Priorities for the Japanese Economy in 2021 (January 2021): Using the COVID-19 Crisis as a Chance to Revive the Japanese Economy

How Regional Revitalization Should Be Promoted to Overcome the COVID-19 Crisis

KONDO Keisuke
Senior Fellow, RIETI

Now, in December 2020, a third wave of the coronavirus disease 2019 (COVID-19) infections is about to occur in Japan. To prevent the spread of infections, it is essential to avoid the "3Cs," namely closed spaces, crowded places, and close-contact settings, but in metropolitan areas, we are often placed in an environment where it is difficult to avoid the 3Cs. Therefore, the 3Cs are being once again recognized as a risk in metropolitan areas. Under these circumstances, the COVID-19 crisis has triggered renewed debate on measures to promote migration to regions outside metropolitan areas so that the "unipolar concentration" in Tokyo can be corrected. However, the ongoing debate appears to be far from the original concept of regional revitalization in which both Tokyo and other regions can play major roles on an equal footing. In this column, I will discuss how regional revitalization should be promoted in order to overcome the COVID-19 crisis (see also Kondo, 2021).

Can the COVID-19 Crisis Be Overcome by Promoting Migration to Non-metropolitan Regions?

The COVID-19 crisis is regarded as an opportunity to promote migration to non-metropolitan regions as a policy initiative. Since teleworking has become possible, in many cases it is unnecessary to live around Tokyo and possible to live in regions where rents are lower and the infection risk is smaller than Tokyo. However, if viewed from another angle, using the COVID-19 crisis as an opportunity to promote migration to non-metropolitan regions could be seen as an effort to transfer the Tokyo metropolitan area's infection risk burden to such areas. It is natural for people who continue to live in Tokyo to wish to minimize infection risk. An increase in migrants from Tokyo to non-metropolitan regions would thus contribute to the creation of a more favorable living environment in Tokyo. On the other hand, from the viewpoint of residents in other regions, an increase in migrants from Tokyo may increase the infection risk, but this situation is not taken into consideration in the current policymaking process. In implementing the policy of promoting migration to non-metropolitan regions, it is essential to hold policy debate on how to strike the right balance with combating COVID-19, in light of the potential stress that could be imposed on local healthcare systems.

Promoting a population dispersion to non-metropolitan regions may level out the infection risk across all regions. However, when considering the strategy for combating COVID-19, it is necessary to take a more detailed approach by looking at the infection situation on a building-by-building or room-by-room basis (this is called a cluster-based approach in Japan). It should be kept in mind that there is a difference in geographical scale between infection risk of COVID-19 (room or building level) and policy debate on regional revitalization (urban and rural areas or prefecture level). In particular, it is important to remember what kind of urban policy is required for Japanese society, where a population decline is expected to be unavoidable. In addition to continuing to combat COVID-19, Japan has its own long-term challenges. Therefore, it is important to take a policy-planning approach that can resolve multiple challenges at the same time.

As for urban development in a society with a declining population, policy initiatives are proceeding based on the "Compact + Network" concept. For example, under the Location Normalization Plans being promoted by the Ministry of Land, Infrastructure, Transport and Tourism, debate is underway on urban development plans centered around areas intended for urban environments, areas intended for residence, and public transportation networks connecting those areas. In a society with a declining population, in order to ensure efficient maintenance of infrastructure, it is necessary to plan and organize urban structure in terms of population distribution within urban areas while preventing urban centers from becoming a "sponge-like" structure full of holes in the form of vacant residences and unused spaces.

From a broad perspective, an increase in migration to non-metropolitan regions may result in a population dispersion, but if examined at in detail, high population density in particular areas of each community exists even in non-metropolitan regions because of the implementation of the abovementioned urban development plans. Whether in urban centers or in non-metropolitan regions, there are situations where it is difficult to avoid the 3Cs, such as when people attend school, visit hospitals, or use public transportation. As a result, merely promoting migration to non-metropolitan regions is likely to make only limited contributions to combating infection diseases. Therefore, in order to reduce infection risk, it is fundamentally important to establish systems that can substitute for traditional social and economic activities based mainly on face-to-face communication and interaction.

