industry. The country features a relatively
dispersed regional economic structure with growth centers not only in the capital, Kuala
Lumpur, but also in Selangor, Johore, and Penang. In particular Penang started out as a tourist
city and was designated as an export processing zone in 1972. Numerous semiconductor
manufacturers subsequently branched out into this area, primarily American (National
Semiconductor, Hewlett Packard, Motorola, Intel), but also including Japanese companies like
Hitachi. By around 1980, Penang had become one of Asia’s leading semiconductor production
and export bases.
In the late 1980s, the influx of Japanese and Taiwanese electrical and electronic machinery
manufacturers increased rapidly, and by the 1990s, production was booming, with Penang
−25−
representing one of Asia’s leading agglomerations in this industry. During this period,
production volume increased by approximately five times for televisions and other audiovisual
equipment, semiconductor parts, and communication equipment in particular (Fig. 1.2.6). The
influx of new corporate operations is now slowing, but some major companies are still setting
up new large-scale plants, such as Dell Computer, and EMS major Solectron.
Penang’s swift industrialization has, however, led to labor shortages and rising wages, which
are in turn pushing up the production costs of foreign companies. In response to this situation,
foreign companies are now focusing on adding value to their production operations. For
example, around the mid-1990s, Hewlett Packard built a production plant for hard disk drives
for high-performance computers, while Intel and Motorola have established design and
development centers, positioning Penang as the hub of their East Asian product development
and services operations.
Penang therefore started out in semi-conductors, powered primarily by foreign investment,
before the production of electrical machinery and electronics expanded to transform the area
into one of East Asia’s leading agglomerations, with companies now working to boost added
value.
Figure 1.2.6 Trends in Penang electrical machinery industry
(Companies)
(100 million ringgits)
400
350
80
TVs and other
audio equipment
300
250
Production
70
Semiconductors and other electronic parts;
telecommunications equipment
60
No. of companies
(right scale)
Production
No. of companies
(right scale)
50
200
40
150
30
100
20
50
10
0
0
1990
1995
1997
1999
Source: Department of Statistics, Malaysia
(c) Auto industry agglomeration in Thailand: Eastern seaboard
Development of Thailand’s eastern seaboard began as of the 1980s. Infrastructure was set in
place by constructing primary highways linking the coast with Bangkok, developing Laem
Chabang Port and building the Nong Plalai Dam, etc., while industrial parks were also
−26−
established and foreign companies actively solicited. Foreign affiliate-powered agglomerations
are developing in the area as a result.
Japanese manufacturers of finished vehicles and parts have been particularly interested in
the area with an eye to boosting their international competitiveness in East Asia, and a huge
automobile industry agglomeration has developed. Japanese finished auto manufacturers
originally set up in Bangkok and nearby Samut Prakan, but have gradually moved across to the
eastern seaboard. Parts manufacturers, on the other hand, followed finished auto manufacturers
into the outskirts of Bangkok, but were actually first to set up on the eastern seaboard. It was the
agglomeration of parts manufacturers in the area which attracted finished auto manufacturers,
including US and European companies (Fig. 1.2.7).
Figure 1.2.7 Timing and location of Japanese auto parts manufacturers establishing operations in Thailand
Year
Thailand
Samut Prakan Chon Buri
of establishment
Bangkok
Rayon
Total
Up to 1969
3
4
0
0
7
70∼79
6
7
1
0
15
80∼89
6
11
1
0
28
90∼94
3
3
11
2
29
95
6
1
1
2
15
96
3
4
2
12
28
97
3
0
4
4
18
98
2
0
0
0
2
99
0
0
0
0
1
2000
0
0
0
0
1
Hino(1964)
Nissan(1962) Mitsubishi AAT(1998)
Total
Finished car
Mitsubishi(1966)
Toyota(1964)
(1996)
GM(2000)
144
manufacturers
Nissan(1977)
Isuzu(1966)
Indonesia
Total
Total
0
4
17
11
4
0
2
0
0
0
Total
38
0
12
11
14
7
15
10
2
1
0
Total
72
BMW(2000)
Spread out to eastern seaboard development region
●Bangkok
Malaysia
Railway
●Samut Prakan
Gulf of Siam (Thailand)●Chon Buri
Large-scale road ■Laem Chabang Industrial Estate
●Phattaya ▲Nong Plalai Dam
■Eastern Seaboard Industrial Estate
●Rayon
■Mapthaput Industrial Estate
Water pipes
Natural gas pipeline
Source: Japan Auto Parts Industries Association
Agglomerations spurred economic activities on the eastern seaboard, which now has a
higher GDP growth rate than elsewhere in Thailand (Fig. 1.2.8). In 1997, the year of the
currency crisis, the eastern seaboard alone maintained positive growth while all other regions
recorded real negative growth, demonstrating the growth capacity of industrial agglomerations.
−27−
The automobile industry agglomeration on the eastern seaboard has also developed due to
US and European companies looking to expand their Asian operations. In recent years, Auto
Alliance Thailand (AAT), a joint venture between Mazda and Ford, GM and BMW have
established itself in the easternmost city of Rayong. Their presence has prompted Delphi and
other US parts manufacturers to flood into the region, where they are working to lift their
competitiveness. A virtuous cycle has therefore been established whereby agglomeration breeds
agglomeration.
Figure 1.2.8 Trends in real GDP growth rate by region in Thailand
(%)
20.0
Eastern seaboard region
15.0
10.0
5.0
Bangkok
0.0
-5.0
1992
Bangkok
Bangkok environs
Central Thailand
Eastern Thailand
Western Thailand
Northeastern Thailand
Northern Thailand
Southern Thailand
1993
1994
1995
1996
1997
(Year)
Source: Thailand Data Book 2001
(2) Competition and linkages among East Asian economic agglomerations
(a) Competition among economic agglomerations
As differentiated economic agglomerations form in East Asia, competition is also becoming
increasingly intense among these agglomerations to establish themselves as hubs for production,
information and knowledge activities.
Production competition in particular is heating up as East Asia becomes into “the world’s
factory”. Trends in industrial production value in the various towns and regions of South Korea,
China, Hong Kong, Taiwan and Japan (Fig. 1.2.9) reveal the emergence of many new industrial
cities, while the cities with top production rankings are changing frequently.
Competition to establish and maintain information and knowledge activity hubs is also
becoming fierce. Figure 1.2.10 indicates changes in the ranking of business environments in
Asia-Pacific cities. The rankings created by Fortune are drawn up by Arthur Andersen based on
the four criteria of overall business environment, the cost of doing business, the ability of the
−28−
local workforce, and quality of life. As the figure shows, cities are moving very quickly in and
out of the top rankings, evidence of the increasingly stiff competition environment in East Asia.
Competition is also picking up in the field of finance, the epitome of global business. Tokyo,
Shanghai, Hong Kong and Singapore are often identified as cities likely to become international
financial centers in East Asia, but on the assumption of the “one time-zone, one global center”
theory, cities may find themselves battling hard to take that position.
Even Singapore, reputed as a business hub, is facing intense competition. The Port of
Singapore once boasted the world’s largest container handling volume thanks to the advanced
services offered by its port facilities. Recently, however, companies have been shifting their
trade to Tanjung Pelepas Port at the southern tip of Malaysia to take advantage of cheaper fees4.
In terms of attracting regional headquarters (RHQ) too, a shift is in progress to Hong Kong as a
gateway to growing China. The rankings in Figure 1.2.10 indicate that Hong Kong replaced
Singapore in 2000-01 as top of the list for the Asia-Pacific. In response to this threat, the
Economic Review Committee, which has been examining measures to stimulate the
Singaporean economy , recommended in April 2002 that the corporate tax rate be reduced.
