Japan's Other Powerhouse

Dec. 21, 2004
Osaka flexes its own manufacturing muscle.

Only 400 km of Honshu island coastline separate Osaka and Tokyo, two of the world's largest and most powerful manufacturing communities. Between them they account for well over 30% of Japan's GDP. Osaka and its port city of Sakai were Japan's biggest economic communities when Tokyo -- then known as Edo -- was nothing more than a backwater town surrounded by marshlands. The 1868 Meiji Restoration changed that. Edo became the nation's administrative, political, and economic capital, and Osaka has been nipping at Tokyo's heels since. Still, Osaka has never let go of its industrial roots. And while the '90s may have been a challenge, there are signs that Osaka's establishment is grappling with the future.

  • Leading consumer-electronics maker Matsushita Electric Industrial Co. Ltd. is undergoing a major reorganization, including consolidating or closing down operations. And in an attempt to regain its competitive edge (particularly against Tokyo-based Sony Corp.), Matsushita will reabsorb its broadcast equipment business this month.
  • A subsidiary, Matsushita Communication Industrial Co., a leading manufacturer of Japan's cell phones, is a particularly hot property. Its share price increased 5.2 times in 1999, raising the firm's market capitalization to 5.08 trillion yen (US$48.4 billion). Consolidated net profit for fiscal year 1999 is forecast to increase 53% to 41 billion yen (US$391 million).
  • Osaka-based Sharp Corp., Japan's leading LCD producer, also is refocusing for a high-tech future, mostly on parts manufacturing, rather than on consumer electronics. Sharp has established an alliance for LCD production with Quanta Computer Inc., Taiwan's largest maker of notebook computers, to start notebook LCD production in early 2001.
All this comes during a difficult time for Japan. The country fell into recession in the '90s for the first time since the end of World War II. "We have been very uncomfortable losers for years," says the new CEO of Nasdaq Japan, Tatsuyuki Saeki, who resigned in December 1999 as IBM Japan Ltd. vice president (Asia Pacific). Japan's unemployment, already at a record high of 4.7% in 1999, is forecast to climb to near 6%. But labor productivity is improving. Japan's Economic Planning Agency says its labor-productivity index rose to 107.8 (1995=100) in the third quarter of 1999, up 3.2% on the previous quarter and close to levels seen when Japan's economy last picked up in January-March 1997. Productivity improvement was most pronounced in the materials sector, following heavy restructuring, as well as in the electrical machinery industry. Restructuring, of the kind undertaken in the U.S., has not really caught hold in Japan, despite a lot of rhetoric and some serious efforts. But the booming U.S. economy on the back of the high-tech revolution is finally turning heads in Japan. And as Japan gets a closer look, many eyes focus on Osaka.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!