Tokyo Neighbor Kawasaki Grabs Abe-Zone Growth Freedoms: Economy

Jun 29, 2014 9:23 pm ET

June 30 (Bloomberg) -- Yuji Kuroiwa’s desire to help develop new approaches to health care started when his 82-year- old father was diagnosed with liver cancer and told he had perhaps two months to live. Kuroiwa senior turned to traditional Chinese medicine and his tumor shrank, allowing him to live another 2 1/2 years.

“It made me think, is ruthlessly defeating disease the best way?” said Kuroiwa, the governor of Kanagawa prefecture, south of Tokyo. “Isn’t it better to find ways to stay healthy?”

Now Kuroiwa is at the forefront of an effort to propel his region to the vanguard of Japan’s life sciences industry and provide a blueprint for cities around the country looking for an industrial revival.

Kanagawa, separated from Tokyo by the Tama River, is one of six regions chosen by Prime Minister Shinzo Abe’s government to become Special Strategic Zones, with relaxed regulations in areas such as government approvals and labor rules. Abe is trying to revive an economy beset by the scourges of most developed nations: an aging population, lack of investment and increased global competition. By building a medical-research hub in the city of Kawasaki, Kuroiwa plans to turn those challenges to his advantage.

“Kawasaki’s focus on medical services and related technology reflects one of the unavoidable patterns of change that developed economies are all tracking now,” said Takashi Kozu, chief research fellow at Ricoh Institute of Sustainability and Business in Tokyo. “Kawasaki’s effort is one of the best attempts to revitalize Japan’s economy.”

Test Beds

Abe has promised nationally to cut corporate taxes and encourage investment in industries such as healthcare to maintain momentum in a recovery that was kick-started by a year of fiscal and monetary stimulus. The special zones are test-beds for how best to foster growth in different parts of the country, from the capital to remote rural areas.

“Businesses have been freed from burdensome rules, with further deregulation planned” in the zones, Abe wrote in an article published in the Financial Times today. “A one-stop process will replace byzantine procedures for starting a company.”

Kawasaki’s region was chosen for its plan to create a national center for advanced medical sciences including biotechnology, regenerative medicine and nanotechnology. Its special-zone status may help ease rules to employ foreign researchers and develop new types of medical schools, said Kuroiwa.

Drilling Hole

“The special zones are designed to be the drill boring a hole into the bedrock” of the resistance to change, Kuroiwa said.

The rise of medical research is the latest chapter for Kawasaki in a history that mirrors Japan’s economic fortunes. Fujitsu Ltd. made Japan’s first computer here in 1954 and growth during the 1950s and 60s turned the city into a cauldron of shipbuilding, steel mills and petrochemicals along the coast where the Tama River meets Tokyo bay. Kawasaki had all the pollution, grime and toiling migrant workers that characterize the boomtowns of China today.

Air pollution at that time was so bad that it could wither the leaves of the fig trees overnight, according to the city’s Environmental Restoration and Conservation Agency. Lawsuits resulting from poisonous gases eventually brought 3.1 billion yen ($30.6 million) in compensation, the agency said.

Scary Station

Riichiro Inaba, 35, grew up across the river from Kawasaki and remembers being scared as a child in the city’s main railway station, which was crowded with factory workers and homeless migrants.

“It had a menacing feel,” said Inaba, a Kawasaki city official involved in the development of the strategic zone. “Now, the face of Kawasaki has changed. The newcomers are academics and foreign researchers.”

The special-zone designation may increase momentum for Tonomachi, Kawasaki’s budding medical-science park on the edge of the city, across the river from Tokyo’s Haneda airport. On the flat 40-hectare (99-acre) site, four and five story glass- and-steel blocs are rising, stamped with initials to identify their research area: CIEA for the Central Institute for Experimental Animals, LiSE for the Life Science & Environment Research Center.

The initiative has attracted companies including Create Medic Co., which sells medical equipment and makes disposable supplies such as catheters.

Welcoming Foreigners

While Kawasaki’s original industrial growth took the traditional path of protecting and fostering Japanese companies and keeping out foreign competition, Kuroiwa says that can’t be the case in future.

“What we envision is the opening of Japan to the world in the medical area,” said Kuroiwa. “People fear losing Japanese technology but globalization means we must go out aggressively.”

Kuroiwa traveled to the U.S. in May to sign cooperation agreements, including with Johns Hopkins University in Baltimore, Maryland, and the Dana-Farber Cancer Institute in Boston, Massachusetts. He reached a similar deal with Singapore’s Agency for Science, Technology & Research last year and plans to visit Europe in the autumn.

Global players are taking note. Surrounded by empty lots in Tonomachi, a stark modern cube with windows like angled gashes in its silver-white walls is preparing to house a surgical training and research center for Johnson & Johnson, the world’s biggest maker of health-care products.

Relaxing Researchers

Abe is hoping that the special zones will show the way forward to other parts of Japan.

“If one regional model is recognized as successful, others may follow,” said Tomomichi Akuta, a senior economist at Mitsubishi UFJ Research & Consulting Co. in Tokyo.

Even so, Kawasaki’s advantages may be hard to replicate. It’s next to the vast Tokyo labor market, has excellent transport connections and already has more workers in academic or R&D institutions than any other prefecture, according to a local government survey in 2012.

“Kanagawa is building on its base with the aid of special- strategic-zone benefits, so the probability of success is high,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Other regions which are not chosen as special strategic zones should find their unique strengths and prepare for a chance to take advantage of deregulation.”