Kansai Economy and its Challenges in the Global Era

July 7th, 2008

Toshio TakedaKansai 　 Institute for Social and Economic Research

（ＫＩＳＥＲ）

0

Sharp’s LCD Panel Factory in Sakai1

Photo Source: Sharp Corp. HP

Industrial 　 Complex 　 in 　 Sakai 　 a 　 la 　 21st 　 Century2

(Source: The Nikkei Shimbun ，　Ｄｅｃ． 27,2007)

Company Products Investment

(in 100 million yen)

Taiyo Nippon Sanso,Air Water Inc.

Industrial Gas 600

Dai Nippon Printing

Color Filter 435

Toppan Printing Color Filter 420

Corning (US) Glass 875

Kansai Electric Power Energy Supply to be fixed

Osaka Gas Energy Supply to be fixed

Nagase & Co. Chemical Materials 90

Kurita Water Industries Ultra pure Water 100

Nippon Express Warehouse 180

Panasonic’s Plasma Display Panel Factory in Amagasaki

3

Photo Source: Matsushita 　 Electric 　 Industrial. Co., 　 Ltd. 　 HP

Contents

　 Introduction

Ⅰ 　 Profile of Kansai

Ⅱ 　 Kansai Economy in the Global Era　　　 1.Large-scale Investment Boom in Kansai 2.Background on Investment Growth in Japan 3.Kansai’s Strengths 　 and Weaknesses

Ⅲ 　 Industrial Clusters in Kansai

　 Closing Remarks

4

Ⅰ 　 Profile of Kansai

Tokyo

(Tokushima)

Kansai consists of 7 prefectures.(However, some define Kansai as having 8 prefectures (including Tokushima); or as the region consisting of 9 prefectures (adding Mie); or with 6 prefectures, excluding Fukui from the original 7.)

Area

(Mie)

Nagoya

5

Note: GDP in 2005 for Kansai (including 7 prefectures)Source: Cabinet Office Japan, Ministry of Foreign Affairs

GDP (Year 2006)

4,376

2,913

2,668

2,396

2,248

1,851

1,272

1,231

1,068

987

906

888

840

782

723

670

13,133

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

USA

J apan

Germany

China,P.R.

UK

France

Italy

Canada

Spain

Brazil

Russia

India

Korea

Mexico

Australia

Kansai

Netherlands

($10billion)

% of JapanArea(thousand k㎡)

372 31.5 8.5

Population(million)

127.8 21.7 17.0

GDP／GRP($billion,nominal)

4,376 723 16.5

JAPAN KANSAI

6

Cross-country/region Comparative Indicators (Kansai, Hong Kong, Denmark, North Carolina ）

7

Kansai Hong Kong DenmarkNorth

CarolinaArea(thousand k㎡)

31.5 1.1 43(*1) 13.9(*2)

Population(million)

22 6.9 5.4 9.1

Scale of Economy($billion,nominal)

723(Y2006)

190(Y2006)

275(Y2006)

374(Y2006)

Per Capita($) 33300(*3) 25600(*4) 51,700(*5) 41,300(*6)

*1: Excluding Faroe Islands and Greenland *2:28th largest in US *3: Regional GDP, *4: GNI, *5GDP, *6: State GDP

Himeji Castle

Buddhist Monuments in the Horyuji Temple Area

Ancient Capital of Kyoto

Historic Monuments of Ancient Nara

Sacred sites and Pilgrimage Route of the Kii Mountains

Himeji Castle

Buddhist Monuments in the Horyuji Temple Area

Ancient Capital of Kyoto

Historic Monuments of Ancient Nara

Sacred sites and Pilgrimage Route of the Kii Mountains

World 　 Cultural Heritage of UNESCO in Kansai

8

Source ：　 Kansai 　Ｕｎｉｏｎ（ＫＵ）　ＨＰ　“ Kansai 　 Window” 　

Ⅱ 　 Kansai Economy in the Global Era

　　　　　　 1. Large-scale Investment Boom in Kansai

　　　 2.Background on Investment Growth in Japan

　　　 3.Kansai’s Weaknesses and Strengths

9

Private Investment driven Expansion (\50billion and over)

1 　 Large-scale Investment and New Factory Boom in Kansai and Japan

10

Company Outline of Investment LocationYear of

Operation

Amount ofInvestment

（￥100million）Producing Items

Toshiba New FactoryKitagami,Iwate Pref.

