July 22, 2016

www.ynu.ac.jp

Visualizing the economic flows of

local economy in Japan

Yoshifumi Ikejima

ikejima@ynu.ac.jp

1

Introduction

• Analysis of Local Economic Circulation

Boosting economic circulations is expected to revitalize

local economies under the downward trend in Japan

Hard to elucidate economic circulations due to the lack of

appropriate data and methodologies

To look for better approaches to visualize economic

circular flows with GIS

Hard to describe economic circulations in local level

Should be focused on one aspects of a local economy

First step to approach economic circular flows

• To analyze monetary flows of public expenditures to verify

economic linkage (leakage) that one local municipality has

Financial flows of payments and profits across geographic boundaries

Focuses on orders from local government to the direction to expenditure

2

The metropolitan areaLocal government

Expenditure within local

Expenditure to outside

Outline

• Introduction: purpose of this study

• Local Economies in Japan and excess concentration on Tokyo

• Data and Methodology

• Results and Conclusions

3

Background: Local economies in Japan

• Downward trend

The shrinking economy by depopulation

The collapse of local industries by the structural change

• Negative spiral

Less job opportunities in local areas

Population flowed out to the metropolitan area

Depopulation accelerated furthermore…

➔Depopulation in the countryside co-existing overpopulation in the metropolitan

area

4

• Excess concentration of population and industry in the Tokyo

Metropolitan area

Tokyo is a political economic center

Large population and corporations have accumulated

図　都道府県別にみた地域経済の不均等発展（2001年基準）

資料：内閣府「県民経済計算年報」2001年度版及び国税庁「法人税統計2001年度版」による。

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

北

海

道

青

森

県

岩

手

県

宮

城

県

秋

田

県

山

形

県

福

島

県

茨

城

県

栃

木

県

群

馬

県

埼

玉

県

千

葉

県

東

京

都

神

奈

川

県

新

潟

県

富

山

県

石

川

県

福

井

県

山

梨

県

長

野

県

岐

阜

県

静

岡

県

愛

知

県

三

重

県

滋

賀

県

京

都

府

大

阪

府

兵

庫

県

奈

良

県

和

歌

山

県

鳥

取

県

島

根

県

岡

山

県

広

島

県

山

口

県

徳

島

県

香

川

県

愛

媛

県

高

知

県

福

岡

県

佐

賀

県

長

崎

県

熊

本

県

大

分

県

宮

崎

県

鹿

児

島

県

沖

縄

県

総

生

産

・

所

得

金

額

構

成

比

（全

国

一

〇

〇

）

法人所得金額

第３次産業

第２次産業

第１次産業

Amount of Corporate Income

GDP of Tertiary

Industry

GDP of Secondary

Industry

GDP of

Primary

Industry

Excess Concentration in Tokyo (2000)

Tokyo

(source) Okada et al. (2010)

5

Background: Uneven development in Japan

Why does value gather into Tokyo?

6

Headquarters

Business

establishments

• Existence of a large variety of professional corporations in Tokyo

Accumulation of highly specialized companies

Attractive companies in Tokyo in the light of quality of goods

and services, business size, and technical standard, and so on.

• An accounting rule for businesses

Profits earned in every establishments are supposed to flow back

to the HQs in Tokyo.

Corporations in Tokyo had 373 new factories, which had more than 1,000 m2 of

site acquisition although no factory was located in Tokyo. The profit earned in

those factories would flow back to Tokyo (METI 2014).

Target Area---Tsuru City in Yamanashi, Japan

（1）Small city at a fringe of Tokyo metropolitan area (far from about

90km/56mile)

（2）Surrounded by forest and nearby Mt. Fuji

（3）Population with about 33,000

（4）Traditional Industry: Production of silk and weaving

➔Current industry: Metal processing industries and approximately

1,800 establishments of other industries

（5）Fiscal size of city: 12 billion yen（2013）

7

Outline

• Introduction: purpose of this study

• Local Economies in Japan and excess concentration on Tokyo

• Data and Methodology

• Results and Conclusions

8

Data

【1】Transaction data in a fiscal year from the city government

Business partners’ name, address, details of transaction, and

amount of money by a transaction

In 2013, Tsuru city carried out 16,902 transactions

Total transaction amount was approximately 3.1 billion JPY,

one third of the government budget.