Figure 1.2.9 Changes in industrial production by region in Japan, China and the ROK
Value of industrial production by region in Japan, China and the ROK (1990)
Value of industrial production by region in Japan, China and the ROK (1999)
Top 20 regions in terms of industrial
production value (Unit: 100 million US$)
Ranking
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Region
23 Tokyo wards
Toyota City
Osaka City
Kawasaki City
Yokohama City
Nagoya City
Shanghai
Seoul
Kurashiki City
Kobe City
Kyoto City
Inchon
Ichihara City
Hiroshima City
Pusan
Sakai City
Kitakyushu City
Fujisawa City
Beijing
Sagamihara City
Taiwan
Hong Kong
Country
Japan
Japan
Japan
Japan
Japan
Japan
China
ROK
Japan
Japan
Japan
ROK
Japan
Japan
ROK
Japan
Japan
Japan
China
Japan
Production
value
972
571
546
443
436
406
341
263
234
227
221
207
200
196
192
188
173
159
154
144
1,747
416
Top 20 regions in terms of industrial
production value (Unit: 100 million US$)
Ranking
Chemicals, spinning, steel
Beijing
北京
Metals, machinery
manufacturing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Tianjin
Seoul
Tokyo
Shanghai
Textiles, steel
Osaka
Publishing,
printing, general
machinery
Chemicals,
publishing,
printing, metals
Taiwan
Electrical machinery
Hong Kong
Textiles
Industrial production value
US$40 billion or more
US$20-40 billion
Region
23 Tokyo wards
Toyota City
Shanghai
Ulsan
Osaka City
Yokohama City
Nagoya City
Kawasaki City
Suzhou
Guangzhou
Tianjin
Wuxi
Ningbo
Kurashiki City
Shenzhen
Beijing
Seoul
Hangzhou
Ichihara City
Kobe City
Taiwan
Hong Kong (1998)
Country
Japan
Japan
China
ROK
Japan
Japan
Japan
Japan
China
China
China
China
China
Japan
China
China
KOR
China
Japan
Japan
Production
value
905
696
684
493
481
436
397
382
363
336
332
301
284
266
259
259
247
245
241
233
2,526
298
Electrical machinery,
steel, chemicals
Publishing,
printing
Tianjin
Beijing
Seoul
Tokyo
Shanghai
Osaka
Publishing,
printing, chemicals
Guangdong
Province
Electrical machinery
Taiwan
Electrical machinery
Industrial production value
Hong Kong
Textiles, electrical machinery,
publishing, printing
US$10-20 billion
US$40 billion or more
US$20-40 billion
US$10-20 billion
Note: Production value rankings are not in strict order because the geographical scope of cities has not been taken into
consideration. However, a comparison can be made between 1990 and 1999, from which it would seem that many cities
in East Asia are industrializing.
Sources: National statistics
Figure 1.2.10 Trends in business environment rankings of Asia-Pacific cities
First
Second
Third
Fourth
Fifth
1995
Singapore
Hong Kong
Tokyo
−
−
1999
Singapore
Sydney
Melbourne
Hong Kong
Taipei
2000
Hong Kong
Sydney
Singapore
Auckland
Tokyo
Source: Data from Fortune magazine
4
In 2001, where Singapore Harbor handled 15.5 million containers (down 8.9 percent on the
previous year), Tanjung Pelepas Port handled 2.05 million( five times the volume of the previous
−29−
Publishing,
printing, general
machinery
(b) Linkages among economic agglomerations
(i) Expansion of sea and air routes
Even as competition intensifies among East Asia’s economic agglomerations, interagglomerative linkages are also deepening. While detailed discussion of these linkages is
impeded by the current lack of trade and investment regional statistics which clearly
demonstrate inter-agglomeration linkages, here we will consider the deepening of economic ties
in the various areas of East Asia, focusing particularly on Japan.
Development of transport networks in terms of air and sea freight is one trend indicating
linkages among agglomerations. Figure 1.2.11 shows trends in container circulation volume
among main Japanese and East Asian ports in the 1990s. Links appear to be deepening between
main Japanese ports and Dalian and Qingdao, which are physically close from a Japanese
perspective. Trade is also expanding between mainland China and the Kita-Kyushu and Hakata
ports, spatially proximal from a Chinese perspective. Figure 1.2.12 focuses on airports, which
handle the bulk of international passenger transport, examining linkages among main Japanese
and East Asian airports. There has been an evident expansion in air routes between East Asia
and Tokyo, Nagoya, Fukuoka, and particularly Osaka, due to the opening of the new Kansai
International Airport. The movement of people between agglomerations in East Asia and Japan
therefore also appears to be growing. Expansion of the shipping routes which underpin the
transport of goods and the air routes on which passenger transport hinge clearly demonstrate the
linkages among economic agglomerations in East Asia.
Figure 1.2.11 Changes in trade volumes of main trading ports in Japan and East Asia
(10,000 tons)
Tokyo
Yokohama
Nagoya
Osaka
Kobe
Kita-Kyushu Fukuoka
South KoreaPusan
3.5 → 8.5 13.3 → 5.9 5.0 → 4.7 9.5 → 6.9 11.6 → 4.8 4.9 → 3.4 0.7 → 2.6
China
Hong Kong
5.5 → 21.5 11.1 → 16 4.1 → 12.2 2.5 → 11.3 17.5 → 15.5 1.2 → 2.3 0.1 → 2.7
Dalian
0.0 → 2.8 0.0 → 3.7 0.0 → 2.1 0.0 → 3.5 0.0 → 2.2 0.0 → 1.8 0.0 → 0.0
Xiamen
0.0 → 0.7 0.0 → 3.1 0.0 → 1.8 0.0 → 1.6 0.0 → 1.8 0.0 → 0.9 0.0 → 0.3
Tianjin New Port 0.0 → 0.3
2.3 → 5.8 1.3 → 4.0 0.6 → 2.1 3.9 → 4.8 0.0 → 1.1 0.0 → 0.0
Shanghai
0.3 → 6.1 2.8 → 9.7 1.6 → 9.3 1.3 → 14.4 6.5 → 9.0 0.5 → 3.1 0.0 → 0.4
Qingdao
0.0 → 2.8 0.0 → 3.4 0.0 → 3.7 0.0 → 3.3 0.0 → 4.1 0.0 → 0.9 0.0 → 1.0
Taiwan
Jilong
7.4 → 6.7 7.8 → 6.5 5.3 → 7.2 5.2 → 4.6 10.4 → 5.6 1.5 → 1.5 0.0 → 0.3
Gaoxiong
4.0 → 4.3 5.9 → 3.4 2.4 → 3.2 1.8 → 3.4 6.1 → 3.4 1.1 → 1.0 0.0 → 0.2
Southeast Asia Manila
1.1 → 2.6 1.7 → 1.8 1.4 → 3.7 0.4 → 1.0 3.9 → 2.2 0.3 → 0.9 0.0 → 0.2
Ho Chi Minh 0.0 → 1.0 0.0 → 1.3 0.0 → 0.9 0.0 → 1.0 0.0 → 1.3 0.0 → 0.2 0.0 → 0.3
Bangkok
2.3 → 6.8 10.5 → 4.5 4.1 → 5.6 0.6 → 3.0 8.8 → 4.1 1.7 → 2.0 0.0 → 1.1
Singapore
7.0 → 7.6 7.8 → 5.8 3.4 → 4.1 1.4 → 3.4 8.4 → 5.7 1.1 → 0.6 0.0 → 1.0
Penang
0.3 → 1.0 0.8 → 1.4 0.4 → 0.9 0.1 → 0.7 1.3 → 0.9 0.6 → 1.4 0.0 → 0.4
Port Klang
1.5 → 3.0 1.1 → 2.5 1.4 → 2.9 0.3 → 2.3 3.2 → 5.5 0.4 → 0.8 0.1 → 0.5
Laem Chabang0.0 → 4.6 0.0 → 1.8 0.0 → 3.5 0.0 → 1.7 0.0 → 2.1 0.0 → 0.3 0.0 → 0.8
Jakarta
1.7 → 2.9 0.8 → 1.2 2.2 → 2.9 0.3 → 3.6 3.7 → 2.3 0.1 → 0.4 0.1 → 0.4
Notes:
1. Figures represent 1989 container throughput volume → 1998 container throughput volume.
2. Shadowed boxes indicate areas where the rate of increase in container throughput volume has been particularly high.
Source: Survey by Ministry of Land, Infrastructure and Transport
year).