Realignment of Regions through Telework: Insights from Spatial Economics

Professor Richard Baldwin used the term "telemigrants" in reference to a new wave of globalization in a book published in 2019 (Baldwin, 2019). Telemigrants are workers who perform jobs abroad remotely while physically remaining in their favorite country of residence. As the principle of telemigration is applicable to working not only across national borders but also across regions within a country, the COVID-19 crisis is expected to spur a further increase in telemigration.

As a simulation, let us imagine a world where teleportation is possible. How would the location of residences and businesses change? In the real world, due to the constraint of commuting, a worker's potential area of residence is limited by the geographical distance from the workplace location. If teleportation were possible, the geographical constraint would be removed from among the determining factors of the place of residence. As a result, it becomes possible to make the optimal choice of location of residence from among countless candidate locations across Japan based on such criteria as the cost of living and the availability of amenities (comfort of living, and pleasantness of neighborhood environment factors). Of course, if the population density becomes excessive in a certain area, the housing and land markets are affected and the level of crowding there changes. Therefore, the distribution of residence locations is gradually determined while adjustments occur. It should also be taken into consideration that the perception of the benefits of amenities differs from individual to individual. The upshot is: from the viewpoint of the mechanism of the housing and land markets, the choice of residence location is likely to be made in a way that maximizes population dispersion in order to avoid crowding, whereas from the viewpoint of amenity availability, a population concentration tends to occur in areas with access to universally popular amenities. Moreover, if the benefits of amenities in a certain area are sufficient, people tend to choose to live there despite the high cost of living. In short, the distribution of places of residence is ultimately determined by the balance between those two factors (Note 1).

How will companies' production activities be affected? When economies of scale exist, efficiency improves under mass production at a single location compared with small-scale production dispersed across several locations. Even in the case of knowledge creation, the creation process can only be partially replaced by online activity, so the importance of face-to-face communication continues to be emphasized. Therefore, the practice of getting together in person (in the real world) is expected to continue. As described above, regarding production activity, concentration tends to occur in some particular areas when economies of scale exist or when the benefits of person-to-person communication and interaction are large. The important point is not that production activity is necessarily concentrated in a single geographical area, but that concentration may become localized. Localized concentrations scattered across Japan, as opposed to a massive concentration like the ongoing "unipolar concentration" in the Tokyo metropolitan area, could occur.

In the field of spatial economics, experts formalized a framework in which urban agglomeration endogenously emerges as transportation costs change. For example, a decline in transportation cost causes urban concentration by promoting the migration towards metropolises of economic activities from non-metropolitan regions. On the other hand, Fujita (2011) pointed out that a further decline in transportation cost causes dispersion. According to the graph below, described by Fujita (2011), Japan's present situation may correspond to the peak of agglomeration. The situation of the abovementioned hypothetical world where teleportation is possible corresponds to the far-left point of the graph. As telework becomes more and more widespread in the future—even though teleportation may remain a pipe dream—residence locations are expected to become more geographically dispersed, whereas production activity is expected to become locally concentrated in some areas, leading to the reformation of new urban and regional structures, according to the spatial economics theory.

Source: Reproduced from Fujita (2011)

Moving On to a New Stage of Regional Revitalization to Overcome the COVID-19 Crisis

The COVID-19 crisis triggered progress in conventional policy discussions on promoting migration to non-metropolitan regions, but if this initiative is conducted in a way that merely transfers infection risk to regions, it cannot be characterized as regional revitalization in the true sense of the term. Regional revitalization is not something that can be achieved through migration to non-metropolitan regions alone. Moreover, the effect of promoting migration to non-metropolitan regions as a means of preventing the spread of infections is limited. As was discussed by Hamaguchi and Fujita (2020), what is essential to regional revitalization is that non-metropolitan regions themselves exercise leadership and achieve economic growth while seeking to create an autonomous, sustainable society by taking advantage of their respective characteristics.

