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Are Japan's "Inter-Regional Gaps" Widening?
- What the gap between statistical facts and awareness of gaps indicates -

September 27, 2006


Amidst the general intensification of the debate over the so-called "gap" problem, "inter-regional gaps" are attracting particular interest. Although Japan's economy as a whole has been enjoying a sustained period of growth, many observers claim that major cities and the areas around them have done well, while provincial areas have fared poorly, and there is a rapidly spreading perception that the gaps between regions are "getting worse".

An examination of the "inter-regional gaps" in employment and incomes, in terms of the trend of the effective ratio of jobs to job seekers, suggests that the gaps have been widening over the past few years. From a longer-term, historical perspective, however, the variation of recent years is still relatively small, and, if anything, the base line of the ratio of jobs to job seekers appears to have risen. A survey of gaps in unemployment ratios by geographical division, likewise fails to reveal a constant widening trend.
On the income front, a survey of the trend of nominal wages by prefecture over the past 10 years fails to reveal any clear indication of a widening of gaps. Moreover, in recent years, the number of poor households, including those receiving livelihood protection, has been rising, but, here too, the widening of gaps between regions has been limited from a historical perspective.

One reason that the widening of the gaps between regions is not as great, in statistical terms, as it is perceived to be, is that, even if the gaps in income levels are not widening in themselves, the polarization between "regions where incomes are rising" and "regions where incomes are falling" causes people to be strongly aware of the widening of gaps.
Another possible reason why the perception that gaps are widening is so strong is the problem of "intra-regional" gaps. Even within the same prefecture, it is possible for the gap between the core urban conglomerations and peripheral cities, towns and villages to be widening, and it may be that "intra-regional" gaps are being confused with "inter-regional" gaps.

In comparison with employment and incomes, the widening of the inter-regional gaps on the production side (corporate activity) since the beginning of the 2000s is clearer to see. This may be partly due to the effects of continued efforts to curb personnel costs in anticipation of a reduction in the labor share. If the widening of inter-regional gaps on the production side continues, it is possible that the upward trend of wages in areas where production is strong will gradually gather momentum, and that the widening of inter-regional gaps will become clearer on the income front.
Moreover, as it is possible that the "intra-regional" gaps that have started to emerge stem, to a considerable degree, from differences in the rate of population growth or decline, it is possible that the problem will grow worse as population decline begins in earnest. There is also a risk that the number of poor households will see a significant rise in regions where employment is expected to decline.

Thus, the widening of employment and income gaps between central and provincial regions is, as yet, limited, and, from this viewpoint, it would be hasty to label the reduction in public works and the sanmi-ittai ["three-in-one"] reforms pursued under the Koizumi administration as having ignored the needs of provincial regions and to use them as arguments against a policy of structural reform.
On the other hand, the impact of ongoing population decline and the restructuring of industry at a global level mean that the problem of inter-regional gaps may well manifest itself increasingly clearly at many different levels, and it is likely that this problem will, if anything, grow in the future.
The debate over the division of labor between central and provincial regions is reaching a critical stage, but it is important that the discussion should be based on a calm and rational evaluation of the structural reforms implemented to date. Moreover, in view of the possibility that inter-regional gaps will widen in the future, it is important that a debate based on impressions should be avoided, that appropriate measures be implemented on the basis of an in-depth discussion of basic policies such as the relationship between regional autonomy and the provision of national minimums.

For more information on the content of this report, please contact Hisashi Yamada , the Japan Research Institute, Limited.

Tel: 03-3288-4245

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