−30−
Figure 1.2.12 Expansion of air routes between main airports of Japan and Asia
(No. of flights)
Tokyo
Nagoya
Komatsu
Osaka
Fukuoka Hiroshima Nagasaki
Okinawa
South Korea Seoul
36 → 25 7 → 7 2 → 2 7 → 32 6 → 7 0 → 3 0 → 3 0 → 0
Pusan
4 → 5 0 → 3 0 → 0 7 → 7 7 → 2 0 → 0 0 → 0 0 → 0
China
Tianjin
0 → 0 0 → 2 0 → 0 0 → 2 0 → 0 0 → 0 0 → 0 0 → 0
Guangzhou
0 → 0 0 → 0 0 → 0 0 → 4 0 → 0 0 → 0 0 → 0 0 → 0
Hong Kong
38 → 37 8 → 0 0 → 0 9 → 23 7 → 7 0 → 0 0 → 0 0 → 0
Kunming
0 → 0 0 → 0 0 → 0 0 → 2 0 → 0 0 → 0 0 → 0 0 → 0
Shanghai
3 → 11 0 → 0 0 → 0 5 → 15 0 → 0 0 → 0 0 → 0 0 → 0
Xian
0 → 2 0 → 0 0 → 0 0 → 0 0 → 0 0 → 0 0 → 0 0 → 0
Qingdao
0 → 2 0 → 0 0 → 0 0 → 1 0 → 2 0 → 0 0 → 0 0 → 0
Dalian
1 → 4 0 → 0 0 → 0 0 → 2 0 → 3 0 → 0 0 → 0 0 → 0
Beijing
11 → 14 0 → 0 0 → 0 4 → 5 0 → 0 0 → 0 0 → 0 0 → 0
Xiamen
0 → 3 0 → 3 0 → 0 0 → 3 0 → 0 0 → 0 0 → 0 0 → 0
Taiwan
Gaoxiong
3 → 3 0 → 0 0 → 0 3 → 0 0 → 0 0 → 0 0 → 0 0 → 0
Taipei
21 → 23 0 → 7 0 → 0 14 → 14 0 → 3 0 → 0 0 → 0 5 → 7
Southeast AsiaKuala Lumpur
6 → 10 0 → 1 0 → 0 0 → 1 0 → 0 0 → 0 0 → 0 0 → 0
Jakarta
0 → 7 0 → 0 0 → 0 7 → 0 0 → 0 0 → 0 0 → 0 0 → 0
Singapore
20 → 28 2 → 1 2 → 0 5 → 18 0 → 0 0 → 0 0 → 0 0 → 0
Bangkok
12 → 27 0 → 4 0 → 0 0 → 9 0 → 0 0 → 0 0 → 0 0 → 0
Ho Chi Minh City 0 → 2 0 → 0 0 → 0 0 → 0 0 → 2 0 → 0 0 → 0 0 → 0
Manila
7 → 15 0 → 4 0 → 0 0 → 2 0 → 0 0 → 0 0 → 0 0 → 0
Notes:
1. Figures represent No. of flights in 1999→ No. of flights in 2001.
2. Shadowed boxes indicate areas where the rate of increase in the number of flights has been particularly high.
Source: Survey by Ministry of Land, Infrastructure and Transport
(ii) Movement of Japanese companies into East Asia
One factor encouraging inter-agglomerative linkages has been the movement of
multinational corporations into East Asia. Figure 1.2.13 illustrates the offshore shift of five
Japanese electrical and electronic machinery manufacturing majors and three auto
manufacturing majors. Japanese companies seem to have directed their attention primarily
toward the NIEs and the ASEAN 4 up until 1985, while recent years have seen a sharp rise in
Chinese operations. However, these operations have focused on the Beijing and Shanghai
economic zones, as well as the Pearl River Delta, while the concentration of operations in these
areas has not exceeded that of other parts of East Asia. The offshore shift of Japanese companies
has also not been into China as such—in other words, China and Chinese territory as a whole—
but rather into the various agglomerations, particularly those along the Chinese coast, while
their presence in these agglomerations is no greater than that of other countries.
What aspects of corporate operations are being shifted overseas? Figure 1.2.14 highlights
six areas with a comparatively high rate of offshore business operations and divides the nature
of these into the three categories of manufacturing and sales, non-manufacturing, and R&D as a
means of identifying inter-temporal changes in the offshore shift of Japanese companies.
Manufacturing and sales clearly comprise the bulk of offshore operations. In the R&D sector,
however, which represents an upstream part of the manufacturing process with comparatively
high added value, companies have just started to shift their operations abroad, and the level has
yet to reach that of production bases. This seems to suggest a distribution of industrial processes
−31−
whereby Japanese companies conduct their R&D at home and manufacture overseas. In fact,
Figure 1.2.15 reveals that Japan still has many R&D bases at home 5.
Figure 1.2.13 Status of offshore operations of five electrical and electronic
machinery manufacturers and three automobile manufacturers
40
30
20
10
0
大連経済圏
Dalian
1974 1985 2001
Other area
40
30
20
10
0
40
30
20
10
0
中国その他地域
in China
1974 1985 2001
40
30
20
10
0
1974 1985 2001
40
30
20
10
0
No. of operations
台湾
Taiwan
1974 1985 2001
40
30
20
10
0
フィ
リピン
Philippines
1974 1985 2001
Zhejiang
zone
珠江デルタ
40
30
20
10
0
マレーシア
Malaysia
1974 1985 2001
1974 1985 2001
40
30
20
10
0
40
30
20
10
0
Shanghai
zone
上海経済圏
1974 1985 2001
1974 1985 2001
韓国Korea
1974 1985 2001
北京経済圏
Beijing
40
30
20
10
0
Thailand
タ
イ
40
30
20
10
0
香港
Hong Kong
1974 1985 2001
40
30
20
10
0
シンガポール
Singapore
40
30
20
10
0
ベトナム
Vietnam
1974 1985 2001
1974 1985 2001
40
30
20
10
0
Indonesia
インドネシア
1974 1985 2001
Source: Overview of Companies Operating Offshore (Toyo Keizai Inc.).
Figure 1.2.14 Breakdown of foreign operations of Japanese companies by process
30
Beijing
economic zone
30
Shanghai
economic zone
30 Pearl River Delta
20
20
20
10
10
10
0
30
0
0
1974 1985 2001
Thailand
1974 1985 2001
30
Malaysia
1974 1985 2001
30
20
20
20
10
10
10
0
0
1974 1985 2001
Manufacturing/sales
Non-manufacturing
(sales only, RHQs, distribution,
imports,services, finance, etc.)
Singapore
R&D; development
design and development
0
1974 1985 2001
1974 1985 2001
Source: Overview of Companies Operating Offshore (Toyo Keizai Inc.)
5
For example, some have argued for the presence of thousands of R&D bases in Zhongguancun, as
well as numerous R&D bases elsewhere (Kuroda (2001), Mizuhashi (2001)). Here, however, we
conducted a standardized evaluation based on World Investment Report (UNCTAD), which is
based on each country’s standard industrial categories.
−32−
Figure 1.2.15 R&D bases in Japan and East Asia
Northeast China
●
●
Beijing environs
●▲
Western China
●
South Korea●
Central China
●
●
●
●
Yangtze Delta
●▲
Pearl River Delta
●
Hong Kong
●▲
●
●
●▲
All Japan
●
▲
Regional divisions
Japan: By region (eight regions)
China: Eastern China (northeast area, Beijing environs, Yangtze Delta,
Pearl River Delta), central China, western China (six regions)
Other: By country or region
Taiwan●▲
●▲
● Philippines●▲
■
R&D bases of domestic companies
●：
R&D bases of foreign companies
▲：
●▲
：1∼10
●▲ ：
11∼30
Malaysia● ▲
●▲：
31∼60
Singapore
●▲
●▲：101∼150
●▲ ：151∼210
●▲：
61∼100
●▲：211∼
Indonesia●
Note: This data from UNCTAD has been extracted from SIC8731-8734 (Standard Industial
Classification system) for the various countries and regions.
Source: WIR (UNCTAD)
Concrete trends in recent years in terms of the division of industrial processes among
agglomerations also suggest increasingly fine division, as seen in the beginning of an offshore
shift for the product developmentprocess in the R&D sector.
