A half century after Okinawa was returned to Japan, the prefecture’s economy has benefited from key infrastructure projects funded by the central government designed to encourage local business investment and tourism. But local leaders are pushing for the prefecture to become more economically self-reliant over the next decade, and believe a reduced U.S. military base presence can help achieve this goal.

On Sunday, the 50th anniversary of Okinawa’s reversion to Japanese rule, a broad economic plan for the next decade was presented by the prefecture to Prime Minister Fumio Kishida. The central government is expected to review the plan and respond later this month.

Under the plan, Okinawa aims to raise its gross prefectural product from ¥4.1 trillion in fiscal 2020, which ended in March 2021, to ¥5.7 trillion by fiscal 2031 and reduce the unemployment rate from 3.6% in fiscal 2020 to 2.5% by fiscal 2031.

There is also a goal to raise per capita income from ¥2.14 million to ¥2.91 million over the same time period. Currently, Okinawa’s per capita income, Gov. Denny Tamaki says, is still only around 70% of the national level five decades after reversion.

“Our goal is to build an Okinawa-style friendly society that leaves no one behind,” Tamaki told reporters Saturday after the prefecture approved the plan.

To reach that goal, the governor says that the U.S. military base presence on Okinawa needs to be reduced. Okinawa, which makes up less than 1% of Japan’s total land area, hosts 70.3% of the land occupied by U.S. military bases in the country. That’s up from 58.8% in 1972, when it was returned to Japan from U.S. control.

“In 2018, U.S. military base-related income accounted for about ¥250 billion, or 5.1% of total prefectural income," Tamaki said during a May 6 news conference at the Foreign Correspondents’ Club of Japan. "Some argue that if the bases are eliminated, this income would be lost and Okinawa would not be able to survive. However, the direct economic impact of developing and utilizing the current base sites (if they are returned) is estimated at ¥890 billion, more than three times the ¥250 billion figure.”

Okinawa's 10-year plan focuses on economic and social development as a whole, and is the sixth to be drawn up by the prefecture since it was returned to Japan in 1972. It came just as the central government finalized its own Okinawa redevelopment budget for the 2022 fiscal year. Both the long-term Okinawa plan and the central government’s Okinawa budget are devoted to major infrastructure projects in order to turn the prefecture into a leading regional hub, especially in logistics, particularly distribution.

But Kazuhiro Miyagi, an economics professor at Okinawa International University, says the prefecture faces a number of fundamental challenges in reaching that goal.

“Okinawa Prefecture is currently trying to overcome the disadvantages unique to island economies, such as small market size and high transportation costs,” Miyagi says. "Although there are national and local tax exemptions for companies involved with distribution that are located in Okinawa, the international logistics industry is not developing well due to a lack of measures to reduce transport costs."

Backed by the central government’s redevelopment funding, Okinawa has invested in two major transportation projects it hoped would spur both investment and bring in more visitors.

The first was the Okinawa monorail. Conceived in 1975, the first leg of the monorail opened in 2003. Today, the 19 station route connects Naha Airport to the city of Urasoe in about 37 minutes at a cost of ¥370. With no subway or train systems in Okinawa, residents and tourists rely on the monorail, buses, and taxis as public transportation options.

The other major project to aid Okinawa’s economy and strengthen its position as a regional hub was a second runway at Naha Airport. That was completed in March 2020, just as the coronavirus pandemic erupted. Built at a cost of ¥200 billion, the 2,700-meter runway increased the maximum number of annual takeoffs and landings at the airport from 136,000 to 240,000.

Okinawa, known for its beautiful beaches and clear, turquoise water, was already a domestic tourism hub before the pandemic hit two years ago. Tamaki said that over the next decade the prefecture plans to continue to work on economic investments that will benefit this sector.

“We’ll be tapping into Okinawa’s proximity to the rest of Asia and looking at how to make the most of its dynamism in areas like tourism,” he said.

Dai Tsukiyama, director of the Okinawa-based Ryukyu Management Consulting, says that the prefecture's economy is particularly reliant on tourism.

“Before the pandemic, the economic ripple effect from tourism reached about ¥1.16 trillion in fiscal 2017. As Okinawa’s gross prefectural product that same year was around ¥4.4 trillion, it’s estimated around 26% of the Okinawan economy is tourism-related," he says.

Over the next decade, the central and prefectural governments will continue to try to develop Okinawa as a major hub for domestic and international tourism and business conventions through funding for various infrastructure projects. In 2019, Okinawa received just over 10 million visitors for the first time. The goal over the next decade is to more than quadruple that number to 42 million visitors annually.

But Tsukiyama warns that several factors could hinder a return to pre-pandemic tourism levels.

“If the yen depreciates further and travel restrictions are eased or lifted, there will be a return, to some extent, of overseas visitors. However, 70% of Okinawa’s tourists are still domestic," he says.

“Since most of them are in the middle class, their disposable incomes are being squeezed by rising prices, so it’s unlikely their numbers will recover to pre-pandemic levels."

Much of the employment gains, the prefecture hopes, will be in tourism-related industries. But Okinawa’s economic future as a tourist hub will depend on what kind of economic and marketing strategies it pursues.

“Okinawa needs to stop leaning on the idea that it’s a resort that can be visited easily and inexpensively. There’s a need to develop ecotours, and experiences that highlight Okinawa’s unique natural environment and culture so that visitors aren’t limited to just shopping and marine activities,” Tsukiyama says.