It is desirable to design a regional revitalization policy that ensures that migration to non-metropolitan regions accelerates as a result of regional revitalization, not as a mean of regional revitalization. To that end, telework is very influential as it enables workers to maintain their existing jobs after migrating to non-metropolitan regions. By stabilizing the employment situation in non-metropolitan regions, telework helps correct the unipolar concentration in Tokyo (Note 2). It may also contribute to preventing the spread of COVID-19 by reducing opportunities for face-to-face communication.

Policy discussions are also underway on digital transformation and the GIGA School Program, which will lay the foundation of social infrastructure that supports the telemigration concept proposed by Professor Baldwin. Digital transformation makes it possible for workers in regions to do business while connected not only with Tokyo but with the entire world. GIGA School Program enables child-bearing families to allow children to receive advanced education online while raising them in a rich and beautiful natural environment. Those policy initiatives help non-metropolitan regions realize an autonomous, sustainable society, and as a result, they could promote migration to non-metropolitan regions, which means that they complement regional revitalization. It is also important to have systems that enable the continuation of social, economic and educational activities online because our existing society, which is based mainly on face-to-face communication, is very vulnerable to infectious diseases.

In my view, the kind of regional revitalization that is necessary for overcoming the COVID-19 crisis is not merely an initiative that focuses on promoting migration to non-metropolitan regions, but one that creates an environment that enables anyone to play a useful role while living in a rural area, regardless of their geographical location. To create such an environment, it is important to adopt a policy design approach that combines mutually complementary policies, such as the ones that were mentioned earlier, and that makes it possible to receive the maximum benefit from the policy synergy.

December 24, 2020
  1. ^ Some people look for the best possible job on the assumption of continuing to live in their existing place of residence. When they face the geographical constraint of commuting, they look for the highest-paying job within the area reachable from their place of residence. However, if teleportation were possible, the geographical constraint would be eliminated, making it possible to look for the highest-paying job at any location across the nation. Having the freedom of choosing both a place of residence and a place of work simultaneously would be the most flexible condition, but in reality, it is not easy to move residences or work locations in many cases. If many people find it difficult to change their place of residence, for example, the dispersion of residence locations is unlikely to occur. Kondo (2019) estimated the cost of migration based on past migration data, and the estimation results showed that compared with young single people, married couples and families with children face a very high cost for migration.
  2. ^ According to a survey conducted by the Cabinet Secretariat's Headquarters for Overcoming Population Decline and Vitalizing Local Economy in Japan (2020), the greatest factor underlying people's worries about migrating to a regional area is the difficulty in finding a job. To make it possible to continue working while living in a non-metropolitan region, telework is considered to have a significant role to play. In addition, by enabling people to work from non-metropolitan regions, telework helps to prevent excessive population outflows from such regions.
  • Baldwin, Richard (2019) The Globotics Upheaval: Globalisation, Robotics and the Future of Work, Weidenfeld & Nicolson.
  • Fujita, Masahisa (2011) "Globalization and Spatial Economics in the Era of Knowledge," RIETI 10th anniversary seminar. (in Japanese) (as viewed on December 14, 2020)
  • Hamaguchi, Nobuaki and Fujita, Masahisa (2020) "Population Concentration and Infectious Disease Risk (I) Promoting Change to the ‘3Cs’ as an Advantage of Cities," Nihon Keizai Shimbun, morning edition, July 8, 2020, Keizai Kyoshitsu [Economics Classroom]. (in Japanese) (as viewed on December 14, 2020)
  • Kondo, Keisuke (2019) "Monopolar Concentration in Tokyo and Promotion of Urban-to-Rural Migration," RIETI Policy Discussion Paper No. 19-P-006. (in Japanese)
  • Kondo, Keisuke (2021) "How Will Covid-19 Reshape Cities in Japan?" Japan SPOTLIGHT, January/February 2021, pp. 24–27.

February 19, 2021

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