Figure 1.2.16 examines the way in which certain manufacturers of consumer goods divide
up the product manufacturing process in East Asia. Marketing (product concept development)
and research are mainly conducted in Japan, while not only manufacturing and sales but also
product development is conducted in ASEAN and China. This reflects the nature of products
like detergents and face cleansers , whereby differences in customs and water quality create
highly specific markets suiting local product development.
Figure 1.2.16 Division of manufacturing process in East Asia (consumer good manufacturers)
Process
Marketing
(product
concept
creation)
P
r
o
d
u
c
t
Basic research
Product
development
Trial manufacturing
Manufacturing
process
Sales
Call centers
Shanghai (China),
Taipei (Taiwan),
Jakarta (Indonesia)
Shanghai (China),
Taipei (Taiwan),
Jakarta (Indonesia)
China
ASEAN nations
China
ASEAN nations
China
ASEAN nations
China
ASEAN nations
1. Laundry
detergent
Tokyo (Japan),
Wakayama (Japan) Shanghai (China),
Taipei (Taiwan),
Taipei (Taiwan),
Shanghai (China),
Bangkok (Thailand)
Bangkok(Thailand)
2. Face cleansers
Tokyo (Japan),
Taipei (Taiwan),
Shanghai (China),
Bangkok(Thailand)
3. Shampoo
Bangkok (Thailand) Bangkok (Thailand) Bangkok (Thailand)
Bangkok (Thailand)
Bangkok (Thailand)
ASEAN nations
ASEAN nations
4. Sanitary items
Tokyo (Japan),
Taipei (Taiwan),
Shanghai (China),
Bangkok(Thailand)
Tochigi (Japan)
Shanghai (China),
Bangkok (Thailand)
Shanghai (China),
Bangkok (Thailand)
Shanghai (China),
Bangkok (Thailand)
China
ASEAN nations
China
ASEAN nations
5. Disposable
diapers
Tokyo (Japan),
Taipei (Taiwan),
Shanghai (China),
Bangkok(Thailand)
Tochigi (Japan)
Shanghai (China),
Taipei (Taiwan),
Bangkok (Thailand)
Shanghai (China),
Taipei (Taiwan),
Bangkok (Thailand)
Shanghai (China),
Taipei (Taiwan),
Bangkok (Thailand)
China
ASEAN nations
China
ASEAN nations
Wakayama (Japan)
Guangzhou (China)
Hong Kong (China),
Tokyo (Japan)
6. Urethane for
shoe soles
Tokyo (Japan)
Tokyo (Japan)
Taipei (Taiwan),
Shanghai (China),
Bangkok (Thailand)
Wakayama (Japan) Wakayama (Japan)
Taipei (Taiwan),
Taipei (Taiwan),
Shanghai (China),
Shanghai (China),
Bangkok (Thailand),
Bangkok (Thailand),
Jakarta (Indonesia),
Jakarta (Indonesia),
Ho Chi Minh (Vietnam) Ho Chi Minh (Vietnam)
Source: Created by METI from hearings.
−33−
Maintenance
Hong Kong (China),
Tokyo (Japan)
Other processes
A similar division of processes is taking place among auto manufacturers. Marketing was
originally handled in Japan, but recently local firms abroad have been taking over from the
product concept development stage. Research relating to next-generation technology, such as
the development of fuel cell, is still conducted in Japan, however.
Figure 1.2.17 shows the process division of certain electrical machinery and electronics
manufacturers. Companies are beginning to shift to East Asia the product development process
for analogue televisions and other products which have reached technological maturity, echoing
the trend described above for automobiles. The majority of processes for technologically
immature products such as customized LSI (large-scale integration) are still developed in Japan.
R&D in particular tends to be concentrated in the major metropolitan areas of the Kanto area,
while smaller cities around the country handle trial manufacturing and manufacturing, which
suggests a domestic division of processes for this type of product.
Figure 1.2.17 Division of manufacturing process in East Asia (electrics and electronics manufacturers)
Marketing (product
concept creation)
Basic research
Product
development
Process
Trial manufacturing
Manufacturing
process
Sales
Call centers
Maintenance
Other processes
Kanto region(Japan) Kanto region(Japan)
Kanto
region(Japan)
Germany
Kanto ･Kyushu
region(Japan)
Kyushu region
(Japan,initial part)
Germany(later part)
Europe
Element technology
development
(Japan,Portugal)
2.Image LSI(games;customized)Kanto region(Japan) Kanto region(Japan)
Kanto
region(Japan)
US
Kyushu
region(Japan)
Kyushu region(Japan)
Japan
CPU element
technology
development in US
Kyushu
region(Japan)
Tohoku･Kyushu
region(Japan,initial
part) Malaysia(later
part)
Kyushu region(Japan)
Asia
1. Network LSI (customized)
3. ICs (AV; generic)
Kanto region(Japan) Kanto region(Japan)Kanto region(Japan)
P
r
o
d 4. Microcomputers (AV; semi- Kanto region(Japan) Kanto region(Japan)Kanto region(Japan)
Central and
u customized)
Southern China
c
Kanto region(Japan) Kanto region(Japan)Kanto region(Japan)
t 5. Monitor LSI (customized)
Tohoku･Kyushu
region(Japan)
Tohoku･Kyushu
region(Japan)
Tohoku･Kyushu
region(Japan)
Japan
6. Camera modules for mobile Kanto region(Japan) Kanto region(Japan)Kanto region(Japan)
phones
Tohoku･Kyushu
region(Japan)
Tohoku･Kyushu
region(Japan)
Asia
Singapore
Northern China
Java(Indonesia)
Japan ，
Asia
Japan，
Asia
Japan，
Asia
Japan ，
Asia
World
World
Singapore
Asia
7. Analog TVs
Kanto region(Japan)
8. Laptop PCs
Kanto region(Japan) Kanto region(Japan)Kanto region(Japan) Kanto region(Japan) Kanto region(Japan)
Taiwan
Northern China
Philippines
9. HDDs
Kanto region(Japan) Kanto region(Japan)Kanto region(Japan) Kanto region(Japan) Philippines
World
10. DVDROMs (PC)
Kanto region(Japan) Kanto region(Japan)Kanto region(Japan)
World
Tohoku･Kyushu
region(Japan)
Philippines
Software development
in Northern and
Southern China
Element technology
development(Singapor
e)
Module design and
manufacturing
in Northern China
Motherboard
manufacuturing in
Philippines
Element parts
manufacturing in
Southern China
Source: Created by METI from hearings.
2. Transformation of Japan’s industrial structure and changing economic agglomeations
(1) Three cycles in regional structural change
The economic growth surge in postwar Japan progressed in three cycles: the advance of
industrialization up until 1970; the transition to a service economy after 1970; and the growing
predominance of the service sector which marked the 1990s. This transformation in industrial
−34−
structure parallels the changes in regional economic structure6, with even interregional
population movement marking the same three cycles in the Japanese regional economic
structure:First cycle: 1950s-late 1970s; Second cycle: late1970s-mid-1990s; Third cycle: mid1990s-present. These cycles are examined below on the basis of GDP share by industry (Fig.
1.2.18), GDP share by region (Fig. 1.2.19), population flows into the three major metropolitan
areas (Fig. 1.2.20) and trends in productivity by region (Figs. 1.2.21, 1.2.22).
Figure 1.2.19 Trends in GDP share by region
Figure 1.2.18 Trend’s in Japan’s GDP share by industry
（％）
80
(%)
80
← First cycle →← Second cycle →←Third cycle→
←
→
70
→← Second cycle →← Third cycle
First cycle
70
Tertiary industry
Tertiary industry
60
60
50
50
Advance of service economy
40
40
Advance of
industrialization
30
Secondary industry
30
Secondary industry
Tokyo region
20
20
Nagoya region
Primary industry
Osaka region
10
10
Other regions
0
0
1955
1955 1960 1965 1970 1975 1980 1985 1990 1995 1998
(Year)
1960
1965
1970
1975
1980
1985
1990
1995
1998
(Year)
Note: See Appended Note Figure 1.2.1 for definition of regional
divisions
Source: Annual Prefectural Economic Statistics (Cabinet Office)
Note: Figures for 1955-1985 are drawn from 68 SNA, and as of 1990 93 SNA.
Source: National Accounts (Cabinet Office).
