Japan’s rural areas are depopulating – could a circular economy deliver local economic revitalization?

In an ageing Japan, the ongoing population decline and growing concentration of people in urban areas are causing a natural decline in rural populations, making redesigning local economies an urgent concern.

Simultaneously, this demographical change presents an opportunity to encourage a sustainable circular economy and more use of renewable energy. In so doing, we must explore innovative approaches to economic revitalization while harnessing the region’s plentiful natural resources.

Regional revitalization does more than invigorate the economy. It opens up the potential to prosper and enjoy sustainable lives in rural areas, even amid a declining population. This endeavour, as well as being rooted in the conservation of nature, safeguards the environment in regions affected by depopulation, which covers roughly 60% of the country’s land area or nearly half of the municipalities. It protects ecosystems through the responsible use of natural resources in place of their neglect.

The shift towards a nature-positive economic transformation to achieve net zero carbon goals and regenerate natural resources demands a fresh model that harmonizes environmental preservation and economic growth. It necessitates bold changes to existing economic paradigms at the local community level.

For instance, the hometown tax (Furusato Nozei) – a donation scheme with a tax credit –introduced by Japan’s government has been helping revitalize local economies since its launch in 2008. The idea is for residents to donate to municipalities of their liking and, in return, receive a tax credit. The amount of donations being sent to rural areas is steadily increasing.

The government launched a corporate version of Furusato Nozei in 2016. Yahoo Japan Corporation, for instance, has donated to eight local governments through the programme as part of their goal to become carbon neutral. In one case, the company chose Osaki Town in Kagoshima Prefecture as a donation recipient, recognizing its 12-year run as having the highest recycling rate in the country.

As the World Economic Forum’s Fostering Effective Energy Transition 2023 highlights, maximizing renewable energy is one of the critical pillars of the energy transition, particularly in Japan, an island nation. Additionally, it is widely acknowledged that local economies’ advancement and long-term viability are vital to a successful transition to a circular economy.

Numerous companies in Japan are actively taking measures in this direction. Suntory Holdings, for instance, is partnering with Yamanashi Prefecture and various companies to develop a green hydrogen production system in the southwest Tokyo area. The green energy produced can be used by the local community as well as Suntory’s production plants in the area.

Meanwhile, pharmaceutical company Takeda has partnered with environmental and energy company ORIX Eco Services and the Japan Freight Railway Company to reduce blister packaging waste, using transportation that emits less carbon dioxide.

As hydrogen is fast becoming an attractive new energy source, Hitachi is taking an advanced approach by assisting one of Japan’s various initiatives to realize a hydrogen-based society in Tomiya City in Miyagi Prefecture through a comprehensive hydrogen supply chain encompassing production, storage and utilization.

Japanese unicorn TBM, which develops, manufactures and sells paper and plastic alternative products made from a limestone-based material they developed called LIMEX, is pursuing a resource-autonomous model that uses its own resources. The company has two in-house manufacturing facilities in Miyagi Prefecture that operate on virtually 100% renewable energy and has concluded a partnership agreement with Japan Professional Football League club Vegalta Sendai to create innovative recycling projects to assist regional revitalization.

The company also recycles LIMEX cups used at home stadiums and reprocess them into artificial wood benches mixed with wood powder from Miyagi Prefecture.

Progressing these trends, however, requires that value creation goes beyond the limits of a single place or industry. Digital technologies and cross-industry collaboration have become crucial here.

The Keidanren (Japan Business Federation) has stressed that collaboration between companies should start transcending the boundaries of a single company or industry. Recycling efforts should focus on the entire supply and value chain, including corporations that process and make raw materials.

Its policy states: “These industries serve as the backbone of economic activity, supporting the growth and development of other sectors and to deepen cooperation among and between the dynamic industries. In addition, public-private partnerships are essential for the realization of a circular economy, and we will continue our dialogue by taking advantage of venues such as J4CE (Japan Partnership for Circular Economy).”

In April, the importance of moving towards a circular economy was expressed at the Group of Seven summit in Hiroshima (G7 Hiroshima Summit 2023). Action guidelines were adopted to promote the private sector’s efforts. At the same time, Japanese Prime Minister Kishida Fumio also visited a recycling facility in Imizu City, Toyama Prefecture, which is engaged in resource recycling.

To promote the circular economy, Kishida announced the launch of an industry-government-academia consultative body led by the Ministry of Economy, Trade and Industry (METI) and the Ministry of the Environment, showing the government’s commitment to sustainability. And that could be the silver lining to Japan’s declining rural populations.