TOKYO -- The COVID-19 pandemic may be helping to halt a trend that many had thought irreversible: the concentration of Japanese businesses in central Tokyo.
The number of Japanese companies that have moved their headquarters from the center of Tokyo in fiscal 2020 increased more than 20% from fiscal 2019, according to data from National Tax Agency.
Relocations to the suburbs or regional cities by small and midsize companies, especially service operations, signaled a fairly dramatic change brought about by the pandemic.
Regional industrial development continues to require entities that attract different types of people, said Shu Yamamura, an associate professor at the Waseda Institute for Advanced Study and expert on urban planning.
"Offices moving into suburban cities that have been mainly residential could lead to the economic revitalization of those areas," Yamamura said.
Japan's corporate law requires companies that relocate their head office to register the move. Using a website by the tax agency that tracks corporations, Nikkei traced the new head office locations of about 390,000 companies that moved after January 2019.
The number of companies that moved out of Tokyo's 23 wards increased sharply, starting in April 2020 when COVID-19 infections began to spread. Some 6,700 companies relocated in fiscal 2020 ended March, up 24% from the previous year. With about 4,600 companies moving into the center of Tokyo, those moving out outnumbered those moving in by more than 40%.
The same trend was seen in other big cities. For example, relocations from Osaka and Nagoya increased 23% and 15%, respectively, in fiscal 2020.
Destinations from Tokyo's 23 wards after April 2020 show that many companies have opted for areas still relatively close to the city. Yokohama in neighboring Kanagawa Prefecture was the most popular, chosen by 770 companies, followed by Kawasaki, also in Kanagawa, and Saitama and Kawaguchi, both in Saitama Prefecture.
A machinery maker relocated to Yokohama in October 2020 following an increase in telework and its easy access by car for about 30 employees.
The head of a music production company, which moved to Saitama from Tokyo's Shibuya Ward, said: "I began to think of moving around the time of the March 2011 earthquake and decided to do so because of the coronavirus crisis."
Moving to resort cities like Naha in Okinawa Prefecture and to those on the outskirts of Tokyo with good train connections, such as Utsunomiya in Tochigi Prefecture and Tsukuba in Ibaraki Prefecture, also increased. In addition, cities that are stepping up efforts to host IT companies, including Kamakura in Kanagawa Prefecture, have also become popular destinations.
Of the companies that moved out of the city center in fiscal 2020, business consultants accounted for the largest portion, or about 570 companies, according to a survey by Nikkei and Tokyo Shoko Research. These were followed by 380 software contract developers.
"Agile companies capable of online work" are leading in relocations, said Mitsuhiro Harada, head of information at Tokyo Shoko.
Small and midsize companies are especially active in relocation. Of 1,328 companies that disclosed financial data and relocated, 90% had sales of less than 1 billion yen ($9.1 million). Sales exceeded 10 billion yen at only 22 companies that relocated, such as connector maker Hirose Electric and tea store chain Lupicia. Many companies moved to places where they already had factories or other operations.
Local governments that are welcoming the influx of companies are seeing a boost to their economy and an increase in corporate tax revenue, prompting them to step up efforts to lure more.
Yokohama amended an ordinance in April reducing the number of employees a company must have before becoming eligible for subsidies, to just over 50 from over 100 previously. As new arrivals pour in, a Yokohama official noted, "Small and midsize companies are fast in making decisions."
Shinichiro Minami, director at software developer ClearCode, which moved to Tokorozawa in Saitama Prefecture, said last December: "While many of our employees live in the western part of Tokyo, we decided to relocate due to the availability of subsidies available to IT companies."
ClearCode is one of 45 companies that have moved to Tokorozawa from Tokyo since April 20.
Changes in workstyles brought on by COVID-19 have made an expensive office in the heart of Tokyo less attractive. The success of local governments to lure companies out of Tokyo will depend on whether they can lead in the creation of business opportunities and other areas.