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Policy Research Institute

Table of Contents

Vol. 131 : Population Decline and Local Economies

Summary of Articles

Gap in Birthrate by Municipality and Analysis of the Underlying Factors

By Hisakazu Kato(Professor, School of Political Science and Economics, Meiji University)


 In Japan, there is a wide regional disparity in the total fertility rate: the rate is relatively high in some regions, while it is very low in other regions. In particular, the fertility rate disparity is wider across municipalities. In recent years, the low total fertility rate in urban areas, including the Tokyo metropolitan area, has been the backdrop against which active debates have been held on the disappearance of local communities. The purpose of this article is to explore the factors underlying the regional disparity in the fertility rate and examine the relationship between the fertility rate and the population density in particular.

Underlying the regional disparity in the fertility rate are complex factors. The low fertility rate in urban areas is presumed to be due to problems related to support for work-child care balance, childcare resources and housing space. The direct cost of caring for children and the possibility of keeping the balance between work and child-giving and -bearing are factors affected by the location of residence. This article treats the population density as a proxy variable for these factors. Until now, there have not been many theoretical studies conducted to examine the relationship between the fertility rate and the population density. In addition, in this respect, few empirical analyses have been conducted with respect to Japan. Therefore, we conducted an empirical analysis with respect to Japanese municipalities based on the conclusion, reached under a theoretical model, that the optimal number of children in rural regions is higher than the number in urban regions under certain conditions. Concerning the total fertility rate by municipality, we used the Specified Report of Vital Statistics prepared by the Ministry of Health, Labour and Welfare, which adopts Bayesian estimation, in order to obtain stable data for small regions.

First, we examined whether the population density and other economic and social variables have statistically significant effects on the total fertility rate by municipality by looking at 1,890 samples. As a result, it was observed that the higher a municipality’s population density is, the lower its total fertility rate is and that the higher a municipality’s female labor participation rate is, the higher its fertility rate is. Another finding was that the higher a municipality’s net population inflow rate is, the higher its fertility rate is. Using the 1,742 samples for which data was available, we also examined the relationship between the total fertility rate and indicators related to countermeasures against the low birthrate, such as the childcare facility installation rate and the child welfare expense rate. As a result, it was found that there is a statistically significant positive correlation. It should be kept in mind that as the analysis is based on cross-section data concerning a certain point in time, the correlation cannot be considered to be evidence of the presence of a causal relationship.

Next, we looked at changes in the total fertility rate between 2005 and 2010. In order to compare the total fertility rates by municipality in these years, it is necessary to select municipalities whose administrative areas did not change during the period due to municipal consolidation. Among the 1,601 municipalities that meet this criterion, the total fertility rate in 2010 was higher than the rate in 2005 in 1,187 municipalities and was lower in 352 municipalities. Based on this finding, we examined the relationship between the total fertility rate in 2010 and the population density and other factors in 2005 through regression analysis concerning the population density in 2005 and through estimation using data for the period between the two years as panel data. In each case, the population density had a negative correlation with the total fertility rate, while the female labor participation rate had a positive correlation. We also estimated how a rise in the population density affected the fertility rate by comparing between municipalities whose fertility rate rose between the two years and those whose fertility rate did not rise. As a result, it was found that although the average total fertility rate in the municipalities whose population density rose declined 0.091 percentage points, the decline was 0.05 percentage points if the average causal effect was taken into consideration.

Keywords: total fertility rate, population density, female labor participation rate
JEL Classification: J13, J21

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Population Decline, Employment and Prosperity:
Setting The Conditions for Quality Job Creation In All Regions of Japan

By Sylvain Giguère(Head of the OECD Programme on Local Economic and Employment Development (LEED))


 A growing imbalance in population between urban and rural areas is dysfunctional and undermines the quality of life in Japan. Only an integrated approach capitalising on talent and innovation and drawing on effective governance mechanisms can reverse this trend and contribute to delivering prosperity in all regions. This article will demonstrate the need for a balanced and differentiated approach in Japan that improves growth and job creation.

The article will review the structure of population change in Japan and compare it with other countries. It will show that the share of the population in big cities is growing in Japan as well as in other countries, though there is no unique trend among OECD countries. It will then show the importance of taking a balanced approach to the supply and demand for skills. The supply of skills is key for productivity and economic growth, but if skills are not fully used in the workplace, the economy risks becoming less resilient and the regions that host them less attractive. The article will show that rural areas in Japan already feature low skills equilibrium. Stimulating growth and job creation in a way that can transform rural areas into attractors of population requires an integrated approach that combines factors on both the supply and demand side.

The article will draw on international evidence to show that this approach needs to be differentiated across the national territory to take into account the diversity of contexts and the various strengths on the supply or demand side of skills. It requires strong governance mechanisms at the local level, which includes flexibility in the management of policies that enable stronger co-ordination between workforce and economic development, as well as effective partnerships and strong capacities.