Figure 1.2.20 Net population flows in Japan’s three metropolises
（％）
(1,000 persons)
500
25
Tokyo metropolis
400
20
300
15
Japan’s real GDP growth
rate (right scale)
Osaka
200 metropolis
10
100
5
0
0
Nagoya
metropolis
▲ 100
99
97
95
93
91
89
87
85
83
81
79
77
75
73
71
69
67
65
63
61
59
57
-5
(Year)
Note: Refer to Appended Figure 1.2.1 for definition of regional categories.
Source: Population Movement Tables (Ministry of Home Affairs), National Accounts (Cabinet Office), Japan’s
Metropolises (Ministry of Land, Infrastructure and Transport).
6
See Appended Note 1.2.1 for the definition of economic zones used here in considering regional
−35−
Figure 1.2.21 Trends in productivity in Japanese regions (all industries)
Figure 1.2.22 Trends in productivity in Japanese regions (manufacturing)
1.9
1.6
←
→←
First cycle
Second cycle →←Third cycle→
←
First cycle
→←
Second cycle →←Third cycle
1.5
1.7
1.4
1.5
1.3
1.2
1.3
1.1
1.1
1.0
0.9
0.9
0.8
Tokyo metropolis
Other areas within Tokyo region
Tokyo metropolis
Other areas within Tokyo region
Osaka metropolis
Nagoya metropolis
Other regions
0.7
Osaka metropolis
0.7
Nagoya metropolis
Other regions
0.6
0.5
1955
1960
1965
1970
1975
1980
1985
1990
1995
1955
2000
(Year)
Note: See Appended Note 1.2.1 for definition of regional categories.
Source: Annual Prefectural Economic Statistics (Cabinet Office)
1960
1965
1970
1975
1980
1985
1990
1995
2000
(Year)
Note: See Appended Note 1.2.1 for definition of regional categories.
Source: Annual Prefectural Economic Statistics (Cabinet Office)
(a) First cycle: 1950s-late 1970s
Figure 1.2.18 examines industrial structure in the first cycle, demonstrating a consistent rise
in the share of secondary industry until 1970. Subsequently, tertiary industry expanded its share
in the 1970s as the secondary industry share declined. The share of primary industry plummeted
over this period, setting in place a permanent trend. The regional trends shown in Figure 1.2.19
suggest that this industrial structural transformation was particularly marked in the Tokyo and
Osaka metropolis es, which spearheaded the transformation.
Figure 1.2.20 shows that there was a net inflow into all three major metropolitan areas over
the same period and that the population inflow terminated in the mid-1970s following the two
oil shocks. In this cycle, agglomerations initially formed in the three major metropolitan areas
where industrialization was most advanced, while the subsequent jump in land prices and wages
in these cities led steel and petrochemicals—both land-intensive industries using imported raw
materials —and the assembly industry, which is characterized by the intensive use of unskilled
labor, out into peripheral areas.
The trends in productivity by region in Figure 1.2.21 reveal nationwide convergence as a
economic structure.
−36−
hallmark of the first cycle. In other words, productivity disparities around Japan shrank as the
productivity of the highly-productive Tokyo and Osaka metropolises underwent a relative
decline and the productivity of the less-productive regional areas experienced relative growth.
(b) Second cycle: Late 1970s-mid-1990s
The second cycle in industrial structural transformation was distinguished by the consistent
drop in the share of secondary industry and the consistent rise of the share of tertiary industry
(Fig. 1.2.18). By region too, this trend was particularly evident in the Tokyo metropolis (Fig.
1.2.19).
In terms of population movement during this cycle, the only population inflow was into the
Tokyo metropolis , a trend not echoed in the Osaka and Nagoya metropolises (Fig. 1.2.20). This
population concentration in Tokyo reflected changes occurring in agglomeration formation in
metropolitan areas. More specifically, metropolitan cities traditionally formed centering around
economies of agglomeration based on the proximity between producers and between producers
and consumers. However, trade and investment liberalization and advances in transportation and
communications technology encouraged the active shift of mass production activities in
particular to local Japanese cities and East Asian locations. At the same time, economic
activities in major cities became focused on information and knowledge, with a particular
emphasis on planning management and R&D. Because there was no need for multiple
knowledge and information hubs around Japan, a regional economic structure of extreme
concentration was formed primarily in Tokyo. However, this shift prompted land prices to
skyrocket again in the capital and slowed the population influx.
Figure 1.2.21 explores productivity in all industries, marked by the relative rise in the
productivity of the Tokyo metropolis in the late 1980s, which consequently expanded the
productivity disparity between the Tokyo metropolis and other areas. During this cycle, the
Tokyo metropolis experienced a structural transformation toward a focus on tertiary industry,
and its productivity rose.
(c) Third cycle: Mid-1990s-present
The third cycle through which Japan is currently passing bears a substantial resemblance to
the structure of the second cycle. As in the second cycle, the industrial structural transformation
centers on a further shift toward tertiary industry (Fig. 1.2.18). Particularly in Tokyo, the share
of tertiary industry has risen to more than 70 percent. The share of tertiary industry is on the
increase in regions outside the three major metropolitan areas, with this cycle distinguished by
−37−
the increasing dominance of the service sector across the country as a whole (Fig. 1.2.19).
As with the second cycle, only the Tokyo metropolis among the three major metropolitan
areas has experienced a population inflow in this cycle. However, the former strong correlation
between population inflow into the Tokyo metropolis and the economic growth rate is absent
this time (Fig. 1.2.20).
Trends in productivity demonstrate a different shape than in the second cycle (Fig. 1.2.21).
Looking at productivity across all industries, while the Tokyo metropolis presents a marked
decline, little change is evident elsewhere. However, when change in productivity is limited
only to manufacturing, the Tokyo metropolis shows no such major decline (Fig. 1.2.22). Given
the increasing shift to tertiary industry characterizing the Tokyo metropolis in the third cycle, it
appears that while more manufacturing has shifted out of the Tokyo metropolis into other
regions, the manufacturing which remains has sustained high productivity. The slump in thirdcycle productivity would therefore seem to reflect the increased share of tertiary industry in
Tokyo and a corresponding drop in productivity.
(2) Correlation between Japan’s regional economic structure and the East Asian economy
In the previous sub-section, we looked at changes in Japan’s regional economic structure. In
the second and third cycles, there have also been changes in the correlation with the East Asian
economy. Figure 1.2.23 indicates the relation between Japan’s regional economic structure and
East Asia. The manufacturing industry as a whole is divided into 17 sectors, plotting the share of
East Asia in East Asia as a whole, Japan included, along the vertical axis, and the share of
Japan’s major metropolitan areas in Japan as a whole along the horizontal axis. In other words,
the figure examines the relation between East Asia’s share of East Asia as a whole in the 17
industries and the degree of agglomeration in Japan’s metropolitan areas .
Figure 1.2.23 Changes in correlation between Japan's regional economic structure and East Asia
East Asia/East Asia (including Japan) x 100
100%
90%
1990
1999
Linear 1990
Linear 1999
13
80%
70%
60%
12
11
50%
1990 t value:-4.072**
R2 :0.493
1999 t value:-2.934**
R2 :0.322
40%
30%
20%
1
10%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Japan’s metropolises/Japan as a whole x 100
Note:
(1) Industries represented: 1. Publishing and printing; 2. Transport machinery; 3. General machinery; 4. Electrical machinery; 5. Precision machinery; 6. Metal
products; 7. Metals; 8. Chemicals; 9. Plastics; 10. Rubber products; 11. Textiles; 12. Apparel; 13. Petroleum and petroleum products; 14. Paper and paper
products; 15. Foods, beverages, cigarettes; 16. Ceramics and cement products; 17: Other.
(2)A single asterisk on the t-value indicates a 5% level of significance, a double asterisk a 1% level of significance.
Sources: Based on data from National Accounts, Annual Prefectural Economic Statistics (Cabinet Office), and ISD (UNIDO) with reference to Fujita &
Hisatake (1998).
