The Journal The Authority on Global Business in Japan

There is a local saying in Kansai: the ideal life is to “study in Kyoto, work in Osaka, and live in Kobe.” Although this phrase may not have a long history, the business aspects of Osaka do. Going as far back as the Middle Ages, known in Japan as the Classical Period, the city was recognized as a hub
of commerce for the country.

This dynamic has continued well into the modern era. Japan’s first brokerage company, Nomura Securities Co., Ltd., was founded in Osaka in 1925. And one of the city’s best-known business successes was Konosuke Matsushita, founder of electronics giant Panasonic Corporation. He started the company, previously known as Matsushita Electric Industrial Co., Ltd., in Osaka in 1917 and had developed it into a multi-billion-dollar behemoth by the time he stepped down as president in 1961.

Even today, some of Japan’s best-known companies—such as Sharp Corporation, Takeda Pharmaceutical Company Limited, and Suntory Holdings Limited—have their headquarters in Osaka. In fact, of the 51 Japanese corporations that made the Fortune 500 list of the top 500 companies by revenue for 2017, seven are based in Osaka.

AIM HIGHER
Compared with Tokyo, however, Osaka is a distant second when it comes to economic and political might. And when foreign companies look to open their first locations in Japan, Osaka is usually not their starting point.

In response to this sentiment, the city of Osaka and the outlying prefecture have established a number of organizations and initiatives to help attract Japanese and foreign investment. The aim is to benefit not only Osaka but the Kansai region as a whole.

Kazuko Murai, Invest Japan coordinator at the Japan External Trade Organization (JETRO) Osaka, explained that one of the leading organizations is the Osaka Business and Investment Center (O-BIC), and that JETRO and O-BIC collaborate on bringing in foreign direct investment (FDI).

JETRO uses its global network of 70 overseas offices to invite foreign investment. It also encourages second investments into the Kansai region from foreign companies that already have locations in the Tokyo metropolitan area. O-BIC was jointly established by Osaka Prefecture, Osaka City, and the Osaka Chamber of Commerce and Industry in 2001. Its mission is to provide information to foreign companies that want to enter Osaka and to receive foreign investment.

The organization acts as a one-stop service center with a detailed support system that provides accurate advice, as well as business contacts with a wide range of Japanese companies. And it has made a difference: from 2015 to 2017, O-BIC, along with JETRO Osaka, drew more than 130 foreign companies to the city. Osaka Prefecture has venture incubation offices that focus on industries such as biotech and information technology (IT), as well as on research and development (R&D) for precision engineering and medical research. The offices are linked to several academic bodies to encourage venture enterprises for R&D.

Osaka is rich in tradition, such as carrying portable shrines at the annual Tenjin Matsuri festival.

DIVERSE DISRUPTION
Another endeavor is the Osaka Innovation Hub (OIH), an innovation creation base that brings together entrepreneurs and engineers who have their eyes on disruptive technologies. OIH was founded by Osaka City and operates under the theme “From Osaka to the World.” It hosts about 200 events and programs each year geared to the creation and scale-up of new projects. These events are recognized in the Kansai region as opportunities for diverse groups from around the world to gather, exchange information, and innovate.

OIH also runs the annual Hack Osaka conference, which brings together entrepreneurs—both those who have been brought up through OIH and those who are active overseas—with investors, large companies, and students.

One private center for entrepreneurial deve­lopment is Global Venture Habitat (GVH) Osaka, where entrepreneurs can meet and develop new business ideas. GVH Osaka is operated by SunBridge Global Ventures Inc., a division of the SunBridge Group that invests in seed-stage companies, and the Urban Innovation Institute, an organization that is designed to create networks between industry, government, and academia by providing co-working spaces, entrepreneur training, and business-matching services.

A representative of the Osaka Prefecture Commerce, Industry, and Labor Department’s International Business and Business Attraction Section pointed out a few other organizations that are helping to support business growth in the region. The Monodzukuri Business Information-center Osaka provides assistance to companies involved in innovative manufacturing. These services include supporting companies with information about technology, management, IT, and patents; business matching and industry–academia consulting; and inter­national business-to-business consultation.

GOVERNMENT SUPPORT
Through the Kansai Innovation Strategy Comprehensive Special Zone, a designation bestowed by the government of Japan to boost international competitiveness, Osaka is looking to support businesses operating in a variety of areas: pharmaceuticals, advanced medical technology, preemptive medical care, medical equipment, batteries, and “smart communities.” The concept combines next-generation transportation infrastructure, intelligent energy grids, and smart houses.

Meanwhile, the Osaka Bio Headquarters is an industry–academia–government collaboration based in the northern part of Osaka Prefecture. It promotes the creation of drugs, medical devices, regenerative medical products, and health-related products and services.

As Murai explained, Osaka has put its weight behind developing areas where innovative enterprises can thrive. Perhaps the most significant example is the Umekita develop­ment area, located to the north of Osaka Station.

Development of the area, which covers nearly 60 acres, has been divided into two phases. The first was completed in 2013 and includes the Grand Front Osaka multi-purpose building complex, which is home to OIH’s offices. The second phase is expected to be completed in 2025 and will create a combined green and urban landscape that city planners hope will attract corporations and researchers from around the world.