*The rest of the budget was outside the scope of this paper.

【2】Corporations data from a credit survey company in Japan

Address information of Headquarters and Industry classification

City government transacted with some different branch offices

or subsidiaries of the same parent company.

9

Supplementary explanation in the transaction data

• Non-mandatory expenditures like “cost of equipment”,

“maintenance fee”, and “investment expenditure” by classification

of budget.

• Mandatory expenditures like “labor cost”, “social assistance

expenditure”, and “public debt payment” .

10

A municipality can change(reduce) these expenditures

A municipality can select business partners in the non-

mandatory expenditures.

Tsuru prioritized local businesses to develop local economy

except for emergencies and highly professional matters.

Methodology to trace destination of money

1. The transaction data by each transaction was aggregated by a corporate

name ➔ 16,902 transactions were aggregated into 1,258

corporations.

2. Of 1,258 corporations, 689 corporations are available to connect the

data from the credit survey company

➔This data can identify locations and industry classification of HQs of

each corporation.

3. Two-type of datasets were created: one is based on the location of

business establishments which the municipality transacted directly【①Primary outflows】, and the other is based on the location of HQs of

companies【②Secondary outflows】

4. Estimation of the amount of primary and secondary outflows

Transaction amount was aggregated by both the location of business-

establishments and the HQs.

11

Image of monetary outflows

12

City

gov.

A

town

B

city

C

state

City

gov.

B

B

B

A

town

C

state

Primary outflowsCity government

➔ providers’ sites

Secondary outflowsproviders’ sites

➔ location of their HQs

*However, this study has a strong hypothesis that all transaction amount counted by

business establishments is supposed to transfer to that of HQs at present

Outline

• Introduction: purpose of this study

• Local Economies in Japan and excess concentration on Tokyo

• Data and Methodology

• Results and Conclusions

13

Result (1): Primary Outflows

• Dataset based on the location of business establishments reflects

the features of primary outflows

➔Most of money from the city government goes into local areas

while 11% of transaction amount flows out to Tokyo.

14

Public expenditures stay within the local area

Prioritizing local business ➔ a beneficial effect

% (JPY) %Yamanashi prefecture 863 68.6 2,753 million 87.1

Tsuru city 439 34.8 2,148 million 67.9 Kofu city 169 13.4 278 million 8.8

Tokyo prefecture 193 15.3 344 million 10.9

Name ofregion

OrganizationBusiness Transaction amount

The directions of monetary flows

Green arrows indicate the

directions from Tsuru to

business establishments

15Regional transaction amount

TokyoTsuru

Kofu

• Dataset based on the location of HQs reflects the features of

secondary outflows

➔Most of money from the city government also stays in local areas

while Economic leakage to Tokyo increases

16

Result (2): Secondary Outflows

% (JPY) %Yamanashi prefecture 791 62.8 2,610 million 82.6 ↓　-143 million

Tsuru city 407 32.3 2,006 million 65.4 ↓　-142 million Kofu city 148 11.7 252 million 8.0 ↓　 -26 million

Tokyo prefecture 254 20.1 476 million 15.1 ↑　 132 million

Difference fromPrimay Outflow

Name ofregion

Organization

Business establishmentsand HQs

Transaction amount

17

Orange arrows indicate the direction from business establishments to HQs

140 arrows = “Transferred transaction”

(It’s likely to mean back-flow of money)

The monetary directions from BEs to HQs

Tokyo

Kofu

Tsuru

Red arrows display the transactions

transferred to Tokyo

Result (3): Additional Economic Leakage

from BEs to HQs

• Differences of monetary inflows from that of outflows at the stage

of secondary outflows

Tsuru has the most amount of outflow: 32 branches in Tsuru transfers 81

million JPY to external area.