Keywords: population decline, skills development, innovation, local economies, employment, productivity
JEL Classification: H70, R10

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Study on Optimal Location of Long-term Care Facilities-
Under the Conditions of a Depopulating and Super-aging Society, with Use of GIS (geographical information system) Data: A case example of Niigata City

By Kazumasa Oguro(Professor, Faculty of Economics, Hosei University)
By Keisuke Hirakata(Senior Manager, Planning Division, Avant Associates, Inc.)


The main purpose of this paper is to analyze and discuss a plan for effective and efficient location of long-term care facilities in a depopulating and super-aging society with the use of GIS (geographical information system) data on distribution of communal daily long-term care facilities for dementia patients (group homes) and elderly population in Niigata City, while also taking into consideration future demographics and service lifespan of the facilities. More specifically, we used data on current and projected future population of the elderly aged 75 and over at the small areas level (“Machi,” “Cho,” and “Aza”), and compared the current and future needs for group homes by service area and the current supply situation of the said facilities.

Our analysis elucidated that a strong sense of insufficiency of these facilities is already being felt in urban areas, including DIDs (densely inhabited districts), while suburban farming communities are in a rather over-supplied situation. It also clarified that looking to the future, the sense of insufficiency in urban areas is expected to rise increasingly, while the sense of excessive supply is expected to grow further in the suburban farming communities. As this result is based on the current and projected future population data on the elderly aged 75 and over, this finding is considered applicable not only to group homes but also to other residential long-term care facilities.

As the need for these types of facilities is expected to grow more than ever against the backdrop of a further increase in the elderly population in future, we believe that the issue of improved efficiency of these facilities by optimizing their geographical locations (through restructuring or relocation) will become increasingly significant. At the same time, promotion of Care Compact City and urban restructuring will also be required in light of financial constraints.

Keywords: Community-based Comprehensive Care, Compact City, Depopulation, GIS, Voronoi tessellation, Building life span, Finance
JEL Classification: H55, H75, I13, J10, R12

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Estimates of Future Numbers of Companies and employees by Region

By Yoshiaki Murakami(Principal Economist, Japan Finance Corporation Research Institute)
By Naomi Kodama(Associate Professor, Institute of Economic Research and School of
International and Public Policy, Hitotsubashi University)
By Yoshio Higuchi(Professor, Department of Business and Commerce, Keio University)


This article estimates the number of companies, which are the source of labor demand, and the number of employees by prefecture in the period until 2040. This study provides key features of the estimation of business startup and closure reflecting the population decline and changes in the age distribution by region.

According to the estimation, the number of companies nationwide is projected to decline from 4,025,000 in 2015 to 2,956,000 in 2040 and number of employees is expected to decrease from 58,457,000 to 45,981,000. As the rate of decline is not uniform across the country, the concentration of companies and employees in metropolitan areas will proceed further. In addition, the rates of decline in the numbers of companies and employees are high from now to around 2025, during which most of the present older managers will retire. Consequently, in most prefectures, the rate of decline in the number of employees will be higher than that in the working-age population temporarily around 2025. This trend will be prominent in provincial areas in particular. Later, in 2040, the labor supply-demand balance will become almost as tight as in 2015.

Therefore, it will be necessary to curb business closure due to the retirement of older managers by providing intensive support for business succession in the period until around 2025. The simulation results also indicate that narrowing the focus of support for business startup to women and middle-aged and elderly men is an effective solution to increase new business startups.

Keywords: business startup, business closure, business succession, number of companies, labor supply and demand
JEL Classification: J11, J23, R12

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Development of a Method of Analyzing Regional Economic Cycles and Analysis of Example Cases
-New Method of Analyzing Regional Economies under the Regional Revitalization Initiative-

By Kiyoshi Yamasaki(Public Consulting Division Value Management Institute, Inc.
Dr. Eng., Corporate Officer, Chief Consultant)
By Akiho Sahara(Public Consulting Division Value Management Institute, Inc.
By Katsuya Yamada(Public Consulting Division Value Management Institute, Inc.


At a time when regional economies in Japan, mainly in provincial regions, remain stagnant, national and local governments are implementing policy measures to revive regional economies, including the regional revitalization initiative. Factors behind the stagnancy of regional economies in Japan include external ones, such as reduction of public works and transfer of factories out of Japan, and factors inherent in regional economies, such as income outflow in three aspects of economies—production, distribution and expenditure. In order to consider measures to revive regional economies in due consideration of those factors, this article proposes a method of analyzing the strengths and weaknesses of regional economies and income inflow into and outflow from them. This is a new method of analyzing regional economies based on the estimation of income inflow and outflow using economic data within the region’s boundary and those by its citizens (equivalent to the concepts of GDP and GNP). In this study, these economic data were prepared with respect to municipalities across Japan and were used to conduct a case analysis in three regions—Kanazawa City, the Toyama area and Ishigaki City.