GROWTH POTENTIAL
Over the past few years, Osaka Prefecture’s employment figures have shown promising developments. The unemployment rate has dropped from 5.4 percent in 2012 to 3.4 percent in 2017. During the same period, the rate for the Kansai region overall declined from 5.1 to 3.0 percent. The industries that have seen the greatest increase in employment between 2015 and 2017 are: manufacturing; food, beverage, and hospitality; as well as education and learning support.

Jiri Mestecky, special advisor to and executive committee member of the American Chamber of Commerce in Japan (ACCJ) Kansai chapter, believes that Osaka can best achieve its goals by focusing on tourism and hospitality, FDI, entrepreneurship, and cooperation with other local governments to promote the Kansai region as a whole. The hospitality industry, which is directly connected to tourism, can be a driver of employment development, he said.

This is a sentiment echoed by Arthur Matsumoto, co-chair of the ACCJ-Kansai External Affairs Committee as well as president and chief executive officer of LS7 Corporation, which specializes in helping companies develop businesses overseas and bring technologies from overseas to Japan. He sees tourism as Japan’s fastest-developing industry, but also one that is still not being exploited as much as it could be—Prime Minister Shinzo Abe’s push for increased tourism figures notwithstanding. Events such as the Rugby World Cup 2019, the Tokyo 2020 Olympic and Paralympic Games, and the World Masters Games to be hosted by Osaka in 2021 could all help bring tourists to the Kansai region and drive growth.

Mestecky, who is also a partner at Kitahama Partners, an Osaka-based law firm, described tourism as something of a gateway industry that can attract not only regular tourists, but also young business leaders and entrepreneurs to Osaka and Kansai. This, he said, would “result in increased FDI and domestic investment, which in turn results in a stronger municipal and regional economy.”

KEEN ON COOPERATION
Mestecky also makes the case that Osaka can achieve many of its goals not just by working alone, but through collaboration with other prefectures and cities in the Kansai region.

“Osaka should continue to cooperate with other Kansai governments, such as those of Kobe, Hyogo, Kyoto, Shiga, and Nara, to promote the Kansai region as a whole. The creation in 2010 of the Union of Kansai Governments (UKG) was a very positive step in this direction. Kansai as a whole has many advantages over other regions of Japan—especially in the area of culture and tourism—and it is my hope that Osaka will continue to cooperate with other areas of Kansai in the commercial, government, academic, and cultural realms to attract young business people.”

The UKG is a coalition of eight prefectures—Shiga, Kyoto, Osaka, Hyogo, Nara, Wakayama, Tottori, and Tokushima—as well as the cities of Kyoto, Osaka, Sakai, and Kobe. In principle, the UKG seeks to create a system that allows member cities and prefectures to be less reliant on Tokyo, from an administrative point of view, and have greater autonomy in addressing the issues that most affect them.

The first areas on which the group is focused are:

  • Disaster prevention
  • Promotion of tourism, culture, sports
  • Industrial promotion
  • Environmental preservation
  • Employee training
  • Testing and licensing for various qualifications

Each year, the ACCJ and UKG hold panel discussions, a tradition that began after the publication of the ACCJ’s “One Kansai” viewpoint in 2010. Since then, the ACCJ-Kansai External Affairs Committee has invited the ACCJ Board of Governors to hold their October meetings in Kansai alongside these annual discussions with the UKG.

KNOWLEDGE CAPITAL
Osaka’s many organizations dedicated to nurturing innovation and high-tech industry share a singular focus. One of the rallying phrases for the city’s development is “knowledge capital,” which can be interpreted in a number of ways.

Mestecky suggested approaching it at the most basic level. “Focusing on knowledge capital reflects a recognition by the Osaka governmental authorities and business community that the world economy is becoming more information-based each day, and that information and knowledge—in the form of intellectual property and innovation—are going to be primary drivers of the local economy in the future.”

This concept is also brought to life at the Knowledge Capital, the core facility of the Grand Front Osaka. The space features showrooms, offices, laboratories, and centers for exchange. It also provides businesspeople, researchers, university staff, creators, and the public with the chance to experience cutting-edge technology firsthand.

FAMILY-FRIENDLY
While business growth is great, let’s not forget one more way in which cities such as Osaka can help drive innovation and increase diversity: work–life balance. Specifically, supporting mothers and families by making it easier for women to enter and stay in the workforce is key. Japan cannot afford to miss out on their valuable skills and experience, and Mestecky says that he has noticed a certain level of progress on this front. In his capacity as an attorney, he has seen “an increasing number of local companies and other organizations which have made changes to their rules of employment and other internal policies to support working mothers.”

Coming back to Kansai’s advantages, of which he spoke earlier, Mestecky added three key points:

  • Economic strength—boasts the world’s eighth-largest economy by gross domestic product.
  • Cultural significance—has more National Treasures and historically significant sites than any other in Japan.
  • High quality of life—offers an attractive cost of living, shorter commute times, and a cosmopolitan lifestyle.

All these factors, as well as the efforts the city and prefecture have made, and the foundation they have put in place, are setting the stage for a promising future for Osaka as not just a place to work, but a place to flourish.

 

Alec Jordan is a staff writer at Custom Media for The ACCJ Journal.
The city of Osaka and the outlying prefecture have established a number of organizations and initiatives to help attract both Japanese business investment and foreign investment.