The impact of population decline, low birthrate　and increasing aging population is problematic in　Japan compared to other countries in the world

Japan’s population has been declining since 2008. The percentage of population aged 65 years or above is as high as 28% of total population, and the low birth rates and aging population is continuing to worsen.
The population decline in Japan is especially problematic in rural areas. However, if the population declines in rural areas, there will be a knock-on effect to urban areas, as population from these rural towns will not migrate for employment, thus urban population will also see a decline. Therefore there is a high concern that the economic society of Japan may, as a whole, lose its vitalization.
Population decline and population aging is also expected to occur in developed countries like Europe and America as well as in the Asia in the near future.

Japan is taking “Regional revitalization” countermeasure to overcome the challenges of population decline and over-concentration of population in Tokyo

“Regional revitalization” is the Japan’s first policy that is focused on addressing the overcoming population decline and population concentration in Tokyo.
It is an initiative that breaks the vicious circle of “Population decline resulting in contraction of rural economy which also leads to contraction of rural economy that speeds up the population decline”.
In order progress with the initiatives further, the government of Japan established a comprehensive strategy of the country at the end of 2016 (as shown in the following figure) that defines policy goals, basic strategy and the countermeasure.
The comprehensive strategy of the country shows the methods for promoting regional revitalization. The central government is not enforcing one strategy for all municipalities to implement. Rather, it is a mechanism that allows municipalities to formulate and promote their own regional comprehensive strategy based on their new ideas while referring to the comprehensive strategy of the central government as a guideline.

■ Population Decline and Aging in Japan and Comprehensive Strategy by the Government of Japan

Supporting nation in creating a mechanism of “regional revitalization”

NRI supports the development of a national strategy plan, system and mechanism using the “Regional Revitalization” as reference. NRI takes into account the current situations of our client countries/ governments, and asses the effects that promotes sustainable initiatives based on our experiences of implementing “Regional revitalization” in Japan.
Regional revitalization is a political measure that should be implemented mainly in rural areas while sharing the awareness about the challenges that are common throughout the country. Based on the viewpoint of “Supporting innovation in rural areas with motivation and enthusiasm”, the government of Japan supports rural areas by 1) “Information support (providing information based on the analysis of rural economy, etc.)”, 2) Human resources support (dispatching experts according to the requirements of rural areas etc.) and 3) Financial support (according to budget and tax measures).

Example of support for regional revitalization in regions (“Innovation program” supporting the establishment of business )

NRI has provided support for “Innovation program”, supporting establishment of business by cooperating with future entrepreneurs in rural areas, local creators, financial institutions in rural areas, local public entities, think tank, media etc., as one of the menus supporting regional revitalization. We have developed a network with more than 100 innovative leaders across the country who lead social problem-solving approach with their unique ideas. In the innovation program, we connect innovative leaders and local future entrepreneurs in workshops with various ideas (planned and organized by NRI) for the development of business plans.
In total 28 business plans were created in 3 years in the “Tokachi Innovation Program” at Tokachi area in Hokkaido prefecture, of which 7 led to the actual founding of the business.

■ Initiative by Local Government and NRI’s Support

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Problems such as hollowing-out and aging infrastructure in cities will become more severe in the future

The problems such as hollowing out of local cities and outskirts of metropolitan cities will worsen in the future along with the population decline. Under such circumstances, it is necessary to develop a compact city and maintain density in cities in order to sustain the urban functions and public transportation, and to protect the livelihood.
There is high risk of problems such as aging infrastructure that support the framework of the city. For example, concrete surface peeling, damage of underground pipelines, bridge collapse, etc. The infrastructure management that minimizes life cycle costs while ensuring safety is one of the most pressing problems under the worsening financial situation of the local government.

