Success in Japan: Why West Japan Matters for Business
West Japan is not just a picturesque region with historical significance but a thriving business destination with a wealth of opportunities. The economic strength, innovation, skilled workforce, manufacturing capabilities, cultural appeal, global connectivity, government support, and quality of life all make it an attractive location for businesses. As the business landscape in Japan continues to evolve, West Japan’s significance as a strategic hub for growth and success should not be overlooked or underestimated.
The region comprises 29 out of 47 of Japan’s prefectures and accounts for 45% of Japan’s total GDP. This is larger than the GDP of Russia and close to that of the UK and France.
Six of Japan’s ten most populous metropolitan areas are in West Japan, with major economic centres including Kansai and Kyushu accounting for 16.2% and 10% of Japan’s total GDP respectively.
The cost of living is generally lower in West Japan compared to Tokyo, which can be a significant benefit for businesses and employees.
West Japan is home to several leading technology companies, research institutions, and universities. The region has a thriving tech ecosystem. This fertile ground for innovation has given rise to numerous startups and tech giants, providing businesses with ample opportunities for collaboration, research, and development.
West Japan is known for its manufacturing excellence. Kobe Steel, Panasonic, and Daikin Industries are some of the key players located in the region. The manufacturing industry benefits from strong logistical networks, local suppliers, and a stable regulatory environment, which contribute to the growth and success of businesses in this sector.
The cultural richness and historical significance of West Japan make it an attractive location for businesses involved in the tourism and hospitality sectors. Kyoto’s temples, Nara’s deer park, and Osaka’s vibrant street food culture draw tourists from all over the world. Businesses that cater to the tourism industry can capitalise on these unique attractions.
West Japan’s accessibility to international markets is another critical factor that makes it appealing to businesses. Osaka’s Kansai International Airport and Kobe’s Port rank among the busiest in Japan, offering convenient access to various global destinations. This connectivity ensures that businesses can easily export and import goods and services.
Differing in many respects from East Japan, we can pinpoint Kansai and Kyushu as major economic centres with certain areas of specialisation that may present new business opportunities.
The Kansai region, encompassing cities like Osaka, Kyoto, and Kobe, serves as the economic powerhouse of West Japan. Osaka, in particular, is often referred to as the “nation’s kitchen” for its role in trade and commerce. The region boasts a well-established infrastructure, including world-class airports, ports, and a robust transportation network. This facilitates efficient supply chain management and trade with neighbouring countries.
The Kansai economy of 7 prefectures is about the same size as the Turkish economy and accounts for 16.2% of Japan’s total GDP. The most populated area in the region is Osaka, which produces about half of the total regional output. The region’s manufacturing sector accounts for 16.6% of overall national output (consistent with regional output) but with strength in electrical/electronic machinery. Kansai’s regional economy is expected to outperform the national average, led by stronger net exports (-0.4% vs. -0.9% and 2.0% vs. 1.9% respectively). Exports from the region account for 21.3% of national exports with higher exposure to Asia (67% of all regional exports vs. 54% of national exports). It produces a higher proportion of manufactured products and services than the national average.
West Japan is home to several leading technology companies, research institutions, and universities. Osaka and Kyoto, for instance, have a thriving tech ecosystem. This fertile ground for innovation has given rise to numerous startups and tech giants, providing businesses with ample opportunities for collaboration, research, and development.
The Kansai area is a crucial part of Japan’s renewed focus on three promising sectors; ‘medical’, ‘tourism’ and ‘womenomics’ as areas with high growth potential.
- Medical: Kansai is a centre of medical related production with the largest share (29%) of national medical drug production and the second largest share (18%) of medical device production. Its population is expected to age faster than the national average, creating higher demand for pharmaceutical and medical related goods and services. In addition, national exports of both medical drugs and devices are expected to grow to almost four times their current value, exceeding 1tr yen in 2025.
- Tourism: Kansai International Airport (KIX) is the busiest airport for foreign visitors, well above Narita and Haneda.
- “Womenomics”: A smaller proportion of women in Kansai work compared to the national average (about 40% vs. 45%). Raising the female labour participation rate to the national average could boost Kansai GDP by 1.8%. Achieving this would stimulate a large demand for child care facilities and related services.
The Kyushu economy of 7 prefectures accounts for about 10% of national GDP. This is about the same size as Austria (the world’s 28th largest economy) and just smaller than that of Taiwan. The regional economy is comparatively strong in the sectors of agriculture (19.5% share of national output), IC production (28.1%) and automobile production (13.3%). The regional economy is expected to grow slightly below the national average (1.3% vs. 1.9%) partly due to its higher reliance on agriculture sector despite a higher share of exports (59.3% vs. 54%).
Similarly to Kansai, Kyushu also contributes to the areas of ‘tourism’ and ‘medical/health’, however it is also a prominent contributor in promoting clean energy and environment as well as in agriculture.
- Kyushu University houses top class hydrogen energy research facilities. Such national Government initiatives and leading research facilities should provide a foundation for the sector to expand.
- The region is also expected to suffer more than the national average from aging and declining working population, producing higher demand for medical and nursing services. Increasing health awareness could open up further markets for ‘healthy food’, value-added food developed in its strong agricultural base.
- The Government aims to transform the Japanese agriculture sector into a competitive one and to double agricultural exports to 1tr yen (£4.5bn). This policy boost should help the region’s agriculture increase its production especially given its location advantage (close to consumers in growing Asian markets).
- Kyushu Economic Federation aims to more than triple foreign tourists visiting the region to 4.4m from current 1.3m. The region has plenty of natural resources such as onsens (hot springs) which could be leveraged as tourist attractions. Fukuoka hosts more international conferences in Japan than any city other apart from Tokyo.
As Kansai and Kyushu have common sectors with high potential growth, there are areas of opportunity for UK businesses to capture increasing demand in both regions. This includes the pharmaceuticals and medical devices sector, an area of longstanding UK strength.
Additionally, the private and public sector in both regions see the OsakaEXPO2025 as a big opportunity for growth in commerce and tourism.
To further encourage business growth and investment in the region, the local governments offer a range of incentives, including tax breaks and grants. These incentives are designed to attract and support businesses in areas such as renewable energy, biotechnology, and advanced manufacturing.
Connect with us today to understand the potential for your business in tapping into these exciting opportunities presented in West Japan.
Last updated November 2023: Steve Crane OBE