EXECUTIVE SUMMARY

Towards the Realization of Compact Industrial
Agglomerations supported by Flexible Networks
Despite its postwar implementation of various policy measures targeting regional
industry, including the Technopolis Policy and the Intelligent Location Policy, Japan
has failed to realize sustainable growth driven by innovation originating in its regional
areas. The failure of conventional central government-led regional industry policy toovercome the present deadlock demands a transformation of its fundamental concepts.
This report proposes the formation of compact industrial agglomerations which makeadvantageous use of the unique features of the regional areas in which they are located.
The development of high-density networks connecting these industry centers to urban
areas would allow flexible configurations, making it possible to nurture industrial
agglomerations possessing a high level of quality and robustness despite theircompactness.

● Taking Up A New Agenda
The Japanese economy from the 1990s onwards has fundamentally differed from theeconomy of the 1980s, in which growth was driven by growth in metropolitan areas.
The ongoing stagnation in the growth rate in metropolitan areas presents us with a newagenda: The realization of growth in the Japanese economy by stimulating growth inregional areas outside the nation’s large urban areas, where the level of stagnation iscomparatively lower.

● Subsidy Policies: Encouraging Decline in Productivity
It would be difficult to view regional industry policies implemented in Japan up to thepresent as a success. Past policies for the stimulation of regional industry resulted in slightincreases in the number of companies and in employment, but the average reduced
productivity in the region. This is because policies of direct subsidization encourage theagglomeration of low-productivity companies.

● Intelligent Use of Existing Infrastructure
Joint research pursued on the basis of face-to-face communication is important to therealization of innovation. However, geographical distance impedes intellectual exchange ofthis type. The intelligent use of existing and planned transport infrastructure such as theShinkansen network and the Linear Shinkansen will be effective in reducing travel times
and promoting the face-to-face exchange of information, making it possible to advance joint
research and other programs that will generate innovation.

● Towards the Realization of Compact, High-quality Industrial Agglomerations
The aim should not be to create uniform industrial agglomerations throughout the country,
but to form unique agglomerations from even small numbers of high-productivity
companies. Leadership from regional administrations will be essential. Japan should work
towards the creation of compact, high-quality industrial agglomerations which incorporatea wide range of industries, including service industries, and make maximum use of thespecific resources and characteristics of the regions in which they are located.

Copyright Ⓒ 2017 by National Institute for Research Advancement

● Formation of Networks
The fostering of business relationships with external companies and the implementation ofjoint research with companies both within and outside the agglomeration will be importantto high-quality clusters formed from a small number of companies.If the closeness of such
relationships can be nurtured via a wide range of networks, industrial agglomerations will
have significant external economic effects, promoting the development of high-qualityindustries. Because small and medium-sized enterprises in particular find it difficult toestablish connections with other companies and with overseas markets, the formation ofnetworks using the human resources and the expertise of regional financial institutions,chambers of commerce, municipal administrations, and the central and prefectural
governments will be crucial.
Latent opportunities for the creation of businesses remain to be discovered in all of Japan’s
regional areas. Japan’s regions will provide the engine for the nation’s economic growth.
We may hope for a burgeoning forth of regional industrial agglomerations displaying richdiversity.
Diagram of Subsidy Policies ―Change in Japan’s Industry Policy―* The names of industrial policies and laws used in the chart (shown in boxes) are abbreviations of or generaldesignations for the respective policies or laws.
①Regional hubs: Act for Promotion of Development of Regional Core Urban Areas and Relocation of Office Work
Functions②New industrial cities: Law for Promoting Establishment of Industrial Cities③Industrial relocation subsidies

Industrial relocation-promoting cities④Coal-producing regions: The Law on Temporary Measures for Coal Mining Area Development⑤Science cities: Policies promoting the creation of science cities⑥Technopolis: Promotion Act for Accelerating the Development of High-Tech Industry Integrated Region(Technopolis Act)
⑦Intelligent Location: Act for Promotion of Concentrated Establishment of Designated Type of BusinessContributing to More Sophisticated Local Industrial Structures⑧New businesses: Law for Facilitating the Creation of New Business⑨Industrial Cluster Plan: Industrial Cluster Plan (Regional Revitalization and Industrial Agglomeration Plan)⑩Activation of Agglomeration: The Act on Temporary Measures for Activation of Specific Regional
Industrial Agglomerations

Copyright Ⓒ 2017 by National Institute for Research Advancement