The Journal The Authority on Global Business in Japan

Call it the blip heard around Japan’s manufacturing world. A pair of little-noticed statistics, published last year, showed a historic reversal of fortunes in Nagoya and Osaka, Japan’s manufacturing and mercantile capitals.

The economies of these two cities have long ranked second and third nationally, trailing only the megalopolis that is Tokyo. Not anymore. The gross regional product (GRP) of Aichi Prefecture, the region that is home to Nagoya and 7.5 million people, has now surpassed that of Osaka Prefecture.

For the Japanese fiscal year ended March 2016—the most recent 12-month period for which statisticians have tabu­lated figures—Aichi’s nominal GRP was ¥39.56 trillion ($350 billion). Economically, Aichi now tiptoes above Osaka (¥39.11 trillion) and stands above some entire countries, such as Denmark.

STATISTICAL STORY
Nagoya is the buckle in Japan’s factory belt, binding together a region that is home to household names such as Toyota Motor Corporation, Denso Corporation, Brother Industries, Noritake Company Limited, and Makita Corporation.

Nagoyans have Sakichi Toyoda to thank for this. He invented a loom in 1924 that not only revolutionized Japan’s textile industry but also paid for a spin-off that became the Toyota Motor Company. Today, autos and auto parts are Aichi’s biggest industry, accounting for one-third of jobs.

Nagoya is also a runway for Japanese aviation. The Boeing Company, Lockheed Martin Corporation, and The Raytheon Company are partnering with Mitsubishi Heavy Industries, Ltd. on high-flying projects, such as making the wings for the 787 Dreamliner (Boeing), assembling the F-35A stealth fighter (Lockheed), and producing parts for the SM-3 Block IIA missile (Raytheon).

Statistics tell the story of Nagoya’s industrial dominance with assembly-line monotony. The greater Nagoya area, inclu­ding Aichi, has topped Japan’s 47 prefectures in manufacturing for the past 40 years. In 2017, industrial shipments were almost triple those of its nearest rival, Kanagawa.

BEYOND THE BLAST FURNACE
But that’s old news for Nagoyans. The GRP data is the latest in a slew of new metrics that point to the possibility of a broader reshuffling of Japan’s regional economic deck. Attracted by a labor shortage in the region’s ubiquitous factories, Aichi’s popu­lation of foreign-born workers sur­passed Osaka’s in 2016 and is now second only to that of Tokyo. The influx—with Brazilians, Chinese, and Filipinos leading the way—explains why Aichi was one of just seven prefectures to eke out a population increase in 2017. While local leaders around Japan have bemoaned the great sucking sound emanating from Tokyo for as long as anyone can remember, the percentage of large Japanese companies headquartered in Nagoya increased in recent decades, from six to eight percent.

PAY IT FORWARD
The most visible manifestation of Nagoya’s rise has been a record growth spurt, driven by export sales and capital investments. In March 2019, the Bank of Japan assessed the region’s economy as “expanding” for an 18th straight month, its longest such run this century.

Confidence in Nagoya’s economic pros­pects has translated into a surge of investment in equipment as well as research and development. One survey showed that, last year, major companies in the region collectively earmarked $34 billion for invest­ments, some of which has gone toward US manufacturing operations. This has created high-paying jobs for Americans and a win–win for both economies.

MANUFACTURING MODESTY
And there’s more to come. Japan’s first domes­tically made jetliner—built in Nagoya, of course—will take off in 2020. Nagoya plans to restore its iconic 17th-century castle by 2022, the same year Japanimation giant Ghibli opens its first theme park near the city. And a magnetically levitated super-train will whoosh into town in 2027, slashing the travel time between Nagoya and Tokyo from 90 minutes to just 40.

All of which is to say that the future is looking up for a city synonymous with manufacturing, modesty, and the delicious local speciality miso katsu. While they’ll never do it with the flash of their extro­verted cousins in Osaka, Nagoyans should be forgiven for indulging in a little uncharacteristic swagger.

Gary Schaefer is principal officer at the U.S. Consulate Nagoya and a member of the ACCJ-Chubu executive committee.