A Second Capital for Japan?

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On the heals of the earthquake and tsunami of March 11, Kansai at the western end of Japan is stepping up its efforts to convince the national government that one of its three major cities (Osaka, Kyoto and Kobe) should be designated as Japan's backup capital.

The ostensible reason is to ensure that commerce (including the Tokyo Stock Exchange and the Bank of Japan) government and even the Imperial family continues to function in the event of a major disaster in Tokyo. Beyond this ostensible reason, the “second capital” proposal strengthens calls from Kansai for greater autonomy from the central government.

In support of its position, Kansai cites that it is already home to 19 official and 60 honorary consulates, 4 United Nations organizations and the World Health Organization's center for health development. Added to this, the area claims sufficient electricity, well-developed transportation infrastructure and enough office space to meet the needs of Tokyo firms looking to avoid likely power shortages in Tokyo over the coming summer.

Logistic challenges

While a temporary shift to Kansai may make sense, convincing large numbers of Tokyoites to relocate will prove difficult. While young, single Tokyoites might not object, employees with housing loans and children in schools or those caring for aged parents will find the decision difficult. This is about more than disruption to lifestyles for the provision of comparable housing is a hidden cost that companies would need to bear. From the public purse, providing access to schools and adequate medical facilities close by to temporary housing also needs to be factored into any backup capital plan.

Cultural differences

To foreigners, Japan often appears to be a homogeneous society. In reality there is long-standing rivalry between Kansai and Tokyo including social and cultural differences that are the subject of endless debates: plans for relocating to Kansai will need to take into account these “soft” challenges. These include Tokyoites being worried about starting over in Kansai without benefit of friends and social networks. Added to this, Osaka people sometimes go out of their way to emphasize their differences with Tokyo – a sentiment that could lead to a second-class enclave of Tokyoites huddled in Kansai.

Finally, at the individual level, Tokyoites with a bad impression of Osaka (particularly those with sought after skill sets) may elect to quit their companies rather than accept relocation.

A snail’s pace

Any decision to designate a second capital will need to be made bilaterally between the central government in Tokyo and the effected prefectural governments. Given the pace at which bureaucracies move, particularly when confronted with an emotive and cultural issue, we can be sure that, unless it is compelled by another major natural disaster, a decision on a second capital will not be made anytime soon. The whole discussion of a “second capital” therefore becomes little more than a publicity opportunity for Kansai to push back against the authority of the Tokyo-centric government.

In the commercial world…

According to a poll of more than 200 corporate executives (carried out by the recruitment company Hays) 28.5% of companies now plan to build their personnel base elsewhere in Japan. The most popular regions for relocation being Kansai, Kyushu and Hokkaido. This however is not a temporary relocation of existing human resources but a change in hiring practices as facilities are built and staffed in new locations. While the events of March 11 might have been the catalyst, in large part this move is motivated by significant reductions in costs that can be achieved when doing business outside of Tokyo.