Local Development in the Higashi Osaka Industrial District＊

Home , Matsubara, Osaka Prefecture, Wards of Japan

Japanese Journal of Human Geography 63―6（2011）

＊ Local Development in the Higashi Osaka Industrial District

David W. EDGINGTON The University of British Columbia NAGAO Kenkichi Osaka City University

Abstract In this paper we address changes in the Higashi Osaka industrial district, part of metropolitan Osaka, western Japan. Higashi Osaka is distinctive due to its very high density of factories and its wide variety of consumer and industrial products. After clarifying the city’s manufacturing structure, history and spatial development, we explain the contemporary challenges facing industrial development. Along with slower economic growth in Japan commencing during the 1990s, Higashi Osaka has experienced declines in production output, employment and the number of establishments. Recent problems include competition with lower ―cost East Asian countries as well as stricter regulations on local industries due to their incompatibility with nearby residential uses. To illustrate these general trends we undertook a limited number of in― depth interviews with four firms that produce industrial bolts, screws and associated machinery. The results indicate that these firms have responded by a variety of business policies, including working more closely with their customers and producing innovative machinery. This suggests that it is unlikely that Higashi Osaka will face terminal decline in the foreseeable future as these firms have upgraded their production and associated activities rather than abandoning the district. The paper concludes by illustrating how public policy has played a role in supporting new technologies and innovative small firms in this industrial district.

Key words : industrial district, small―and medium―sized firms, local economic development, Higashi Osaka, Japan.

I Introduction

This paper illustrates some of the key concerns facing Japanese manufacturing by focusing on 1 Higashi Osaka, a prominent industrial district in the Kansai region. With a population of around 513,000 persons, （year 2005 population census） Higashi Osaka is a city of small―scale factories, principally in the metal and machine sectors, crowded at extremely high densities and lying in the eastern part of the Osaka metropolitan region. Our research methodology involves an analysis of the Japanese census of manufacturing, detailed land use surveys, and results from establishment level surveys. We also draw from interviews with factory managers and owners, city officials and the local chamber of commerce and industry, carried out between 1999 and 2011. Our aim is to first describe the city’s historical and spatial development and then examine the challenges currently facing all its firms. Following a general account of the city’s industrial profile, we examine the growth of Higashi Osaka in the pre ―and post―1945 period, and comment

― 25 ― 508 Japanese Journal of Human Geography 63―6（2011） on its fortunes during the last 20 years or so, a period characterized by economic recession. Besides encountering greater international competition due to higher costs of production there are unique local factors at work leading to increasing conflicts between industrial activities and nearby residential areas, We then report on an empirical investigation of a selected number of local companies, focusing upon the problems involved in sustaining manufacturing within a dense urban neighborhood, together with the strategies taken by these firms to remain competitive in the face of international competition and strict environmental regulations. The paper argues that Japan’s economic slowdown has impacted on local work and job creation, yet many firms in Higashi Osaka have responded, restructured, and “fought back”. Instead of developing strategies associated with cost cutting or abandonment, local firms in our survey focused on making major investments, innovative products and general upgrading. The final section presents some concluding remarks and highlights recent public policy that has supported industry in the city.

II Industrial Development in Higashi Osaka

Industrial Characteristics In year 2008, Higashi Osaka hosted around 6,000 industrial plants and workshops, and ranked fourth among Japanese cities by its overall number of factories （see Table 1）. It also recorded a very high density of factories at 116.3 manufacturing establishments and workshops per square kilometer, which was third only to the much smaller Sumida ―and Taito―wards in metropolitan Tokyo. In terms of total production value the city ranked fourth in Osaka prefecture behind the cities of Osaka, Sakai and Yao（ Census of Manufactures）. Higashi Osaka itself is dominated by firms in the fabricated metals sector （29.1 per cent of total establishments）, followed by the general,

Table 1. Ranking of Japanese cities by number of manufacturing establishment, 2008

