Interview: Japanese Regional Economy and National Strategic Grant
By : Kie Tsukamoto
As you may be aware, Japan faces significant socioeconomic issues due to the shrinking and aging population. These issues hit non-Tokyo regional areas the hardest, where the shrinking, aging population is deteriorating local businesses and generating a bad socioeconomic spiral.
As a matter of fact, Japanese GDP is solely and heavily dependent upon Tokyo. Major businesses and the young working population reside in Tokyo and it is critical for non-Tokyo regions to come up with plans to stop people/businesses from migrating to and taking up permanent residence in Tokyo (Reference: Cabinet Office Report in 2014 http://www5.cao.go.jp/keizai-shimon/kaigi/special/future/wg3/0917/shiryou_04-1.pdf).
The government’s solution to tackle this socioeconomic issue is to inject money into the local regions through a grant, which is called ‘Regional Revitalization Promoting Grant.’ Similar grants have existed for years; however, this has been attracting more media attention recently, given the strong government drive to increase tourism and the fast-approaching Olympic games in 2020. Since 2011, inbound tourism in Japan has been growing significantly; and local governments/regions are striving to grab the attention of international tourists in the hope of turning their region into an international travel destination.
In this Asian Market Entry interview post, we invited Yoshimasa Sakai, from The General Council of Regional Revitalization Promotion at the Cabinet Office to explain what this grant is and what seems to be the core issues that these regional governments face. (We also organized a workshop with him in March, 2018. For more information visit here)
What is the Regional Revitalization Promoting Grant?
What is the Regional Revitalization Promotion Grant?
The term “Regional Revitalization” emerged in 2015. At first, the Regional Revitalization Grant appeared to promote projects that aimed to activate those local areas. Not only the name but the scheme was also a bit different from the current grant—the former grant provided 100% financial coverage for a project, whereas the current one only covers a portion of a project’s cost. Recently, the content was reviewed and the current grant, Regional Revitalization Promoting Grant (地方創生推進交付金), was created.”
For this grant, 100 Billion JPY (app. 900 Million USD) has been secured as/for its annual budget. This grant program covers 50% of local government programs to revitalize their economies. However, exceptions can be made. If a local government is not receiving any other grants from the national governent, then the grant can cover up to 90% of costs. Initially, a three to five-year regional revitalization program needs to be submitted for this grant. If selected, then the plan will be executed for that proposed time span. The important point is that the program and its execution will go through scrutiny annually and necessary changes will be added for the next year. This is the PDCA cycle to monitor the effectiveness of the program and to ensure that it stays on track and achieves its set goals in a given time frame.
Another important point to understand about this grant is that only a program that is planned by a local government is applicable. However, it can be executed by a private entity.
What makes this different from other grants is that this one covers the parts that each ministry wants to include, but cannot work on due to, for example, fiscal constraints. For instance, if/when all the measures for a specific regional issue from every bureau are executed, traditional grants can only cover a fraction of them. However, this grant can cover those missed areas. On top of this, the coverage is not just for a single year but covers a three to five-year span. Thus, local governments can make more effective, long term programs to better the region.
What is the utilization rate of this program?
This grant is highly utilized by local governments. For example, the national budget is set at 100 Billion JPY for this year, and already 60 billion JPY is taken for projects selected for the first round. We will offer this grant opportunity two more times this year with the remaining budget.
I hope that this grant can become a savior for many local governments, who are financially struggling to plan and execute programs to revitalize their region. With a well-constructed long-term vision, this grant will become one of the keys to activating local economies. If there are not enough human resources to plan and lead such programs, they can use this grant to bring such human resources in from outside the region.
What is the issue?
What is the biggest issue regarding regional revitalization?
The majority of the population and businesses are clustered in Tokyo. Thus, when we talk about regional revitalization, we cannot dismiss this all-in-Tokyo problem. This problem can be broken into two parts:
- The young population migrates to bigger cities, mainly Tokyo, to find purposeful employment. This is not about increased opportunities, but rather the job content itself. As the younger population becomes smaller, they are in the position where they have the privilege to “choose.”
- Their parents’ generation is pessimistic about the future and feel hesitant to pass their local businesses down to their children.
Thus, a regional revitalization program needs to solve both parts of the problem:
- How can a local area generate interesting jobs to attract the younger generation?
- How can a local area turn the existing local businesses into something attractive/interesting to the young generation?
In solving the socioeconomic issues in Japan, what measure is getting the most attention?