Kofu, the prefectural capital of Yamanashi, has lots of additional inflows (23

HQs) and outflows (44 branches) .

Tokyo has an additional inflow(69 HQs) over additional outflow (8 branches),

and its net amount of money reaches 131 million JPY.

18

Tokyo

+131 million

Tsuru

-81 million

Kofu

-26 million

Result (4): Economic Leakage by industry classification

• Examining expenditures by industry based on the secondary outflow

shed light on the current regional economic structure in Japan

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Rank IndustryTransaction

amountDifference fromprimary putflow

IndustryTransaction

amountDifference fromprimary putflow

IndustryTransaction

amountDifference fromprimary putflow

1INDUSTRIES UNABLE TOCLASSIFY

391,089,684 21,000 CONSTRUCTION 44,360,519 25,527,210 SERVICES 179,383,026 58,368,541

2 FORESTRY 4,197,000 0 FINANCE 2,520,034 2,179,969TRANSPORT andCOMMUNICATIONS

58,663,602 50,202,248

3 MINING 149,310 0GOVERNMENTSERVICES

593,613 21,350WHOLESALE and RETAILSALE

83,873,399 18,883,534

4 REAL ESTATE 0 0 FORESTRY 0 0ELECTRICITY, GAS, HEATSUPPLY

117,918,023 6,125,472

5ELECTRICITY, GAS, HEATSUPPLY

0 0 MINING 0 0 FORESTRY 0 0

6 GOVERNMENT SERVICES 262,487,830 -6,160 REAL ESTATE 0 0 MINING 0 0

7 MANUFACTURE 78,298,703 -20,806 INDUSTRIESUNABLE TO

87,590,164 0 FINANCE 5,775 0

8 FINANCE 0 -2,200,878 WHOLESALE andRETAIL SALE

21,263,796 -103,059 GOVERNMENT SERVICES 4,200 0

9TRANSPORT andCOMMUNICATIONS

2,003,125 -2,505,704 MANUFACTURE 492,969 -4,294,100 INDUSTRIES UNABLE TOCLASSIFY

8,638,121 0

10WHOLESALE and RETAILSALE

75,521,858 -12,628,380 ELECTRICITY, GAS,HEAT SUPPLY

0 -5,048,756 REAL ESTATE 0 -64,200

11 CONSTRUCTION 1,132,253,169 -29,325,585 TRANSPORT andCOMMUNICATIONS

0 -15,912,782 CONSTRUCTION 7,267,995 -561,225

12 SERVICES 129,109,704 -35,092,572 SERVICES 95,618,715 -28,893,267 MANUFACTURE 20,301,255 -1,043,914

Secondary outflowTsuru Kofu Tokyo

Service, Transportation and Communications, Wholesale and Retail Sale ,

and Electricity➔converge on the metropolitan area

Construction and (Regional) Finance➔ flow out to the regional center

Government service and Forestry ＝local-oriented industries

Conclusion（1）

1. Local expenditures mostly flow back to local economy

Prioritizing local businesses on public services can be said to

be effective in staying money within a local area

Corporations in Tsuru gain 65-68% of transaction amount

Corporations in Yamanashi prefecture: 82-87%

*Future study need to examine whether this prioritizing local businesses can

boost local economies as a whole.

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2. Economic leakage to Tokyo

Tokyo absorbs 10-15% of transaction amount

The second largest area to connect with public expenditure of a

local municipality

Conclusion（2）

3. Accumulation of highly specialized industries in

One side of the current regional economic structure in Japan

Competitiveness of companies headquartered in Tokyo

For example, ITS management service, telecommunications, medical services,

publishing services, and scientific research, professional and technical services,

etc.

Tsuru /Yamanashi: manufacture, wholesale and retail sale, construction, etc.

4. Linkage between economic leakage to Tokyo and the excess

concentration in Tokyo

21