At the beginning of this new millennium, many OECD countries find themselves embarked on a demographic transition that is without precedent in history. Our populations are ageing rapidly and, in many cases, they are also beginning to shrink. While these processes have gone further in Japan than elsewhere, they are by no means unique to Japan – many OECD countries will move down the same path as the century unfolds, with important consequences for both economic performance and settlement patterns.

Japan is experiencing an unprecedented demographic transition. The population is both declining and ageing very rapidly. On current projections, the population is expected to decline by around 23% between 2010 and 2050, with the elderly (65+) share of the population rising from around 26% today – the highest in the OECD area – to almost 40% at mid-century.

Japan’s future prosperity depends on its ability to tackle two enormous and inter-related challenges, which will largely shape its future spatial and economic development. The first is an unprecedented process of demographic change: the country’s population is ageing and shrinking rapidly. The second challenge concerns productivity. With the labour force shrinking as a share of the population, output per worker will have to rise even faster if per capita incomes are to increase. A “super-ageing” Japan cannot sustain rising living standards without strong, sustained productivity growth. This will require efforts to stimulate innovation and entrepreneurship and to strengthen the international integration of the Japanese economy. The productivity of services, in particular, will be a critical concern, because demographic change will create challenges for service delivery, in particular – both increased demand for age-related services and increased unit costs for service delivery in places where population is falling.

This chapter provides an overview of regional trends and challenges facing Japan. It begins with a look at the demographic and macroeconomic context, reflecting in particular on the implications of population ageing and decline for economic policy, especially efforts to enhance productivity. It then turns to an analysis of regional growth performance, inter-regional disparities and other socio-economic outcomes. This is followed by consideration of the economic policy response to demographic change at different territorial scales, from the national to the local, and an examination of the spatial consequences of Japan’s restructuring challenge. The primary focus of the discussion is on the interactions among demographic change, productivity performance and the evolution of the country’s settlement pattern.

This chapter considers the institutional and policy framework that Japan is putting into place in order to secure national prosperity and a sustainable settlement pattern in the face of the quite radical demographic changes now under way. It starts with an analysis of the National Spatial Strategy adopted in 2015 and a look at the work of the Government Headquarters for Overcoming Population Decline and Revitalising the Local Economy. This is followed by a discussion of the relationship between revitalisation efforts and policies aimed at greater decentralisation in Japan’s public governance. Two further sections focus on inter-governmental revenue-sharing and grant allocation and on possible pathways for reforming inter-governmental transfer mechanisms. The final portions of the chapter consider national infrastructure policies and the future of local public corporations, particularly – but not only – those working in infrastructure sectors.

This chapter looks at policies aimed at strengthening the competitiveness and liveability of Japan’s major cities, particularly the three great metropolitan areas centred on Tokyo, Osaka and Nagoya. It begins with a description of Japan’s urban system and an analysis of recent trends in urban settlement patterns and in economic and environmental performance. This is followed by a discussion of Tokyo’s global competitiveness and its future. The future of Tokyo is intimately connected with plans to forge Tokyo, Osaka and Nagoya into an urban mega-region, united by super-high-speed magnetic levitating trains. The chapter reviews the prospects for this effort, looking at international experience with such mega-projects and at the “soft” policies that should accompany this infrastructure effort. Finally, it examines ways in which Japan can make the most of its investment in hosting the 2020 Olympic Games in Tokyo and at social policy for cities.

This chapter is concerned with the revitalisation of Japan’s smaller cities and towns and its rural areas. It begins with a review of revitalisation policies in Japan and then presents a brief overview of economic conditions and trends in Japan’s intermediate and predominantly rural regions. It then presents the current package of revitalisation policies before turning to three key themes that emerge in discussions of regional and local revitalisation efforts. The first is the relationship between agricultural and rural development policies, which has been evolving in Japan in recent years. The second is the design of policies for geographically challenged regions, such as small islands and remote mountainous areas, of which Japan has many. The third concerns the policy framework for managing infrastructure, service delivery and economic development in places that are destined to lose much of their population over the longer term.