Introduction of the so-called “doshu-sei” system of reorganizing Japan into several regional blocs is the “ultimate structural reform” that will fundamentally change the nation’s administrative, fiscal and political systems, Fujio Mitarai, chairman of the Japan Business Federation (Nippon Keidanren), told a recent symposium in Tokyo.

The system will redefine the roles of the central government and regional/local administrative bodies, and will enable rural Japan — which has long relied on support from national authorities — to regain vigor through its own strengths, the top business leader said.

Mitarai, also chairman of Canon Inc., gave the keynote speech to the Sept. 18 symposium organized by Nippon Keidanren and its public relations arm, Keizai Koho Center, under the title “Changing Japan through doshu-sei.”

What is doshu-sei? The idea is nothing new, but so far there has been no widespread consensus or broad public debate for actually turning it into reality.

Doshu-sei in its essence will reorganize Japan’s 47 prefectures into smaller numbers of administrative bodies that cover wider regional blocs.

However, Mitarai emphasized that it means much more than a mere reshuffle of local administrative organizations — even though debate on doshu-sei has so far tended to focus on specifics of how the prefectures will be regrouped.

In March, Nippon Keidanren put together a proposal calling for the introduction of the doshu-sei system by 2015.

Under the proposal, the system is defined as an “ultimate structural reform” that will change Japan’s conventional administrative, tax, fiscal and political systems at national and local levels, and its main objective is to create vigor in Japan’s ailing rural areas, Mitarai noted.

In a new national-local division of labor, the central government’s role will be limited to the “minimum necessary” functions such as diplomacy, defense, judiciary, macroeconomic and monetary policies, and other policy areas that concern the nation’s international competitiveness, such as scientific research, he said.

On the other hand, most of the domestic matters that have so far been handled by the national government will be handed over to local authorities, which will in turn be given greater administrative and taxation powers in accordance with their increased jobs, he added.

And on the basis of these new powers, each of the new broad-based local administrative bodies, to be called “doshu,” or state, will seek to build a vibrant regional economic bloc built on its own unique characteristics, according to Mitarai.

Rural Japan’s problems

One of the biggest problems confronting the nation, Mitarai told the audience, is the impoverished state of rural Japan, which has been hit by depopulation, loss of jobs, and an exodus of industries and various other resources.

Many people in these areas find it hard to share the benefits of growth focused on urban Japan, and feel that they are increasingly left behind in the nation’s economic expansion, he said.

Mitarai cited the example of his hometown — a small town formerly called Kamae in southern Oita Prefecture before it was merged into the city of Saeki. Its population has dropped from 23,000 in his childhood days to about 8,000 today.

Mitarai said that as he witnessed the depopulation of the town upon each of his visits, he became convinced that all rural communities like his will eventually be lost unless the “unipolar” concentration of resources into Tokyo is reversed.

In Japan, all resources — manpower, industries, finance, information as well as culture — have moved out of rural areas and concentrated in Tokyo, he said. And as the national government monopolized much of the administrative and taxation powers, many local governments gave up implementing policies at their initiative, thereby leaving the rural parts of the country to lose vigor, he argued.

Such a form of concentration is unique to Japan, Mitarai said, adding that in the United States, for example, the headquarters of major American firms are not clustered in New York but dispersed across the country.

Under the U.S. federal system, each state has power, and state governments spend much energy on efforts to lure corporate investment to spur local economies, he pointed out.

It is time that Japan pursued such a dispersed structure of national development, and introduction of doshu-sei is one way to achieve the goal, he said.

Regional economic blocs

Under the proposed system, each doshu should have the resources to “run” the local economy by building infrastructure, inviting corporate investment and promoting regional industries at its discretion, Mitarai said.

Since each of the doshu will compete with one another, it will need to devise strategic industrial policies, for example, by promoting sectors that are different from its competitors, he added.

Mitarai noted that each of these regional blocs will stand a good chance of being internationally competitive. Kyushu is about equal in its geographical size, population and economy to the Netherlands, and Hokkaido is roughly comparable to Austria, he said.

If each of the regional blocs regains its economic vigor through such efforts, the Tokyo-concentrated economic development will make way for a more dispersed structure, Mitarai said. Major companies that today keep their headquarters mostly in big cities like Tokyo and Osaka may relocate to other parts of the country, creating jobs and reversing the depopulation trends in rural areas, Mitarai said.

Doshu-sei is intended to change the division of labor between national and local governments, and most of the domestic administrative duties will be shared by the regional doshu and the smaller municipalities.

The municipalities, which will be put in charge of much of the day-to-day administrative services for local residents, need further consolidation so that each of the cities and towns will have a solid fiscal base, Mitarai said, calling for further cuts in the number of municipalities — reduced to about 1,800 nationwide in the recent wave of mergers — to between 300 and 500.

The clear division of labor will also eliminate the rampant duplication of administrative work between central and local governments, Mitarai pointed out.

Today, many of the central government ministries have regional branches, but they can be abolished and their functions taken over by the doshu governments, he said, adding that this should pave the way for further streamlining of the national government bureaucracy itself.