2010 8,500 Flash Memory

Sharp LCD Production FactorySakai,Osaka Pref.

2010 3,800 LCD Panel

IPS AlphaTechnology

LCD TV Panel ProductionFactory

Himeji,Hyogo Pref.

2009 3,000 LCD Panel

Matsushita Electric The Fifth Factory in AmagasakiAmagasaki,Hyogo Pref.

2009 2,800 Plasma Displays Panel

Sumitomo Metal Blast Furnace FacilityWakayama,Wakayama Pref.

2009 2,500 Slab、Steel Plates, Pipes

Suzuki Extension of Factory, etc.Makinohara,Shizuoka Pref.

2011 1,890 Assembly of Automobiles

Matsushita ElectricNew Factory (Extension ofTonami Factory)

Tonami,Toyama Pref.

2009 940 MOS Image Sensor

Canon -Hita,Oita Pref.

2009 800 Tonor Cartridge

Honda New Automobile FactoryYorii,Saitama Pref.

2010 700 Automobiles

Yachiyo New FactoryYokkaichi, Mie Pref.

2009 500 Automobiles, Engines

Source:Nikkan Kensetsu Tsushin, MITI, ＫａｎｓａｉＥｌｅｃｔｒｉｃ ＰｏｗｅｒＨＰ

【 Hyogo Pref. 】 TakasagoAsahi Glass　　Amount 　 \ ３０ billion

和歌山県WAKAYAMA

兵庫県 HYOGO

京都府 KYOTO

大阪府 OSAKA

奈良県NARA

滋賀県 SHIGA

福井県 FUKUI

【 Hyogo Pref 】 Amagasaki Matsushita Electric Ind.Plazma ・ Display ・ Panel （ＰＤＰ）　 Amount 　￥２８０ billion

【 Osaka Pref. 】 SakaiSharp

　 Amount 380billion　

【 Wakayama Pref. 】Wakayama

Sumitomo Metal Ind.

Amount 　 \160billion

Department Stores

Daimaru （ Osaka ）　　　　　　 Hankyu (Osaka ）　　　 Kintetsu （ Osaka ）　　　

【 Hyogo Pref. 】 HimejiIPS Alpha Technology

(Matsushita Electric Ind.　 & others) 　　

　 Amount 　 \ ３００ billion

Source: Various news reports

【 Shiga Pref. 】 KusatsuNitto Denko\8billion 　

Private 　 Investment Project in Kansai

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2 　 Background on Investment Growth in Japan

Postwar Japanese Economic Development 　　

1956 － 1973 　 Era of Rapid Economic Growth (until the 1st Oil Shock) 　 　 　 Keywords: 　 Promotion of Heavy 　 Industries ， “ Three Holy Durables”　　　　　　　　　 (black and white TV, washing machine, refrigerator)

1974 － 1991 Era of Moderate Economic Growth (until the end of Bubble era and Beginning of “The Heisei Recession”): Keywords: 　 Promotion of High-tech and high-precision Industries ， “3C’s”(car, cooler (=air conditioner), color TV)

1992 － 2001 Era of Long Term Stagnation (until the advent of Koizumi regime): Keywords: 　 Globalization raised Concerns about the flight of Important Economic Resources from Japan, IT Revolution

2002 － Era of Economic Revitalization Keywords; Export-driven economic growth （ Increase of Overseas Demand ） and Private Sector Activities But now, effects of former PM Koizumi’s Structural Reforms seem to be shrinking,,,

12

Factors related to the Return of High-tech Factories to Kansai

1.Correction of three ‘excess’ problems companies’ excess deficits, excess employees, excess equipment

2.Severe competition among companies due to globalization -background- Rapid technological innovation in IT & Electronics Industry Increased purchasing power of newly industrializing economies

3. Deregulation related to factory location Restriction of Factories Act (abolished in 2002), Industrial Relocation Promotion Act (abolished in 2006), Factory Location Act 　 (Regulations were diminished in 2004)

13

Development of Global Manufacturing Network in East Asia

　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　

PR.China

ASEAN

Japan

Asia 　 NIEs

U.S. 　 EuropeJapan

Processing/assembling Industries General products/materials

Labor Intensive

High-tech Industry products/materialsCapital Intensive

<Triangle 　 trade 　 + 　 Mutual Supply System of Intermediate Goods>

Source: METI “White Paper2007”

14

Why “Panel Bay” in Kansai 　 now?