It is necessary to implement objective prediction on the image of the city decades later and create futuristic image

Both city and infrastructure require a long term planning in the scale of decades for its implementation. Therefore, it is necessary to predict the future to create a realistic future image and then, create an action plan for its implementation.
The developing countries such as in Asia are growing rapidly, following similar steps to some cities in Japan and they may also face the problems faced by Japan in near future.
Japan as a country already experiencing challenges, will develop solutions to solve the issues in the city using latest technology and it is expected to be expanded to various countries.

■ Review Process of City Infrastructure Management Plan

Extensive support for resolving all management issues in cities

NRI provides extensive support in resolving management issues in cities.
Following process would be proceeded to control unplanned expansion chaos and formulate appropriate management plan.
1) Analyze the current situation and future trends of a city from the viewpoint of population, economy, city functions, transportation, disaster prevention, administrative management, etc.
2) Materialize the urban structure for mid-to-long term to resolve the issues in cities.
3) Identify the areas that is attractive as the location for residency and urban function in order to implement the urban structure.
4) Develop policy options that should be implemented by the government to attract urban function and residency in the identified areas. Latest technologies such as IoT, AI, Automated driving, EMS, and etc. could be applied if its appropriate.
The mechanism of city management cannot be sustained only with government initiatives. Therefore, it is necessary to build a scheme in which public and private organizations work together while creating sufficient business opportunities for the private companies involved.

Visualizing potential of business innovation in cities through “Growth potential city ranking”

NRI has identified the following six elements are required for business innovation in the cities, based on the analysis of growth potential of cities globally.
1) Cultural receptive to diversity
2) Initiatives encouraging innovation
3) Platform for diverse industries
4) Sufficient and diversified human resources
5) Ease of living in cities
6) Attractiveness of the city
Based on above elements, we conducted a proprietary survey of 100 cities in Japan to evaluate the “Growth potential city ranking”. The analysis visualizes the current state and future potential for business innovation in cities.
Based on the ranking, managers in each city can quantitatively understand the strengths and weaknesses of their city, and thus can consider methods of further complementing their strengths, whilst implementing measures to overcome their weaknesses.
NRI uses this ranking to support the policy planning of cities in Japan. This ranking can be used as a KPI^* for city management.

＊ KPI: Key Performance Indicator

■ “Growth Potential City Ranking by NRI”

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Impacts of disasters will become more severe in a society that is expanding their network globally

With the effect of global warming, natural disasters are becoming more frequent and intense. On the other hand, with global supply chain expansion by distribution and manufacturing companies, the impact of disasters are likely to be more severe than previously experienced.
Companies with global network experienced the impact of natural disaster during the Tohoku (North-East Japan) Earthquake (2011) and floods in Thailand (2011) that disrupted the automobile production, and the 1999 Jiji Earthquake in Taiwan that led to a rise in the prices of computer parts. There may also be a risk of business discontinuity even if the company’s location is not directly affected from the disaster. Therefore, it is necessary to visualize the risks in supply chain during normal operation and develop relevant strategies to minimize the risks during disasters.

Businesses must develop relevant strategies for business continuity by visualizing risks

Through the lessons learned from the disasters that occurred in the past, we have realized the importance of understanding the supply chain in great depth, and will expand our understanding on the structure of supply chain during normal operation. However, expanding knowledge of supply chain will not be enough to deal with major disasters. Therefore, it is necessary to analyze the potential risk of damage to the company and factories, and impact on the social infrastructure for business such as electricity, water supply and transportation network. It is also necessary to predict supply chain disruption risk and perform a “bottleneck analysis” beforehand based on the disaster and flood hazard mapping. This approach can help in eliminating critical bottlenecks during normal operation and also reduces the impact of disasters by making quick recovery.

