[Correspondent Column] Why Do They Keep Flocking to Tokyo and Seoul?

"Why is everyone going to Tokyo?" That question from the 1991 Japanese drama Tokyo Love Story still feels relevant today. The difference between then and now is this: in the past, Tokyo’s pull was visible as a movement of people. Today, the structure itself draws them in. That makes it even more powerful, and even harder to solve.
Hiroya Matsuda, an adviser at NRI and co-chair of the Conference for Choosing the Future, summed up the issue in one sentence during a recent meeting. "Support for the regions alone is not enough. Unless we change the structure of Tokyo itself, the problem will keep repeating," he said.
Matsuda was the first to raise the term "Regional Extinction" in Japan. In his 2015 book Regional Extinction, he warned that if population decline combines with concentration in the greater Tokyo area, many regions could lose their functions. His diagnosis was that this was not simply a population issue, but the result of intertwined economic, fiscal and industrial structures.
The era when moving factories to the regions could solve the problem is over. In a network economy, a single headquarters can manage the entire country, and that headquarters is almost always in Tokyo. Sales are generated nationwide, but taxes accumulate in Tokyo. Matsuda identifies this concentration of tax revenue as a key issue that must be addressed.
Even as the population shrinks, net inflows into the Tokyo area continue. The flow of money is even more extreme. Tokyo's 23 special wards account for just 1% of the nation's commercial land, yet they collect about 20% of fixed asset taxes. That revenue is then reinvested in education, welfare and infrastructure, which in turn attracts even more people. It is a structure that feeds on its own concentration.
There have been attempts to change this structure. The debate over relocating the capital, symbolized by the 1992 Law on the Relocation of the National Diet and Other Institutions, was once a national agenda item. Candidate sites were even selected, but the plan eventually faded away. Interests were too complex, and above all, the case for why relocation was truly necessary never became convincing enough. Later discussions about moving government agencies to the regions continued, but the only visible result was the Agency for Cultural Affairs' move to Kyoto in 2023.
The reason for the failure is clear. Only the institutions were moved; the structure was left untouched.
Japan is now changing its approach. The Tokyo supplementary capital plan proposed by the ruling LDP and the Japan Restoration Party is less about simple decentralization than about designing incentives. Rather than splitting functions, it seeks to redesign the conditions so that companies and capital will move.
Specifically, certain regions would be designated as supplementary capitals, with deregulation and tax incentives concentrated there. The goal is to attract private investment, build industrial clusters and draw in population.
Industrial policy is also being linked to the effort. The Regional Future Strategy announced in December last year by the Takaichi Cabinet set out to place strategic industries such as semiconductors, artificial intelligence and aviation in regional clusters. MLIT is also considering easing floor-area ratio rules in downtown regional areas to attract office tenants.
Even so, skepticism remains. The reason is simple: Tokyo's gravitational pull is still overwhelming.
In a media interview last December, Yuriko Koike, Governor of Tokyo, pushed back against tax revenue redistribution, saying it could "harm the national interest." Her logic is that "Tokyo's growth is Japan's growth." Given the reality that global capital and talent continue to choose Tokyo, it is hard to say the argument is entirely wrong.
South Korea is also following a similar path. Recently, discussions have expanded beyond public institutions to include the Korea National University of Arts and even the relocation of HMM headquarters. But Japan's experience offers a clear lesson: relocation alone is not enough.
Institutions can be moved, but companies calculate. Taxes, talent, networks and markets. Unless those four conditions change, headquarters will not move. And if headquarters do not move, people will not move either. So the question returns: why do people head to Tokyo? Why does capital gather in Seoul?
sjmary@fnnews.com Reporter