−38−
The result is a negative correlation tracing a downward line. The negative correlation
indicates that East Asia has limited competitiveness compared to Japan in those industries
agglomerating in Japan’s metropolitan areas , while conversely, East Asia’s competitiveness is
comparatively high in those industries not agglomerating in said major cities (that is, industries
located in local Japanese cities). For example, the publishing and printing industry appearing as
1 in the figure is closer to a service industry than a manufacturing industry, focusing on
information and knowledge activities. Because industries of this type have low transport costs,
they are strongly agglomerative, and Japan’s possession of the most advanced economic
structure in East Asia gives Japan an overwhelming dominance in such industries. Trends in
regard to textiles, apparel, petroleum and coal products reflect the fact that while plants were
originally transferred to local cities, as of the 1980s, companies also began to look beyond Japan
to actively relocate their production overseas. However, this correlation becomeshard to explain
in 1999 in comparison with 1990. In other words, Japan tends to have greater competitiveness
than East Asia in those industries agglomerating in major Japanese cities, but as East Asian
competitiveness grows, the previous clear correlation has become weak. As a result, while there
is very little change in the downward trend line in Figure 1.2.23, it is beginning to shift slightly
upward, making an explanation toward the correlation increasingly difficult..
Along the vertical axis, East Asia is divided into the NIEs, ASEAN 4 and China to examine
the correlation with these countries and areas, each of which evinces a different trend (Fig.
1.2.24).
Figure 1.2.24 Regional economic structure in Japan and changes in correlation
with East Asian countries and regions
Correlation withNIEs
Correlation with China
40%
NIEs/ East Asia (including Japan) x 100
1999
30%
1990 t value:-2.580 ＊
Linear 1990
R2
25%
:0.261
1999 t value:-1.512
20%
R2
2
:0.074
Linear 1999
15%
1
10%
5%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
China/East Asia (including Japan) x 100
30%
1990
35%
25%
1990
1999
Linear 1999
11
20%
15%
1990 t value:-3.266 ＊＊
R2
:0.377
1999 t value:-4.032 ＊＊
:0.488
R2
12
10%
Linear 1990
5%
0%
0%
10%
20%
30%
40%
50%
60%
Japan’ s metropolises/Japan as a whole x 100
Japan’s metropolises/Japan as a whole x 100
ASEAN4/East Asia(including Japan)x100
Correlation with ASEAN4
Note:Same as Fig.1.2.23
Source:Same as Fig.1.2.23
25%
1990
1999
20%
1990 t value:-2.533 *
R2
:0.256
1999 t value:-2.392 *
R2
:0.228
15%
10%
5%
0%
0%
10%
20%
30%
40%
50%
60%
Japan’s metropolises/Japan as a whole x 100
70%
80%
−39−
70%
80%
In 1990, the relation between the NIEs and Japan presented a downward trend line, but by
1999, this had flattened out as result of growing NIEs competitiveness in those industries
agglomerating in major Japanese cities. The improved competitiveness of East Asia in those
industries seems to have been marked in the NIEs. Particularly in 1999, the explanation toward
a correlation had become extremely difficult. In other words, the strong competitiveness of
Japan compared to the NIEs in those industries agglomerating in major Japanese cities is
beginning to erode.
In terms of the relation between ASEAN 4, China and Japan, the downward trend line of
1990 had become even steeper in 1999. This would suggest that the economic development of
ASEAN 4 and China has been focused in the industries located in local Japanese cities rather
than those agglomerating in metropolitan areas. In China, this correlation is considerably more
marked in 1999 than in 1990. It reveals that China is developing based on the former type of
industry rather than the latter. As a result, China’s development would until now appear to have
been centered on comparatively labor-intensive and land-intensive industries rather than on the
information and knowledge-intensive industries found in Japan’s metropolitan areas .
3. Characteristics of Japan’s economic agglomerations and linkages among economic
agglomerations
(1) Diversity in Japan’s economic agglomerations
(a) Features of Japan’s economic agglomerations
What features distinguish Japan’s economic agglomerations? Here we consider the degrees
of specialization and diversity of agglomerations as indicators of those features7. In calculating
degrees of specialization and diversity, it is important to first determine the geographical
distribution of economic activities and industrial categorization. In terms of the former, we used
the metropolitan area defintion, which comprises cities, wards, towns and villages based on
commuting pattern criteria, dividing the country up into 118 metropolitan areas. For our
industrial categorization, we selected 322 industrial subcategories within three main categories:
manufacturing; wholesale/retail and restaurants; and services . Employment data for these 118
metropolitan areas and 332 industrial subcategories was used to calculate degrees of
specialization and diversity since 1981.
The results of our calculations suggested a high level of diversity as a feature of Japan’s
7
See Appended Note 1.2.2 concerning formulae for calculating diversity and specialization indices.
A key work in regard to the relation between urban growth, specialization and diversity is Duranton
and Puga (2000).
−40−
economic agglomerations. In other words, rather than single-industry agglomerations, Japan’s
agglomerations comprise heterogeneous economic zones, usually concentrated in metropolitan
areas, where numerous industries and companies agglomerate. Japan’s metropolitan areas
develop a high level of diversity, particularly in key local cities such as the seats of prefectural
government (Fig. 1.2.25). This phenomenon reflects the tendency of prefectural government
seats with administrative functions toward a wide-ranging industrial structure rather than
specialization in particular industries. For example, the top 10 metropolitan areas in terms of
level of diversity in both 1981 and 1999 were all areas containing housing prefectural
governments. Similarly with levels of specialization, all metropolitan areas from the 111th
position downward housed prefectural governments .
Figure 1.2.25 Specialization and diversity in Japan
Specialization
ranking
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
111
112
113
114
115
116
117
118
1981
Kure metropolis
Odawara metropolis
Iwakuni metropolis
Takasaki metropolis
Hirosaki metropolis
Aizuwakamatsu metropolis
Hekinan metropolis
Fukui metropolis
Gamagori metropolis
Tukuba metropolis
Kariya metropolis
Takamatsu metropolis
Kanazawa metropolis
Nobeoka metropolis
Niihama metropolis
Hitachi metropolis
Hamamatsu metropolis
Isahaya metropolis
Fuji metropolis
Joetsu metropolis
Tsu metropolis
Nagano metropolis
Hiroshima metropolis
Sapporo metropolis
Fukuoka metropolis
Niigata metropolis
Osaka metropolis
Tokyo metropolis
330.51
279.75
247.07
222.04
133.82
126.85
123.62
104.85
99.64
98.50
74.62
71.50
70.81
68.10
62.93
61.25
55.98
55.57
51.53
51.52
6.90
6.27
5.76
5.59
5.06
4.78
3.99
3.25
Diversity
1999
Isahaya metropolis
Kure metropolis
Sakata metropolis
Hekinan metropolis
Tomakomai metropolis
Gamagori metropolis
Takasaki metropolis
Aizuwakamatsu metropolis
Kisarazu metropolis
Fukui metropolis
Muroran metropolis
Kariya metropolis
Takamatsu metropolis
Nobeoka metropolis
Hamamatsu metropolis
Nagasaki metropolis
Niihama metropolis
Himeji metropolis
Hiroshima metropolis
Gyoda metropolis
Kagoshima metropolis
Fukuoka metropolis
Sapporo metropolis
Sendai metropolis
Osaka metropolis
Naha metropolis
Kumamoto metropolis
Tokyo metropolis
1981
810.10 Tokyo metropolis
425.87 Osaka metropolis
235.56 Nagoya metropolis
204.79 Okayama metropolis
174.66 Kobe metropolis
150.92 Hiroshima metropolis
137.19 Utsunomiya metropolis
136.94 Niigata metropolis
121.15 Kanazawa metropolis
111.58 Maebashi metropolis
97.62 Takamatsu metropolis
82.65 Sendai metropolis
80.54 Fukuoka metropolis
78.45 Takasaki metropolis
76.30 Kyoto metropolis
74.47 Kitakyushu metropolis
69.61 Sizuoka metropolis
66.89 Yamagata metropolis
64.03 Toyama metropolis
63.52 Mito metropolis
4.07
3.72
3.18
2.64
2.53
2.51
2.48
2.43
2.40
2.36
2.25
2.24
2.24
2.23
2.16
2.13
2.11
2.11
2.10
2.09
1999
Osaka metropolis
Tokyo metropolis
Nagoya metropolis
Okayama metropolis
Hiroshima metropolis
Kobe metropolis
Kanazawa metropolis
Sendai metropolis
Utsunomiya metropolis
Niigata metropolis
Maebashi metropolis
Fukuoka metropolis
Kumamoto metropolis
Kyoto metropolis
Sizuoka metropolis
Takamatsu metropolis
Mito metropolis
Kitakyushu metropolis
Takasaki metropolis
Toyama metropolis
4.63
4.44
3.82
3.54
3.36
3.21
3.08
3.07
2.91
2.91
2.89
2.89
2.74
2.69
2.67
2.67
2.66
2.64
2.59
2.51
6.50 Gyoda metropolis
6.43 Gamagori metropolis
5.65 Okinawa metropolis
5.26 Nishio metropolis
4.58 Hekinan metropolis
4.55 Anjo metropolis
3.84 Kariya metropolis
2.84 Toyota metropolis
1.17
1.15
1.12
1.11
1.09
1.01
0.99
0.99
Sanjo metropolis
Ohda metropolis
Gamagori metropolis
Nishio metropolis
Anjo metropolis
Kariya metropolis
Hekinan metropolis
Toyota metropolis
1.29
1.23
1.20
1.18
1.17
1.14
1.12
1.09
Source:Establishment and Enterprise Census (Ministry of Public Management，Home Affairs，Posts and Telecommunications ）
Another Japanese hallmark is the way in which almost all metropolitan areas grow more
diverse year by year. More specifically, rather than the swift development of particular
industries, Japan’s metropolitan areas demonstrate a stronger tendency toward diversification in
industrial structure.