■ Support for Business Continuity Management of Global Supply Chain

Disaster simulation service that supports the initiatives of “risk visualization”

NRI has extensive experience in disaster risk management consulting and solutions. For example, we were involved in simulating damage estimation during massive disasters and large-scale floods undertaken by the Central Disaster Prevention Council under the government of Japan, and providing consulting support for formulating disaster prevention measures. Further, we developed and introduced the Disaster Information System (DIS) that transmits early estimation results of disaster damage within 15 minutes of its occurrence to the Cabinet Emergency Control Center or Cabinet Intelligent Information Center. With expert knowledge and technology, we have been using our proprietary “Supply chain risk evaluation system” that estimates supply chain disruption risk at the early stage with synchronization of “Damage simulation services” that assess the possible damage which may be caused to our client company’s headquarters, production location and supplier. This system is used as a disaster prevention measure and supply chain risk management tool by large-scale automobile and automotive parts manufacturers.

“Board BCP” supports businesses in determining flexible and compatible trade-offs to face an emergency

NRI has provided support for developing “Board BCP” for a heavy industry company. “Board BCP” is a set of decisions making criteria that is agreed within the whole company, unlike traditional BCP which only focuses only on the early response manual etc. It is based on the idea that it is valuable to have an integrated decision making process, during disasters.
Since critical resources such as facility, personnel and systems are limited during disaster, there is an immediate requirement for tradeoff decisions such as “what to leave and what to protect”. Therefore, it is necessary to analyze the gap between the “to-be” and “as-is” situation and to identify challenges in business continuity with the help of “goal setting” and “risk visualization” of items and level that must be protected during normal operation. Since the management’s values differ during any emergency, there is a risk that ideal actions cannot be taken across the organization. Therefore, it is important to identify the priority in the management’s values in advance. “Board BCP” functions as a tool for supporting business to make flexible trade-off decision when faced by an emergency.

■ NRI's Disaster Prevention/BCP Development Consulting Solutions menu

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According to the circumstances of each country, it is necessary to identify the purpose of introducing PPP as a measure

Since the demand of infrastructure development in the developing and emerging countries can’t be supported only by government financial resources, infrastructure investment through private funds is being more widely adopted. PPP is considered as a key mechanism for the development of new infrastructure.
On the other hand, developed countries are facing various challenges such as deterioration of existing infrastructure, management reforms for inefficient infrastructure businesses and off-balance sheet of assets by the government. Therefore, PPP is considered as an effective measure to resolve these challenges.

Need to design PPP scheme and select companies according to diversified needs

In the “PPP model for developing countries”, infrastructure can be developed promptly as well as high quality services can be provided with the combination of multiple schemes including Official Development Assistance (ODA) and initiatives for resource development through technological cooperation, while prioritizing the fund utilization of private companies and financial institutions.
On the other hand, in the “PPP model for developed countries”, it is necessary to shift the risk to private sector and get investors’ participation to offbalance public projects from the government. Also,organization building and governance development will be required for the initiatives such as o verseas expansion beyond traditional framework.

■ Purpose of Introducing Different PPP Model for “Developing Countries” and “Developed Countries”

Provides support menu required for each phase of entire PPP project development

NRI provides support for all stage of PPP project development for various facility types and infrastructure development, with deep understanding of the economic cooperation system of Japan, and administration and financial system of each country.
In the first phase of our advisory service, we study conditions that define basic performance such as facility concept, necessary functions and scale. We also conduct onsite surveys and estimate development,maintenance and management cost for the formulation of a master plan considering the facility details.
In the second phase, we study development and operation method of facilities, basic schemes, fund raising methods and order unit (bundling multiple facilities). We could also support by gathering the willingness of investors to participate in the bid, and conducting financial simulation as well.
In the third phase, we accompany and support until realizing the signing of agreements by developing the RFP (Request for Proposal) including the design of the criteria for prequalification and/or bids, proposal evaluation, management of selection committee, and creation of meeting material for committee.