As a result, it was found that: in tourism regions, even if a large amount of tourism expenditure flows into the regions, the expenditure is not recycled to the local people unless the regional income recycle structure is well-established; if active companies in the region is not local ones but ones headquartered in the other regions, income earned in the production process flows out; and in regions where manufacturing industries have a high level of productivity, there is robust demand for capital investment, creating an inflow of such investment. It was also found that in some provincial regions, the ratio of fiscal transfer to income other than employee income is large, which means that fiscal transfer is essential to secure income, and that in such regions, income is flowing out in the expenditure and production processes, indicating that fiscal transfer is not contributing to the enhancement of the regions’ income earning capability.

Keywords: regional economies, regional revitalization, analysis of regional economic cycles
JEL Classification: H71, H72, R15

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Determinant Factors of Return to Rural Areas and Measures to Promote Return
-Example Case of Hirosaki City, Aomori Prefecture-

By Young-Jun Lee(Professor, Faculty of Humanities and Social Sciences , Hirosaki University)
By Hiroaki Sugiura(Professor, Faculty of Economics, Aichi University)


This article examines the impact of a population decline on a regional economy by looking at the case of Hirosaki City, Aomori Prefecture and analyzes the promotion of relocation as a measure to counter the impact. In Hirosaki City, a population decline due to the outflow of youth is not only reducing total production in the region but is also affecting the labor market structure. In order to consider how to promote relocation to Hirosaki, we analyzed the migration from urban to rural areas. As a result, it was found that in many cases, relocation to rural areas represented a return to hometowns. This analysis also revealed that the presence of parents’ homes is the strongest factor attracting people to rural areas. People relocating to rural areas tend to make the move after voluntarily taking actions that lead to the relocation, such as quitting a job. Among such people, a sense of satisfaction or happiness with work-life balance is significantly strong, indicating the likelihood that they will settle in rural areas over the long term. As a policy implication, the article points out the need to promote relocation with emphasis placed on return to hometowns and housing measures.

Keywords: population decline, inter-regional migration, return to hometowns, promotion of relocation
JEL Classification: J61, J68, R11

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Aging of Large Cities and Medical and Nursing Care Issues
-Estimate of Future Numbers of Doctors and Hospital Beds and Future Facility Capacity Based on Trend Data-

By Tai Takahashi(Dean, Department of Social Services and Healthcare Management,
International University of Health and Welfare)
By Teppei Watanabe(Chief, R&D Group, Strategy Planning Division, Wellness Co., Ltd.)
By Ryohei Kato(Representative director, Care Review Inc.)


The purpose of this study is to grasp the current status of nursing care, particularly in large cities, by identifying changes in the numbers of doctors and general hospital beds and the capacity of nursing care facilities in the past 10 years due to and to forecast future numbers. In order to look at changes in the numbers of doctors and general hospital beds in each secondary medical care area in the past 10 years the drastic change in the area demarcation following the major consolidation of municipalities, we recalibrated the data for 2004 in line with the demarcation of the secondary medical areas in 2014 and calculated the numbers of doctors and general hospital beds in 2004 and 2014 in each area. In addition, we estimated the supply of facilities for elderly people in 2025 based on changes in the facility capacity between 2014 and 2016. At the same time, we estimated an excess or shortage of facilities for elderly people by region in 2025 by multiplying the estimated number of people aged 75 or older by the ratio of the capacity of such facilities to the number of people aged 75 or older in 2015 (0.081). As a result, it was found that in the whole of Japan, the number of doctors increased 15% during the 10 years from 2004 to 2014, while the number of hospital beds decreased 7%. In large cities, the number of doctors increased remarkably but the number of hospital beds declined slightly. In the Tokyo metropolitan area and Fukuoka in particular, the increase in the number of doctors was prominent and the number of doctors per bed also rose steeply. Concerning facilities for elderly people, the capacity of facilities for elderly people recorded an increase matching the growth in the number of people aged 75 or older only in the Tokyo metropolitan area. On the other hand, in other large cities, the increase in the capacity of facilities for elderly people did not keep pace with the growth in the number of people aged 75 or older. If the current situation continues, it is highly likely that the capacity of facilities for elderly people will fall far short of the necessary capacity, resulting in a steep rise in the number of elderly people with nowhere to go in order to receive nursing care.

Keywords: number of doctors, number of general hospital beds, capacity of facilities for elderly people, time-sequential changes, secondary medical care area, large cities
JEL Classification: I11

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Any article in the Review reflects the writer's own opinion, and has nothing to do with any statement issued by the Ministry of Finance or the Policy Research Institute.