This high level of diversity indicates the high potential embodied by agglomerates. The
formation of diverse economic zones promotes the spread of knowledge out to different
companies and industries, establishing a key condition for innovation. Moreover, at the point of
−41−
industrial structural transformation, sustained growth is easier to maintain where there is
diversity rather than specialization in a single industry. The same phenomenon is also apparent
historically in the rise and fall of cities in 19th century England. An extremely efficient
production system was created in the textile industry in Manchester, which subsequently
declined, while the seemingly more mixed and inefficient city of Birmingham later moved on to
a development trajectory. These different fates can be explained by the industrial homogeneity
of Manchester as opposed to Birmingham’s diversity.
Accordingly, Japan’s metropolitan areas can be seen as having enormous potential in terms
of economic agglomeration. The strong diversity and the lowest level of specialization in the
Tokyo metropolitan area in particular suggest that Tokyo has developed the country’s most
diverse industrial structure, a tendency is also strengthening. The Osaka metropolitan area too
matches Tokyo in its level of diversity.In other words despite the economic slump of recent
years, Osaka has fully secured the diversity which is the cornerstone of growth.
(b) Features of East Asian economic agglomerates
How does East Asia rate in terms of specialization and diversity? While the definition of
metropolitan areas and industrial categories is important in estimating these indices, regional
economic statistics have yet to be developed in many East Asian countries8. Bearing this
shortcoming in mind, we looked at South Korea, Malaysia and China. Diversity and
specialization calculations for South Korea were based on 16 areas (Seoul, Pusan, etc.) and
crude production value in 75 mining and manufacturing industries; in the case of Malaysia, 15
areas by state and crude production value in 139 mining and manufacturing industries; and for
China, 25 economic areas based on provincial data and crude production value in 40 mining and
manufacturing industries.
Looking first at South Korea, the level of specialization grew overall in the 1990s, while
diversity fell (Fig. 1.2.26). Particularly in the capital city of Seoul, the degree of specialization
rose from 9.19 in 1990 to 15.42 in 1999, while diversity fell from 1.20 to 0.90 over the same
period9. A similar situation existed in Pusan, South Korea’s second-largest city. The Japanese
8
Progress in being made in the development of regional economic statistics in developed countries.
For example, the United States has created these statistics based on the CSMA (Consolidated
Metropolitan Statistical Area) and CBSA (Core Based Statistical Area) for city categorization. Japan
also produces statistics based on the metropolitan area discussed above, as well as the zone
categorization employed by the Ministry of Land, Infrastructure and Transport.
9
Because those industries falling within the category of services are not included, Seoul may be
experiencing increasing manufacturing specialization while diversifying out into the service industry.
However, in the case of Japan, the overall trend toward diversification and the diversification of
−42−
trend toward greater diversification the larger the metropolitan area was not observed in South
Korea.
Like South Korea, Malaysia too demonstrated an overall increase in specialization and
falling diversity (Fig. 1.2.27). In the capital, Kuala Lumpur, the degree of specialization rose
from 4.99 in 1990 to 12.95 in 1999, while diversity held at 1.24 in both 1990 and 1999. In the
industrial cities of Selangor, Johor and Penang too, the level of specialization has increased
where the level of diversity has shown no particular rise. Malaysia’s economic growth to date
therefore seems to have been accompanied by increasing industrial specialization.
Figure 1.2.27 Specialization and diversity in Malaysia
Figure 1.2.26 Specialization and diversity in South Korea
Specialization
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
1990
Kangwon
Gwangju
Taejong
Chungnam
Cheju
Seoul
Pusan
Chongbuck
Taegu
Chongnam
Chunbuck
Inchon
Kyongbuk
Kyongnam
Kyonggi
24.04
15.43
12.54
12.10
12.06
9.19
9.14
7.80
7.29
7.06
6.38
4.99
4.87
4.65
2.68
2000
Kangwon
Cheju
Taejong
Seoul
Gwangju
Pusan
Taegu
Kyongnam
Inchon
Kyongbuk
Chongnam
Chongbuk
Ulsan
Chungbuk
Chungnam
Kyonggi
Specialization
Diversity
1990
63.16 Kyonggi
23.69 Inchon
18.70 Kyongnam
15.42 Pusan
14.00 Chungnam
12.94 Seoul
11.51 Kyongbuk
8.37 Chungbuk
7.20 Taejong
6.27 Taegu
5.17 Chongbuk
5.07 Gwangju
4.28 Chongnam
3.86 Kangwon
2.87 Cheju
2.76
2000
1.89 Chungnam
1.62 Kyonggi
1.44 Inchon
1.41 Pusan
1.32 Kyongnam
1.20 Chungbuk
1.19 Chongbuk
1.16 Kyongbuk
1.03 Taegu
1.00 Taejon
0.93 Gwangju
0.86 Seoul
0.78 Ulsan
0.77 Chongnam
0.73 Kangwon
Cheju
2.01
1.84
1.69
1.27
1.27
1.22
1.14
1.09
0.97
0.94
0.93
0.90
0.90
0.79
0.76
0.66
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1990
Perlis
Labuan
Terengganu
Negeri Sembilan
Kelantan
Pahang
Kedah
Johor
Penang
Sarawak
Melaka
Kuala Lumpur
Perak
Sabah
Selangor
39.55
25.89
13.10
11.33
11.33
11.12
8.10
6.36
6.24
5.55
5.12
4.99
4.73
4.26
4.00
1999
Kelantan
Perlis
Terengganu
Pahang
Kuala Lumpur
Penang
Melaka
Kedah
Labuan
Negeri Sembilan
Johor
Perak
Selangor
Sabah
Sarawak
Diversity
54.19
51.32
38.85
14.94
12.95
11.82
11.18
10.36
9.22
8.96
7.12
6.72
4.85
3.70
2.75
1990
Perak
Selangor
Johor
Penang
Sarawak
Melaka
Kedah
Sabah
Negeri Sembilan
Kuala Lumpur
Kelantan
Pahang
Terengganu
Labuan
Perlis
1.94
1.85
1.84
1.74
1.58
1.42
1.31
1.26
1.25
1.24
1.12
1.02
0.85
0.74
0.66
1999
Johor
Perak
Selangor
Sarawak
Sabah
Negeri Sembilan
Penang
Kuala Lumpur
Melaka
Kedah
Pahang
Labuan
Terengganu
Kelantan
Perlis
Source:Data from Department of Statistics, Malaysia
Source:South Korean regional statistics
Figure 1.2.28 Specialization and diversity in China
Specialization
1993
1 Tibet
2 Shanxi
3 Xinjiang
4 Yunnan
5 Nei Menggu
6 Heilongjiang
7 Shanxi
8 Liaoning
9 Gansu
1 0 Jilin
1 1 Jiangxi
1 2 Guizhou
1 3 Qinghai
1 4 Fujian
1 5 Henan
1 6 Ningxia
1 7 Guangxi-Hainan economic zone
1 8 Guangdong
1 9 Hunan
2 0 Beijing-Tianjin economic zone
2 1 Sichuan economic zone
2 2 Hubei
2 3 Anhui
2 4 Shandong
2 5 Shanghai economic zone
2000
44.76 Tibet
40.64 Guangxi-Hainan economic zone
34.52 Yunnan
16.52 Shanxi
12.40 Jilin
11.24 Nei Menggu
10.41 Heilongjiang
10.38 Xinjiang
7.37 Guizhou
7.14 Qinghai
6.64 Ningxia
6.04 Gansu
5.52 Hunan
5.30 Henan
4.94 Liaoning
4.80 Shanxi
3.29 Fujian
3.19 Anhui
3.07 Beijing-Tianjin economic zone
2.85 Shandong
2.84 Jiangxi
2.46 Hubei
