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Recently, I feel the “Aging” of Tokyo sometimes.
Of course, what I will write here from now will be just a hypothesis, but considering a fate of the domestic regional structure for the next 5-10 years, we should not ignore that, I think.
This time’s story has also been greatly related to the collapse of the domestic inter-regional income redistribution and circulation system. It was the conventional growth model of this country and I mentioned, for example, at “Thinking about the money flow“.
Nevertheless, even when facing its collapse, we have never found an effective prescription for the revival of domestic economy and industry yet. One of reasons of that may be that we cannot accept the truth of “The Aging of Tokyo”.
<From “Outstanding Growth Center” to “Huge, But Normal City”>
At first, I would like to explain why I have felt aging to Tokyo, by referring to some economic and social indicators.
Looking the demographic of Tokyo, after increasing to the mid-1980s, there was a downward trend until the mid-1990s bubble period. There may be a sense of incongruity when considering the “Tokyo over-concentration”, but there were some external diseconomies such as urban problems. The “suburbanization” due to rise in land prices had progressed in that period, and in fact, a main cause of excess of moving out was increase of out-migrant. It recorded a minus 0.5% per every year of the total population in the first half of 1990s.
On the other hand, from the latter half of 1990s, the social population dynamics turned to excess of in-migrant, and it reached 0.5-0.6% per year of the total population in the mid-2000s. The reasons of that might be decline of urban life costs including asset prices.
Under such changes, the words “regression of population to the city center” had been heard frequently at that time.
However, the fact seems not to be “regression”. Looking at in-migrants and out-migrants separately, the social population dynamics at that time was brought by decline of out-migrants rather than increase of in-migrants. In addition, in-migrants which were 4% of the total population in 1980s had decreased to lower than 3% in the latter half of 2000s.
Moreover, in addition to such social increase and decrease trends, daily inflow and outflow through employment and attending school also had changed. From 80s to 90s, the ratio of daytime population to nighttime (which was divided daytime population that includes employees and students of schools by residence-based nighttime population) rose by the suburbanization of residence areas, and it had reached to 124%. Nevertheless, in 2010, this value was then declined to 118% which was the same level as 80s.
One of reasons which are the city of the city is being something like “a melting pot” of various people. Since the high-growth era till the bubble period, Tokyo had gathered human resources and capital from all over the nationwide by its overwhelming size and diversity, become the national growth pole, and re-distributed fruits of its growth to local areas in compensation for supplying productive factors. The concentration and accumulation of human resources made it become something like “a seed bed” which had driven various innovation of domestic industry.
On the other hand, considering the population dynamics above, such a position of Tokyo economy may have been changing in 2000s. The agglomeration disadvantage and external diseconomies has surely been mitigated in exchange for today’s economic stagnation, and as a result of that, Tokyo may have become a more livable city than before. That may have also contributed to decrease of out-migrants.
However, “easy to live” is different from “want to live there”. The reduction of in-migrants would weaken diversity as a city. The decline of ratio of daytime population to nighttime can be regarded as reduction of centripetal force as a geographic center. The decrease of out-migrants also seems to be related to the aging problem of urban areas that has been focused in recent years.
<Meaning of Changes of External Balance and Capital Efficiency>
Next, I’d like to pick up the economic and industrial structure at that time.
Looking at the external balance of Tokyo (note: It is the current account side in nominal terms, but in case of Tokyo, the transfer income had not been estimated until 1999.), you will notice reduction of the net exports. It had been more than 40% of its nominal GDP in 1990s, but it had gradually decreased in 2000s, and it has fallen down to about 30% recently.
Decrease of net exports is likely to be often regarded as a decline of “industrial competitiveness”, but I guess that it has been caused by weakness of a demand outside Tokyo, maybe.
The reason why I think so is (in my words) “the collapse of the inter-regional income redistribution and circulation system” that had just begun to fall down since that moment. It can be defined by “accumulating productive factors to the growth pole” and “redistributing fruits of its growth”, and it had been the growth model of this nation for a long. However, as to be representative to “the trinity reform” in early 2000s, the redistribution function to local areas has been weakened by the long stagnation of domestic economy.
In fact, if plotting net exports and income balances against transfer income of the government sector of each prefecture, there is a negative correlation. Its determination coefficient was 0.33 in 1990, and 0.49 in 2000. The former (net exports and income balances) can be regarded as external balances of the private sector, so this tendency explains that their excess and deficiency are likely to be balanced by the latter (the government sector’s transfer income).
However, the determination coefficient declined to 0.22 in 2010, so such a relation seems to have become fading out. As a result of that, demand of local areas has been weakened, and the net exports of Tokyo may also have decreased, probably.
By the way, Tokyo is not plotted in this scatter. One of its reasons is that the transfer income has not been estimated up to 1999 as described above.
Yet, there is another reason besides. There is a difference of 37 trillion yen in “other current transfers” of GDP between total of the “Prefectural Account Statistics” of each prefecture and the “National Account Statistics”. Looking at each institutional sector separately, its difference of the household sector and the corporate sector is limited to a few trillion yen, but the difference of the government sector is 30 trillion yen or more in 2010. As mentioned in the separate article, As mentioned in the separate article, this fact suggests that an income transfer from the central government to local governments which must originally be added up to Tokyo may be underestimated.
If this hypothesis is right, also in the above graph of the external balance of Tokyo, it may not be wrong that the transfer income of minus 30% of nominal GDP (that is the same volume as its net exports) is added.