１） Roots of Household Appliance makers Kansai is famous as the birthplace of major Household Appliance manufacturers. Panasonic, Sharp, Sanyo still have their headquarters, R&D, business functions in Kansai. Proximity to Kansai airport facilities. .2)Revitalization by Utilization of Unused Land: Panasonic’s 　 Amagasaki Factory → former Oil Firing Power Plant 　 IPS 　 Alpha Technology’s Factory → former Oil Refinery Plant 　　　　　 (plus Local Governments competitive incentives)

3)Business Competitiveness as a whole (Importance of human power) There are business partners who can provide high level process management, quality management, service, as well as high level energy supply. .

15

Regional 　 Income(2005/2001) (base year 2001) 　

Source: 　 Cabinet Office

3 Strengths and Weaknesses of Kansai 16

112.2

107.8106.6 108.5

113.7

100102104106108110112114116118120

(FY2001=100)

J apan(07/ 01)

J apan(05/ 01)

Kansai Kanto Chubu

産業別生産額構成比（２００３年度）

21.1%

30.9%

17.3%

4.6%

5.8%

5.3%

14.2%

11.3%

14.4%

6.3%

5.5%

8.9%

13.4%

11.1%

14.0%

6.2%

6.1%

6.5%

20.0%

16.4%

23.2%

14.2%

12.9%

10.3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

関西

中部

関東

（資料）内閣府『県民経済計算』

製造業 建設業 卸売・小売業 金融・保険業 不動産業 運輸・通信業 サービス業 その他Manufacturing Construction Wholesales・Retail Banking・Security

Real EstateTransport・Telecom Service Others

産業別生産額構成比（２００３年度）

21.1%

30.9%

17.3%

4.6%

5.8%

5.3%

14.2%

11.3%

14.4%

6.3%

5.5%

8.9%

13.4%

11.1%

14.0%

6.2%

6.1%

6.5%

20.0%

16.4%

23.2%

14.2%

12.9%

10.3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

関西

中部

関東

（資料）内閣府『県民経済計算』

製造業 建設業 卸売・小売業 金融・保険業 不動産業 運輸・通信業 サービス業 その他Manufacturing Construction Wholesales・Retail Banking・Security

Real EstateTransport・Telecom Service Others

Industrial 　 Structure (Y2003 ）

Kansai

Chubu

Kanto

Notes: Chubu: 　 Nagano, Shizuoka, Aichi, 　 Gifu, 　 Mie　　　　 Kanto: 　 Ibaraki, 　 Gunma, 　 Saitama, 　 Chiba, 　 Tokyo, 　Kanagawa, 　 YamanashiSource: Cabinet Office

17

Components of the Manufacturing Industry

Transport Machinery

Electrical MachineryGeneral MachineryMetalProducts

Iron & SteelChemicals Others

Kanto

FY2004

18

Notes: Chubu: 　 Nagano, Shizuoka, Aichi, 　 Gifu, 　 Mie　　　　 Kanto: 　 Ibaraki, 　 Gunma, 　 Saitama, 　 Chiba, 　 Tokyo, 　 Kanagawa, 　 YamanashiSource: 　 METI 　” Industry Statistics Tables”