In order to generate cash flow in those local areas, measures that target inbound tourism is something that cannot be missed. These local areas should reform to attract international tourists with experience-based tourist products. This can become a great profit center for the local areas. In other words, there is sufficient promotion, but not enough tourist product development. Therefore, there is nothing to keep tourists in the area for very long.
This is a great economic opportunity loss for the areas. They promote the areas to bring those tourists in and lose them without having them spend enough time in the area, meaning no money spent for the local economy. Thus, it is very critical for those local areas to take effective measures to create tourist products by utilizing the existing resources which are still untouched. Things like unique nature, agricultural products, activities and technologies/craftsmanship can all be marketed. They should review what they have in their areas and promote them well, turning them into great tourist products.
With our population aggressively shrinking, relying solely on measures to keep the younger population within the local areas will not be the answer. However, if those measures are done together with inbound tourism, then it can provide an immediate solution for those local areas. Thus, it will result in more revenue and a greater variety of interesting jobs, while creating an area more attractive and appealing for the younger population.
Furthermore, once the tourism measures gain traction, seasonal, temporary tourism related service work opportunities will be generated; these jobs are great positions for the local area’s senior population as well, and for people who cannot work full-time.
This becomes a positive socioeconomic loop. Once this loop starts running, the area is active and attractive, which can motivate the younger generation to stay in the area.
Are there any success stories about regional revitalization?
Programs are still on-going; however, there are great stories coming out from the efforts of local governments.
For instance, in a project to revitalize a local shopping district, they brought in and involved non-local people to lead the reformation. By doing so, they generated employment opportunities and drew a new customer journey, by which they attracted customers and successfully revitalized the district.
Project Leader—a Facilitator is the Key
What is the most important factor for such programs to succeed?
What needs to be done is: determine the core issue, plan how many resources need to be allocated to solve the issue, then break it down into project tasks and a timeline. Finally, those tasks need to be executed in the region.
We (the cabinet office) expect the local governments to plan a project and execute it; however, we do not believe that local governments can do everything. When the success of a project is concerned, it is important to involve professional personnel to lead the project or execute certain tasks. These professionals may or may not be from the local region, but need to have the right skillset to facilitate the program.
Thus, being able to gain access to those skilled professionals is critical for those local governments. These professionals need to be innovators, facilitators and leaders who can work with the region, the citizens and the local governments to realize project goals.
Of course, relying solely on experts from outside the areas is not the only option. Providing educational programs to train the local human resources and generate such specialists will go a long way to solving the problem. In addition, there is nothing to stop members of the local government from attending these training courses as well.
The important fact to remember, is that this is not an easy job and requires a professional(s) to lead the project.
Creating a Livable, Lovable City
Can you share with us how you believe “regional revitalization” should be?
Many youngsters are moving to metropolitan areas and they tend to feel that their hometown is not “attractive.”
This is not a great trend to observe. Everyone should feel proud of their origins and we like to provide support for those areas to activate/reform their cities.
Regional Revitalization, to me, is creating a happy place. This means the people are happy and active—this can make others happy and active. It is a positive circulation. Everyone likes to be around happy people and live in a place where there are positive feelings around. Creating a happy place — that is revitalization.
＜Profile of Yoshimasa Sakai＞
The General Council of Regional Revitalization Promotion Office at the Cabinet Office:
・2017 – Appointed as the General Council of Regional Revitalization Promotion Office at the Cabinet Office
・2013 – Worked as the Head Office of Expo Milan 2015 at the Japanese Ministry of Economy, Trade and Industry. He planned and raised funds for the “Japan Day Tohoku Parade” for the Japan Pavilion at the expo. He was also the Deputy Japan Representative at the expo, and was involved in BIE to manage the overall exhibition.
・2012 – Worked at a private company, AGC Asahi Glass, handling new business development and solar power product sales
・2003 – worked as the Deputy Director of Industrial Economy in Miyagi to attract a major baseball team to Miyagi as their home base
・1999 – Worked as the First Secretary at the Japanese Embassy in the Philippines
Message from Asian Market Entry
iCubes Inc, a consulting firm in Tokyo operating an Asian Market Entry service, provides a comprehensive solution for local governments with regional revitalization issues. We support local governments through developing new businesses/products until they start bringing in revenue for their regions.
If you are an International Startup with a vision and service to guide these local governments, Asian Market Entry is the place to contact.
Source : PB Journal
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