RIETI Report September 2014

Does a Growth Strategy Based on an Agglomeration Economy Conflict with Reviving the Fertility Rate?

As Japan faces an aging population that is rapidly declining along with a falling fertility rate, the debate over local revitalization has heated up again recently, as some municipalities were said to be "in danger of vanishing." The Shinzo Abe government has set up an office to prepare for the establishment of a revitalization headquarters for the city, people, and creating employment, which will take steps to reinvigorate rural areas and overcome the problem of the rapidly declining population. Various government ministries and agencies have also begun taking measures with the future in mind. In the September issue of the RIETI Report, we present RIETI Fellow Keisuke Kondo's special report "Does a Growth Strategy Based on an Agglomeration Economy Conflict with Reviving the Fertility Rate?" which looks at the reason for the different fertility rates in different regions from the perspectives of "space" and "agglomeration" and considers the kind of growth strategy and declining-fertility countermeasures that should be taken.

Kondo addresses the fertility rate by region and points out that regions with high population densities have low fertility rates. One such reason for this is agglomeration, but does it really lower the fertility rate? Kondo takes a deeper look into this. He states that regional policies based on an agglomeration economy could cause even lower fertility rates, however, Kondo concludes that it is necessary not only to have a growth strategy based on an agglomeration economy, but also countermeasures to mitigate the decline in the resulting fertility rates at the same time, and appropriate policy should be made to encourage this.

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Does a Growth Strategy Based on an Agglomeration Economy Conflict with Reviving the Fertility Rate?

KONDO KeisukeFellow, RIETI

The debate over local revitalization in Japan has heated up again recently. The government's 2014 Basic Policies for Economic and Fiscal Policy Management and Structural Reform lists maintaining a stable population of about 100 million people 50 years from now as a basic policy. The government has also set up an office under the Shinzo Abe administration to prepare for the establishment of a revitalization headquarters for the city, people, and creating employment, which will take steps to reinvigorate rural areas and overcome the problem of declining population. Driving this is a uniquely Japanese problem: a population that is rapidly declining as the fertility rate falls and the population ages.

Perhaps one development that greatly affected the government's judgment was a list of municipalities that are "in danger of vanishing," as announced by the Japan Policy Council several months earlier. A similar discussion took place in July 2014 at the National Governors' Association meeting in Saga prefecture, where the participants adopted a "declaration of declining fertility state of emergency," which stated that declining fertility countermeasures should be addressed as a national issue.

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