2.14 Sichuan economic zone
1.98 Guangdong
1.91 Shanghai economic zone
1993
113.50
24.74
20.92
18.68
13.65
13.33
12.74
9.51
8.46
8.44
6.04
6.02
4.95
4.33
4.00
3.95
3.92
3.88
3.58
3.36
3.17
2.91
2.76
2.60
2.09
Beijing-Tianjin economic zone
Anhui
Shanghai economic zone
Shandong
Henan
Hubei
Hunan
Jiangxi
Nei Menggu
Liaoning
Fujian
Guangdong
Guangxi-Hainan economic zone
Jilin
Sichuan economic zone
Guizhou
Gansu
Shanxi
Ningxia
Heilongjiang
Qinghai
Yunnan
Xinjiang
Shanxi
Tibet
Diversity
2000
3.75 Shanghai economic zone
3.34 Beijing-Tianjin economic zone
3.29 Hubei
2.86 Shandong
2.75 Anhui
2.69 Liaoning
2.66 Fujian
2.53 Henan
1.92 Hunan
1.86 Shanxi
1.83 Guangdong
1.78 Jiangxi
1.66 Sichuan economic zone
1.60 Guangxi-Hainan economic zone
1.53 Gansu
1.51 Shanxi
1.44 Jilin
1.35 Nei Menggu
1.33 Ningxia
1.30 Guizhou
1.29 Xinjiang
1.27 Yunnan
1.23 Heilongjiang
1.13 Qinghai
0.76 Tibet
3.10
2.78
2.45
2.41
2.36
2.16
2.07
2.02
2.00
1.94
1.89
1.82
1.75
1.47
1.27
1.23
1.19
1.17
1.13
1.10
1.07
1.00
0.99
0.82
0.69
Source:Statistical databooks for the various provinces
China shows the same overall tendency as South Korea and Malaysia (Fig. 1.2.28). The
Shanghai economic zone, however, has seen little change in its level of specialization or
diversity, the former shifting from 1.91 in 1993 to 2.09 in 1999, the latter 3.29 to 3.10 over the
metropolitan areas in particular holds true even when data is limited to the manufacturing industry.
−43−
1.95
1.85
1.77
1.58
1.45
1.42
1.41
1.24
1.15
1.13
0.99
0.78
0.78
0.73
0.58
same period. Accordingly, the Shanghai economic zone may be maintaining a certain degree of
diversity in the course of its economic growth. Diversity was also greater in the Shanghai and
Beijing-Tianjin economic zones, revealing the same correlation between city size and diversity
as in Japan. However, as diversity levels are not rising as clearly as in Japan, while the degree of
specialization is increasing as a whole, the possibility that China’s economic growth has been
accompanied by a stronger tendencytoward industrial specialization is strong.
The levels of specialization and diversity examined above in three East Asian nations seem
diametrically opposed to the Japanese specialization and diversity patterns revealed in the
previous sub-section. Japan’s key cities demonstrated a high degree of diversity which
continued to increase, where the three East Asian countries were all experiencing an overall rise
in level of specialization. In other words, where Japan has the foundations to enjoy the benefits
of diversity, East Asia has rather weak foundations at this point at least, with growth pinned on
the benefits of specialization.
(2) Japan and East Asia as neighbors
Japan lies within Asia, and is spatially close to East Asia (Fig. 1.2.29). For example, it takes
approximately seven hours to fly from Tokyo to Singapore, not much further than the roughly
six hours separating New York and Los Angeles. The spatial proximity of Japan and East Asia
places Japan in a better position in terms of deepening linkages with East Asian economic
agglomerations than the US and the European nations.
Figure 1.2.29 Spatial relationship between Japan and other countries
5,000
km( (approx.
5,000km 約7 時間） 7 hrs)
2,500km （約4.5時間）
2,500
km (approx. 4.5 hrs)
ジャンボ（最新機）の航続距離
By Jumbo jet (latest model)
12,300
Km （所要時間 約
12,300
km
(approx.12時間）
12 hrs)
Source: METI.
（資料）経済産業省作成
The economic agglomerations in neighboring East Asia have also grown enormously in
recent years. Figure 1.2.30 shows the annual average rate of growth for real GDP in key East
−44−
Asian economic agglomerations in the 1990s. Almost all of these agglomerations have achieved
an annual rate of growth of at least 10 percent. By comparison, the economic growth rates of
Japanese economic agglomerations are extremely low. This does not of course reduce the value
of these agglomerations. The per capita GDP indicated by circle size in the figure reveals that
Japan’s economic agglomerations remain a significant economic presence. If Japan can deepen
linkages with the developing East Asian economic agglomerations and channel their growth,
Japan is in the position to create a virtuous cycle which will benefit both Japan and East Asia.
Figure 1.2.30 Trends in 1990s per capita GDP in East Asia
Hokkaido
Beijing
1.6%
Dalian
12.0%
18.8%
Seoul
10.3%
Tokyo
Chengdu
Tianjin
20.5%
18.1%
Chongqing
Xiamen
19.4%
▲ 0.1%
Shanghai
19.3%
Osaka
0.8%
12.2%
Shenzhen
Taiwan
Fukuoka
7.4%
1.2%
18.0%
CITY
Manila
Hong
Kong
Bangkok
10.8%
Average annual GDP growth
rate since the 1990s
(local currency base)
10.5%
6.2%
Per capita GDP for most recent year
(US$ base)
Malaysia (peninsula)
9.8%
$1,000
Singapore
6.1%
Jakarta
29.2%
$10,000
$20,000
Notes:
.Data refer to the following years:
Manila, Hong Kong, Taiwan, Singapore: 2000, China, Jakarta, Malaysia (peninsula), Seoul: 1999, Japan: FY1999, Bangkok: 1997
2. The average annual GDP growth rate shown under each city name indicates the average annual growth rate on a local currency
basis from 1990 up to the most recent year for which data was available.
3.Circles indicate the difference in the annual average growth rate between 1990 and the most recent year. These are divided into
four categories: up to 5.0%; 5.1-10.0%, 10.1-20%, and 20.0% and over.
Source: National statistics
As observed above, Japan stands in an advantageous position in terms of both stage of
development and spatial location. However, these favorable conditions have not been reflected
in Japan’s economic activities, with economic growth currently stalled. Japan’s failure to link
favorable conditions basic to an economy to economic growth is borne out in the evaluation of
Japan’s international competitiveness provided by Switzerland’s International Institute for
Management Development (IMD), one of Europe’s leading business schools. The IMD World
Competitiveness Yearbook rates Japan highly in terms of technological development capacity,
but looks askance at its ability to turn technology into business.
Measures to rectify this situation will be examined in Chapter IV. Here, suffice it to say that
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the development of institutional frameworks is an urgent task in facilitating the formation of
economic agglomerations able to reap the full benefits of diversity. Given Japan’s privileged
status in regard to stage of development and spatial location, and the strong possibility of
regional linkages with East Asia deepening, we must aim to realize attractive economic
agglomerations at home with an emphasis on the benefits of diversity, and to build ties with
economic agglomerations in East Asia.
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