A Hokkaido postscript: Endless recession

The Nikkei reported not so long ago on prefectural GDP and per capita incomes for FY3/08 (the Cabinet Office takes forever to collate the data).

Regional income gaps persist

FY3/08 average income ¥3.06mn, declines in Hokkaido, elsewhere  

Tokyo (Nikkei)—According to data on prefectural economies for FY3/08 released by the Cabinet Office on the 19th, average per capita prefectural income rose 0.7% to ¥3.06mn. Incomes rose in regions such as Kyushu and Chugoku, where manufacturing plant numbers have increased, but incomes in Hokkaido, Tohoku, and Shikoku fell. The metric that shows intraregional income gaps was virtually unchanged YoY, thereby confirming that the income gap widening that occurred in the first half of the last decade remains in place.

Per capita prefectural income is calculated by dividing the sum of working people’s wages, corporate profits, and dividend and interest income by the population. At a press conference held the same day, Cabinet Office Secretary Keisuke Tsumura noted that variation in incomes from prefecture to prefecture remained elevated and that perceptions of intraregional gaps were backed up by the statistics.

Per capita prefectural income was highest in Tokyo, at ¥4.54mn, with Aichi in second place at ¥3.59mn. At the bottom of the ranking stood Okinawa, with ¥2.05mn. The coefficient of variation, which shows intraprefectural income differentials, stood at 15.30, almost unchanged from 15.33 in FY3/07. Having turned higher in FY3/02, it remains elevated. 

The per capita YoY income growth rate was highest in Saga, at 5.0%. Silicon wafer and other electronics industries grew significantly, and chemicals and primary metals also fared well. Hokkaido saw the largest percentage decline in income, at 3.4%, as construction and wholesale/retail were weak. At the regional block level, Hokkaido/Tohoku and Shikoku reported income declines, but incomes grew in all other regions. 

(The Nikkei February 20 morning edition)

 I turned to the Cabinet Office data itself to get a measure of Hokkaido’s endless recession. 

Hokkaido’s real GDP fell from Y20.7trn in FY3/97 to Y19.6trn in FY3/08 (down 4.9%), falling every year but one from FY3/02 to FY3/08. 

Hokkaido’s nominal GDP, which is unadjusted for deflation and better reflects how much money people sense they have in their pockets, fell from ¥20.9trn in FY3/97 to ¥18.5trn in FY3/08 (down 11.6%), falling every year but one (FY3/01). 

Per capita prefectural income, which is a still better reflector of how well off people feel, fell from ¥2,825,000 (roughly $30,300 at the current exchange rate) in FY3/97 to ¥2,408,000 ($25,800) in FY3/08 (down 14.8%), declining every single year without exception. In FY3/97, Hokkaido ranked 30th out of the 47 prefectures, with per capita income 12.3% below the national average; by FY3/08 it had slid to 39th, with income 21.3% below the national average. 

We can be confident that the numbers for FY3/09 will be atrocious and reasonably confident that the numbers for FY3/10 will be unpleasant. 

What is occurring in Hokkaido is a diseased mirror image of what happens in a normal post-war business cycle in a developed country, where years of steady growth are punctuated intermittently by recessions of six to eighteen months. Hokkaido rather has been groaning through years of recession punctuated by very occasional and brief spurts of expansion. If Hokkaido were an independent country, swarms of experts would descend upon it, attracted by its extraordinary exceptionalism, to prod the carcass of its economy, examine the atrophy of its institutions, and advise its government on the errors of its ways. 

The causes of the endless recession do not need great elaboration: an overdependence on the teat of public works spending, from which the island has found it so difficult to wean; the lack of its own enterprise foundations (there are just 22 companies listed exclusively on the Sapporo Securities Exchange); the dearth of sophisticated manufacturing (the presence of Japan’s automakers, for instance, is confined to a Toyota transmission plant and an Isuzu engine factory); the collapse of what was left of the mining and forestry industries and hard times for the steel and pulp & paper industries; time-consuming and expensive transport connections with the rest of Japan; an overcentralized state that shows no inclination to move any part of central government administration to the regions and a private sector that mimics this, further concentrating power in Tokyo; the fickleness of tourist tastes; and above all the fragility of the economy of the motherland to the south. 

The consequences of the endless recession must be apparent to anyone who has read the preceding series of posts.

5 responses to “A Hokkaido postscript: Endless recession

  1. Too bad. My guess is that the Japanese will not make the necessary changes until a true economic collapse is at hand. I got married in Sapporo and have fond memories of Hokkaido, both from summer and winter stays.

  2. Andrew in Ezo

    What’s the point of encouraging “sophisticated manufacturing” in Hokkaido? All of the subcontractors would be located in Honshu, as well as the markets. Hokkaido is two things, agriculture and tourism.

    “time-consuming and expensive transport connections with the rest of Japan”
    LCC’s have or will begin services between Chitose AP and Nartita/Kansai. As for driving, well there is the problem of the Tsugaru Straits. Can’t fight geography.

    • “What’s the point of encouraging “sophisticated manufacturing” in Hokkaido?
      I wasn’t (in what I wrote) advocating the encouragement of it, merely pointing out its dearth. But if Iwate can have a successful auto manufacturing plant:
      I don’t see many reasons (though I do see some, naturally) why Hokkaido shouldn’t.
      “All of the subcontractors would be located in Honshu, as well as the markets.”
      You’d much rather have a job at Kanto Auto Works than at one of its subcontractors, believe me.
      “LCC’s have or will begin services between Chitose AP and Nartita [sic]/Kansai.”
      Skymark’s been flying the Chitose route for years.
      “Hokkaido is two things, agriculture and tourism.”
      Bad luck then, Hokkaido! But you are of course being essentialist: to consider how that might be so, take a mental trip back to 1850, when Hokkaido was neither of those “two things, agriculture and tourism”, and have the courage of imagination to at least contemplate how it might be different.

  3. I rarely drop remarks, however after reading through a great deal of comments on this page A Hokkaido postscript: Endless recession | Spike Japan. I do have some questions for you if you do not mind. Could it be just me or do a few of these responses look as if they are coming from brain dead people? 😛 And, if you are posting on other sites, I’d like to follow everything new you have to post. Would you make a list of the complete urls of all your social community pages like your Facebook page, twitter feed, or linkedin profile?

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