Kansai

Chubu

10.8%

5.1%

10.3%

6.9%

3.2%

4.3%

6.6%

3.7%

4.7%

13.5%

9.1%

11.4%

8.3%

7.9%

5.9%

7.1%

36.0%

14.7%

7.1%

5.0%

8.1%

39.7%

30.1%

40.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Chemicals 　Iron&Steel　

Metals 　 Gen.Mchny Elec Mchny 　TransportEqpt Food&BevOthers

Source: METI Industry Statistics Tables

Kanto

Exports and Imports by Country/Area

26.6

28.4

27.7

26.6

25.9

25.6

24.3

24.1

23.4

22.6

22.6

24.0

24.5

26.7

28.9

30.8

32.0

32.6

33.0

33.6

20.6

18.5

16.4

14.5

13.7

12.1

11.3

9.7

9.6

9.1

8.3

11.4

14.5

14.2

12.8

13.0

14.0

14.0

13.5

11.9

11.1

11.7

10.5

19.3

18.8

19.7

18.9

18.3

18.0

19.2

21.5

22.8

23.0

34.9

25.0

0 10 20 30 40 50 60 70 80 90 100

98

99

2000

01

02

03

04

05

06

Kansai 07（ ）

J apan 07（ ）

Year（ ）

（％）

Asia(excl. PR China) PR. China US ＥＵ Others

Exports 　 Imports

19

Source: Osaka Customs

35.2

37.8

41.5

40.1

41.4

41.8

42.0

41.6

39.8

39.7

32.8

7.7

8.3

9.0

11.4

13.8

17.3

18.0

18.5

19.5

19.4

15.3

25.2

25.2

23.2

22.4

20.2

17.3

16.4

16.4

15.7

14.5

20.1

18.0

17.3

16.5

15.5

14.6

14.4

14.6

13.7

13.9

14.5

14.8

13.9

11.3

9.8

10.5

10.0

9.2

8.9

9.8

11.1

11.9

17.0

0 10 20 30 40 50 60 70 80 90 100

98

99

2000

01

02

03

04

05

06

Kansai 07（ ）

J apan 07（ ）

（％）

ASIA(excl. PR China) PR. China US ＥＵ Others

Ⅲ 　 Industrial Clusters in Kansai

Major R&D Clusters in Kansai

20

Source: KISER

Major R&D Clusters Area(1) Shiga-Nagahama Industrial Cluster Nagahama-Shi of Shiga Pref.

(2) Kansai Science Park8 Cities/town of Kyoto Pref, OsakaPref. anda Nara Pref.

(3) Kyoto Nano Technology Cluster Kyoto-shi, Kyoto Pref.

(4) Kyoto Bio City Conception Kyoto-shi, Kyoto Pref.

(5) Northern Osaka Bio ClusterSuita-shi and Ibaraki-shi , OsakaPref.

(6) Higashiosaka Manufacturing Cluster Higashiosaka-shi, Osaka pref.

(7) Harima Science Garden CityTatsuno-shi,Shinngu-cho,Kamigori-cho and,Sayo-cho, Hyogo Pref.

(8)Kobe Medical Industry DevelopmentProject

Kobe-shi, Hyogo Pref.

(7) Harima Science Garden City

(8)Kobe Medical Industry 　 Development Project

(5)Northern Osaka Bio Cluster (1)Shiga-Nagahama Industrial 　　　 Cluster (Bio-Science and Technology)

Katsura 　 Innovation 　Park

(2)Kansai 　 Science ParkMatsushita 　(Panasonic ）PDP 　 Panels Factory

Sharp, 　 LCD PanelFactory

Kansai International Airport

(6)Higashiosaka 　Manufacturing Cluster

Bay Area Industrial 　 Area

of Fukui Pref.

Hanshin Industrial Area

Sumitomo Metal

Osaka Bay Industrial Area

Automobiles and IT Cluster

(3)Kyoto Nanotechnology Cluster

(4)Kyoto Bio City

21

Source: METI- Kansai

Others 41635%（ ）

Chubu 14812%（ ）

Kanto 389

33%（ ）

Kansai 237

20%（ ）

Total1,190

Others775,839

26%（ ）

Kanto1303230

43%（ ）

Kansai631561

21%（ ）

Chubu304745

10%（ ）

Total3,015,375

Number of Universities/Colleges ( ＊ )

in Japan 　 by 　 Area

Note: ( ＊ ) Universities, Colleges, Graduate Schools, Junior Colleges. As of May 2007Source: 　 Ministry 　 of Education, Culture, Sports, Science & Technology

Number 　 of Students in Japan 　by 　 Area

22

Kansai Electric Power and Sharp’sMega Solar Electric Generation System in Sakai

1st Stage

2nd Stage (KEP is planning to supply Electricity for Sharp’s LCD Panel Factory and other factories in theArea)

Ⅳ. Closing Remarks23

Photo Source: Ｋａｎｓａｉ　Ｅｌｅｃｔｒｉｃ　Ｐｏｗｅｒ　 Co., Ｉｎｃ． HP

Today (July 7th) 　 is Tanabata( 七夕 ), or the day of the Star Festival in Japan.

　 This event is based on a Chinese 　 legend, 　 in 　 which 　 Ken-gyuu （ or Hiko-boshi) （ the star Alter ） meets Ori-hime （ the star Vega) only once a year on this day over the Milky Way.

The Japanese 　 celebrate 　 this 　 day 　 by putting up long branches of bamboo with 　 colorful 　 decorations at home. 　 People also make a 　 wish and 　hang 　 a 　 strip 　 of 　 paper 　 on bamboo sheaths with their wish written on it.

Milky Way

Ori-hime ＝ Star Vega

Ken-gyuu=Star Alter

Photo Source: National Astronomical Observatory of Japan

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