Friday, October 12, 2007

Where have the factories been closing fastest?

It may not be where you thought.

Courtesy: Nihon Keizai Shimbun
Evening edition of October 11, 2007

According to the Ministry of Economics, Trade and Industry, factory and workshops have been closing down fastest in the Tokyo Metropolitan District. In between the end of the year 2000 and the end of 2005, an incredible 28.0% of all TMD factories and workshops (fabrication facilities employing fewer than 3 persons) closed their doors.

During that same period of time, the population of the TMD grew 4.2%--more half a million persons.

A lot of service jobs opening up in Tokyo, it seems.

Other prefectures with significant percentage losses over the end 2000 - end 2005 period include:

Gifu - 23.7%
Nara - 23.5%
Osaka - 23.4%

Interesting in the above map is the position of Aichi among the top ranks of prefectures in terms of percentage of closures. If any part of Japan could preserve the many-layered pyramid of suppliers and sub-contractors, one would think it would be the home of Toyota Motors.

Also interesting are the contrasting fates of the Chūgoku Region and Shikoku. In Shikoku, manufacturing has basically collapsed. In the Chūgoku is has stayed relatively steady (let me be the first to say that the Nikkei's scaling is damn suspicious). If the graph is not entirely misleading, one might hazard a guess that exports to China have something to do with the relatively better survival rates of the Chūgoku region factories.

Another general rule--if you were an economic basket case to begin with, you did not lose nearly as many factories percentage-wise (yes, I'm talking about you, Hokkaidō)--unless your name is Akita, the prefecture with the highest suicide rates of all Japan.

Shizuoka's stability is understandable, given its role as the Tokaidō's industrial underbelly.

Shiga's is an untold story. The prefecture is doing something right--aside from the southern Kantō, Aichi, Fukuoka and those happy breeders down in Okinawa, Shiga is the only prefecture that has been consistently gaining population. It is also holding on to its factories.

Whatever romantic notions one may hold of Japan's true economic strengths, the country sure as heck was not clinging to a monozukuri culture during the Koizumi years. Indeed in general, the healthier the economy of a prefecture, the faster it was disposing of its factories.

The Nikkei's choice of subject and time frame is somewhat amusing. On the very same day, METI released figures showing that for the first time in 15 years total employment in manufacturing grew year-to-year in 2006.

Ken Worsley over at Japan Economy & News Blog has already offered his take on the 2006 numbers.


Anonymous said...

"Indeed in general, the healthier the economy of a prefecture, the faster it was disposing of its factories."

Thanks, that's very perceptive. This cuts to what is fundamental about capitalism.

Christopher said...

There are a lot of weird things going on.
Okayama city is experiencing a condo boom in spite of its citizens losing all those great, high paying metal bashing jobs and the city/prefecture teetering on the edge of bankruptcy. In the past 5 years almost every corner of what stands for the main drag has had a huge condo put up. Well, has the population of Okayama blasted through the sky? Or is it a sign of let's buy a condo as an investment?

Yes, Shikoku is a disaster. I was in Marugame the other day to see the Ernest Netto exhibit. Basically the shotengai of Marugame city is a desolate stretch of shuttered stores. We had a teishoku meal for 550 yen. My friends were amazed at how cheap it was. Marugame is seemingly trying to reinvent itself with let's build something cultural and then watch the money roll in. There is no money in Marugame.

Jan Moren said...

It's difficult to read out anything from this single data point. I would like to see:

* What are the proportional numbers for each region - ie. what proportion of Tokyo or Osaka TMD:s closed?

* How many such businesses opened at the same time (or is the nubmer the difference betwen opened and closed businesses)? What is the situation for small businesses in other sectors during the same time?

* What happened to larger businesses in the same sector?

It's all but impossible to say what is happening. But I would hazard a guess that this is connected to urbanization. The areas that have lost most small manufacturing are those with very dense and increasing population.

So, a small manufacturer may have been located in a semi-rural area twenty years ago. Now the same spot is crammed in between condos, single homes, cafes, cultural centers and whatnot. So there's less tolerance for noise and pollution; your transports become a hassle as trucks have to navigate urban streets; land prices are up and nearby land perhaps unattainable so you can't expand.

My guess a good deal of businesses simply leave for literally greener pastures in order to expand, or sell out - transfer work to larger competitors and sell the land to a developer.

MTC said...

janne morén -

The Nikkei article (it was very brief) mentioned conflicts arising from the noise & pollution of manufacturing and the increasing density of urban habitation as encouraging the closure of production facilities in the TMD and Osaka-fu.

If you know of studies that describe the loss of manufacturing faciilities in finer detail, I invite you to post the URLs.