Provides practical solutions based on the experience of supporting domestic and overseas infrastructure development

NRI has conducted numerous projects on waterfront development, new transportation infrastructure development (LRT, etc.), redevelopment in central urban areas to resolve urban problems such as overcrowding, congestion and environment destruction in the major cities of Japan. We have been supporting the formulation of infrastructure plans in various fields such as transportation, urban development, sanitation and other facilities overseas using our past experience.
For example, we proposed a scheme for a railroad project in which the funding for the infrastructure portion (e.g. tunnels, bridges, etc.,) can be procured through government funds (local government budget and ODA loans) and operational portion (e.g. for vehicles, electronic equipment etc.), can be procured through private funds (as shown in the left figure below).
In a project for support of a project in Southeast Asia, we actively supported the implementation of business by identifying expected issues beforehand and proposing common interests of the both parties’ needs based on the findings of conflicts between the interests of government and private sector using our vast experience (as shown in the right figure below).

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Need to resolve various environmental issues simultaneously with industrial development and urbanization

In the course of economic development, there has been a rapid increase in the emission of exhaust gas and wastewater from factories due to industrial development, which is raising concern of industrial pollution, including pollution in surrounding areas and damage to residents’ health. Furthermore, various environmental issues, such as generation of large amount of waste and exhaust gas from automobiles are becoming apparent with urbanization. Also, in many cases, it is difficult to establish an environmental policy that address all of these various environmental problems simultaneously.
The SDGs (Sustainable Development Goals) that are being advocated by the United Nations also include sustainable targets to strike a balance between economic development and environmental protection, and require activities and collaboration by various governments and companies.

Sustainable development requires a multifaceted approach from the product lifecycle

Sustainable development requires implementation of measures against factories that are the source of industrial pollution as well as development of various multifaceted solutions throughout the product lifecycle of manufacturing companies.
If we look at the product lifecycle, environmental pollution is not only caused by the energy that is consumed or pollutants that are emitted while the product is in use, or due to inappropriate disposal of a used product, but also by various pollutants that are generated during the production of a product.
Companies are required to ensure environmental protection not only when manufacturing a product in their own factory, but during the entire supply chain, including manufacturing of components,materials and/or resources. With an aim of developing sustainable social systems, it is important to expand the policies and systems to take into account the whole product lifecycle.

■ Environmental Protection and Sustainability from the View of Product Lifecycle

Support for conducting research, formulating plans and implementing technical demonstration related to appropriate disposal and recycling of waste

It is anticipated that with improvement in standard of living, the waste discharged will also increase significantly. Therefore, it is necessary to organize the social systems for appropriate disposal and recycling of waste.
NRI extends various support related to waste processing and 3Rs (Reduce, Reuse, Recycle), which includes implementing research, proposing policies,formulating plans and designing systems. In order to develop a recycling system, it is necessary to implement various researches related to the product lifecycle, such as emissions from a used product,initiatives taken at the manufacturing stage, case studies of best practice and recycling technology of overseas companies.
Moreover, we suppor t the implementation of demonstration projects and subsidy-funded projects to develop and introduce technologies and systems related to waste processing and 3Rs. Further, execution support is also provided to government and companies which includes taking charge of the office that manages these businesses and participating as a joint proponent in demonstration business, etc.

Support for implementing research about the current situation, creating guidelines and formulating standards to promote green buildings

In order to solve the climate change issue associated with consumption of fossil resources, wide-scale adoption of green buildings (ZEB/ZEH^*) has become a challenge to promote energy conservation or renewable energy use in buildings.
NRI provides support for the planning and execution of policies that promote green buildings. In order to materialize green buildings, mutual understanding between the parties, including building owners,developer, designer and construction company,and the initiatives. In addition, various building materials, facilities and design-related knowhow are required for such buildings, is necessary as well as their proactive engagement. Therefore, we have been involved in activities, such as creation of policy roadmap, guidelines and standards for building material in collaboration with the related entities.
Moreover, from the perspective of technological development and resource training associated with green buildings, we are also working on a “design / demonstration competition” of green buildings through universities and private companies.

＊ ZEB/ZEH: Zero Energy Building / House

■ NRI’s Solution Menu for Environmental Protection and Sustainable Buildings

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