Household Consumption and Long-Term Structural Changes in Regional Retail and Service Industries

         
Author Name KAINOU Kazunari  (Fellow, RIETI)
Creation Date/NO. June 2009 09-J-014
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Abstract

Regional economic trends by prefecture over the last thirty years in Japan show broad disparities in changes in population and income levels. These changes are understood to be closely linked to the industrial structures of each prefecture and their individual development. In contrast, the impact of these changes on household consumption has not been clearly explained.

This paper analyzes the impact on household consumption of the retail and service industries by investigating household consumption, retail sales and service production by prefecture and looking at the trends in their changes. We do this in the context of analyzing the regional economy, based on long-term statistics by prefecture, including the Family Income and Expenditure Survey and commercial statistics, and by focusing on and comparing the elements of household consumption by expenditure item.

Results of the analysis revealed that although changes in household consumption did occur, such as the rise in spending on health and entertainment, these changes have been very similar across all prefectures. Meanwhile, sales per person and the number of employees in the retail and service industries have been increasingly concentrated in major cities, where income per prefectural resident is relatively large. This suggests the phenomenon of consumption leakage, in which consumers living in regional areas travel to urban areas to do their spending, especially in the health and entertainment sectors, rather than shopping in their local areas.

As a result of this phenomenon, there has been a bipolarization between urban and regional areas. In city areas that take advantage of urban redevelopment projects, large businesses with sizeable workforces have entered markets and have even altered local characteristics, resulting in a decline in the number of retail stores. In regional areas, by contrast, because the existing businesses have been maintained, modernization of industries has been slow.

Consequently, to revitalize regional economies, it is essential to modernize retail and service industries in regional areas and facilitate "reverse consumption leakage" from city areas. One effective way to achieve this is through policies that promote local urban redevelopment, including encouraging the redevelopment of local retail and service businesses, developing a high-end commercial area, supporting tourism development, and promoting cooperation between the agricultural, commercial, and manufacturing sectors.