The Journal The Authority on Global Business in Japan

INVESTMENT | OKINAWA

January 2014

The Isle of Opportunity
Tourism, ICT sector, and increased population have helped Okinawa’s economy to expand rapidly

Custom Media

Over the past five years, the economy of Okinawa Island has expanded more rapidly than that of the main Japanese island of Honshu, primarily as a result of population growth, increased tourism, and the information and communications technology sector.

These factors, in turn, have fueled private consumption, investment, housing construction, and consumer-related business, transforming what not long ago was considered a business backwater into what optimists believe is a strategically located isle of opportunity. And it doesn’t hurt that the island is still blessed with coral reefs, long golden beaches, and a far less frenetic lifestyle than that of Tokyo, Osaka, or any other of Japan’s cities.

“Okinawa is doing fairly well, but much can be attributed to the sustaining value of the US military bases in Okinawa, which employ many Okinawans who purchase numerous goods and services locally,” said Walt Christiansen, president of the American Chamber of Commerce in Okinawa.

“Tourism is also a fairly good contributor to the economy, and prospects for the future are looking good in this sector,” Christiansen said. “Much of the rest of the financial impact comes as subsidies from Japan’s mainland central government.”

According to Christiansen, the construction sector is “still quite robust,” while many Japanese are choosing to invest and retire in Okinawa. Further, the national government has approved a second runway at the overused Naha Airport, which will bring a welcome boost to the island’s economy.

But 67-year-old Christiansen, who is from Panama City Beach, Florida, cautioned that the islands still lack manufacturing and large-scale financial operations that could see the local economy take off, as well as dramatically benefit US-owned companies based in Okinawa.

“Realistically, the US business base is not going to grow significantly,” he said.
“There are hundreds of American businesses operating on mainland Japan. These companies—including giants like Boeing, Kraft Foods, and Pittsburgh Paint & Glass—could operate in Okinawa if they were given an incentive.

“Right now, there really isn’t one.”

Numerous companies are, nevertheless, members of the local US chamber of commerce and are thriving.

“Our business is the tourism industry and we are doing very well, in large part, thanks to the upward trend in tourists,” said Ryuko Hira, president of Okinawa Ora Corporation KK, which owns the Rizzan Sea-Park Hotel at Tancha Bay.

Statistics compiled by the prefecture show that the second quarter of 2013 saw a year-on-year increase of 11.2 percent in the number of inbound visitors and of 10.4 percent in revenue from tourists.

“The national government’s campaign to promote tourism throughout Japan has been a big help, along with promotional efforts by the local government. But I would say that the biggest reason [for the growth in tourism] has been the public’s recognition of the beauty of Okinawa’s natural environment,” Hira said.

Like others who heavily depend on the tourism sector, Hira is looking forward to the completion of the new runway, scheduled for 2019.

In addition to the influx of tourists, there has been migration to the islands from Japan’s main island. In particular, many families from the Tohoku region of northeast Japan have relocated there since the March 2011 triple disaster.

“I believe that this increase in the local population will have a great long-term impact on the economy,” said Victoria Kuznetsova, marketing and sales manager for healthcare and beauty products company Acche KK, which has an office in Okinawa.

“Abenomics has helped the recovery in tourism-related industries, although it may not have assisted other sectors quite so much,” Kuznetsova said.

Further investment by the national government is needed, such as the construction of a railway between Naha and Nago in the north of the island.

“But we are optimistic about the future for our business in Okinawa,” she said.

“Investment from the mainland is continuing, new department stores, shops, and other businesses are opening, while new apartment buildings are being constructed.”

All these projects are an opportunity for Mike Holland’s business, English Teachers in Okinawa, which he started in April 2004.

“Okinawan companies are finally starting to realize that they need English for their businesses to grow,” said Holland, a member of the chamber’s board of governors and originally from Boston.

“The Okinawa prefectural government has been receiving more money from the national government for the past few years and some of that is being spent on trying to make Okinawa more international,” he said.

Richard Boudreault, president of Ginowan City-based American Engineering Corporation, echoed the optimism for the tourism sector. According to Boudreault, the Japanese government is injecting substantial funding into the prefecture for the construction of roads in the area’s northern districts and to update the water supply system.

“On a local basis, we do construction work for the prefecture and local cities,” he said. “But we deal primarily with the US government for maintenance and construction on all the bases in Japan.”

For other people, the bases are a source of political friction between the national government in Tokyo and local authorities and residents. Although the US military provides locals with revenue and employment, among some it raises the question of sovereignty.

“A study of the issues would show how much concern Okinawans have for their financial future without the American bases being in the prefecture,” said Christiansen.

“Would the central government begin committing more money to developing Okinawa? It’s a good question; I have no good answer.”

Dr. Hiroshi Kakazu, who serves on the panel of experts advising Japan’s Cabinet Office on the development of the prefecture, firmly believes that Okinawa’s future is rosy.

“The increase in the population and thriving tourism have been the two main engines of Okinawa’s growth. They have created private consumption demand and investment, including housing construction and consumer-related businesses,” Kakazu said.

“Amid depopulation in Japan proper, Okinawa’s population grew from about 1 million in 1972 to 1.4 million in 2013. The population is still growing because of the longevity of the people, the warm and earthquake-free conditions, and the proximity to dynamic Asia.”

He added that although expenditure by the national government remains very important, Okinawa’s weight in prefecture-based gross domestic product has remained almost constant in recent years.

“The most important effort will be how to make use of returned US military bases over the next one to 15 years,” he said.

“Another big challenge will be to establish Okinawa as a cargo hub for Asia. But we can see that, since All Nippon Airways established its Naha cargo base in 2009, cargo shipments have increased nearly 500 times,” he said. “This demonstrates that Okinawa’s location as the ‘keystone of the Pacific’ is becoming a reality.

“Okinawa should be Japan’s frontrunner to reap the economic dynamism of the rest of Asia.”