Anyway, under such changes of the balance of payments structure, how has its economy and industry changed?
Looking at GDP of Tokyo, the net exports had contributed to increase till the mid-1990s in demand side. However, its momentum had disappeared till 2000s, and instead of that, increase of the domestic demand including the household sector had contributed. On the other hand, in supply side, the contribution of wholesale and retail trade has stood out till 1990s, but that had disappeared till 2000, and other service industries such as finance, insurance and real estate had contributed to growth since then.
Such a trend is consistent with changes of the external balance or the demographics movement described above. One of the most important functions of a city is to be a center of broad commercial areas. The decline of ratio of daytime population to nighttime and the decrease of in-migrants seems to suggest weakening of those features, and that is also expressed as the stagnation of wholesale and retail trade in supply side, and the decrease of net exports in demand side.
Moreover, looking at the real growth rate of Tokyo, it fell down larger than across the country after the bubble collapse, but it recorded 2% growth which was more than the nationwide in the latter half of 1990s. However, since the mid-2000s till the end of 2000s, it becomes lower than the national averaged growth again. On the other hand, the capital coefficient (It is a value of real GDP divided by private sector capital investment) was in a level of 1.5-1.6 times of the nationwide average in the early 1990s, but after that, it declined gradually, and it fell to 1.3-1.4 times of across the country in the latter half of 2000s, except before and after the collapse of Lehman Brothers.
If regarding capital coefficient as one of indicators about profitability of investment, this figure may suggest that Tokyo compared to other regions has become less attractive than 1990s. In this background, there may be changes of the demographic movement, the external balance or the economic and industrial structure as described above. As pointed out at the separate entry, relatively big decline of business opening ratio of Tokyo may also be caused by that, I guess.
<Aging of Tokyo and Impoverishment of Local Areas>
Well, changes of Tokyo economy and society as above are similar to generation and annihilation of cancer although it’s something like black humor.
Needless to say, cancer is a cell group whose proliferation cannot be controlled autonomously by genetic mutation. It grows at a speed faster than ambient by monopolizing nutrients that is originally for normal surrounding cells.
Of course, as a result of that, function of life forms is weakened, and finally, leads to death. If body that’s infested by cancer dies, cancer cells are also forced to die.
The “aging” of Tokyo described above also looks like such a process, I feel.
Under the inter-regional income redistribution and circulation system, Tokyo had attracted capital and human resources from the nationwide and had grown faster than other regions since the high-growth period. During the period when it had gone well, it had been able to re-distribute fruits of its growth to local regions through public income transfer. That’s why local regions had been able to become export markets for goods and services of Tokyo, and they had also been able to provide production factors.
However, domestic economy reached a turning point of growth after the bubble collapse, the globalization had expanded at a stroke, and in the end of 1990s, the financial crisis occurred. As a result of that, the approach to create effective demand artificially and politically has no longer stimulated economy as before, as I described in the separate entry.
As a result of those, the exhaustion of local areas become more and more serious, and its aftermath also spread to Tokyo gradually. Now, people in local regions have no spare purchasing power to buy goods and services produced in Tokyo. They don’t also have excess-savings as before and there is not surplus labor force as it was. Such a painful position is not only problem for local areas but also is factors to limit economic growth for Tokyo.
Exactly, that looks something like annihilation of cancer which cannot be alive by death of hosts.
<Is It Inconvenient Truth? >
By the way, I was interested in the “boom” of Tokyo revival plans in the last gubernatorial election. In that election, the most of major forces in today’s political spectrum backed up each candidate as I wrote before, but whatever their stances are, all of them claimed the necessity of restoration of Tokyo unanimously. We may be able to point out a similar thing about success and passion for the Olympic bid. Moreover, a policy stance of the current ruling party such as “the growth pole and trickle-down” also seems to be related to those.
Perhaps, many people in this country may feel the “aging” of Tokyo unconsciously, and quite a few of them seems to have something like resistance to that phenomenon. That’s why feelings of reaction to that have brought such movements or thoughts as above.
However, the globalization is originally likely to promote integration and fusion of markets which are divided geographically. In such process, status and positions of geographic centers of each market tend to relativize in broader markets which are newly integrated. As a result of that, functions of conventional centers are absorbed by new geographic centers. Even if it’s Tokyo, there is no exception.
Erstwhile, Tokyo was recognized one of the global cities, especially in the babble economy era. Nevertheless, in progress of the globalization after that, even if in Asia, we cannot deny that it has fallen behind other cities including Shanghai, Hong Kong, Singapore and Seoul etc.
If there is something that Tokyo had forgotten in its “aging” process, one of them may be the relation to outside regions. Come to think of it, the reason why cities are cities is to be center of something in terms of production, logistics, technology or culture. That is a relative matter which is not decided by a city itself but the relation to outside of a city.
The “aging” of Tokyo described above from some economic and social indicators is caused by collapse of the inter-regional income redistribution and circulation system. That is also a matter of the relationship to outside of Tokyo. Therefore, even if a matter is its revival, what we have to consider is really issues about “Tokyo and others”, I think.
Is there such a viewpoint in today’s economic or industrial policy that is colored by the thoughts of “the growth pole and trickle down”?
Anyway, even if it’s like “inconvenient truth”, we should not look away the “aging” of Tokyo. If we cannot do that, effective solutions for revival of our economy will not be able to be found out.
I cannot help feeling some kind of anxiety like that, today.
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