City Prefecture Establishment Employment Density 1 Osaka Osaka 15,778 162,075 70.9 2 Nagoya Aichi 9,950 127,846 31.7 3 Kyoto Kyoto 6,594 78,543 30.4 4 Higashi Osaka Osaka 6,016 58,681 116.3 5 Yokohama Kanagawa 5,491 115,995 13.8 6 Hamamatsu Shizuoka 4,600 91,996 9.5 7 Ota ―ward Tokyo 4,362 35,741 73.4 8 Kawaguchi Saitama 3,667 31,127 66.7 9 Kobe Hyogo 3,620 75,401 11.3 10 Sumida ―ward Tokyo 3,391 21,303 246.6 11 Shizuoka Shizuoka 3,293 51,689 10.0 12 Katsushika ―ward Tokyo 3,139 17,445 90.2 13 Adachi―ward Tokyo 3,094 21,464 58.2 13 Yao Osaka 3,094 36,842 83.9 15 Kawasaki Kanagawa 2,968 59,129 22.0 16 Ichinomiya Aichi 2,795 27,647 24.5 17 Sakai Osaka 2,762 55,260 19.0 18 Edogawa ―ward Tokyo 2,614 17,078 52.5 19 Fukuyama Hiroshima 2,495 45,354 9.8 20 Taito ―ward Tokyo 2,290 10,153 227.2

２ Note : Density is establishments per km of inhabitable land Source : Census of Manufacturing

― 26 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 509

Table 2. Industrial Structure of Higashi Osaka in 2008

Production Processing Industry Establishments ％ Employment ％（Yen ‘0,000）％（Yen ‘0,000） Ratio （A）（B）（B/A） Food 86 1.4 2,753 4.7 5,355,529 4.2 25,993 0.5 Beverages 7 0.1 65 0.1 351,078 0.3 377 0.1 Textile 179 3.0 1,129 1.9 1,359,103 1.1 337,224 24.8 Lumber 39 0.6 159 0.3 202,147 0.2 12,696 6.3 Furniture 162 2.7 1,450 2.5 3,845,778 3.0 234,447 6.1 Paper & pulp 219 3.6 2,747 4.7 5,719,283 4.4 499,034 8.7 Printing 385 6. 4 4,825 8.2 8,955,297 6.9 1,758,747 19.6 Chemical 79 1.3 1,637 2.8 4,247,597 3.3 115,165 2.7 Petroleum 3 0.0 11 0.0 26,073 0.0 350 1.3 Plastic 621 10.3 6,647 11.3 12,546,060 9.7 1,017,757 8.1 Rubber 82 1.4 590 1.0 922,763 0.7 73,718 8.0 Leather 81 1.3 408 0.7 546,855 0.4 25,707 4.7 Ceramic 47 0.8 626 1.1 1,629,638 1.3 81,159 5.0 Iron & steel 166 2.8 2,169 3.7 11,868,306 9.2 327,560 2.8 Non ―ferrous metals 105 1.7 1,358 2.3 6,418,948 5.0 236,745 3.7 Fabricated metals 1,751 29.1 12,735 21.7 22,121,979 17.2 4,664,244 21.1 General machinery 287 4.8 2,465 4.2 4,743,114 3.7 479,701 10.1 Production machinery 931 15.5 8,209 14.0 18,889,849 14.6 1,556,651 8.2 Business machinery 78 1.3 914 1.6 1,558,401 1.2 114,590 7.4 Electronics parts 30 0.5 535 0.9 968,956 0.8 147,731 15.2 Electrical machinery 256 4.3 2,619 4.5 5,233,252 4.1 343,973 6.6 Information machinery 15 0.2 225 0.4 1,041,083 0.8 43,162 4.1 Transporataion equipment 147 2.4 2,299 3.9 7 ,222,612 5.6 382,930 5.3 Miscellaneous 260 4.3 2,106 3.6 3,205,854 2.5 130,807 4.1 Total 6,016 100.0 58,681 100.0 128,979,555 100.0 18,744,368 14.5

Source : Census of Manufactures production and business machinery industries （comprising 21.6 per cent）, and together these accounted for about half of total factories and workshops（ see Table 2）. Overall, the city has a wide variety of manufacturing business. Production is particularly high in a range of metal parts and industrial equipment, as well as specialized consumer and household items （Research and Statistics Department, 2002）. For instance, there are factories that make vacuum flasks, artificial pearls, special lenses, fountain pens and umbrellas. Also produced are high quality screws and bolts to fasten the supports in Japanese bridges, as well industrial tools and factories that make use of specialized wire drawing technology（ Higashi Osaka City/Higashi Osaka Chamber of Commerce, 1998a）. Its narrow but regular streets often hum with the sound of machinery together with the noise of small trucks delivering raw materials, parts and components. Together with factory complexes in the adjoining Higashinari and Ikuno wards of the City of Osaka, Higashi Osaka has been regarded as a typical cluster of “medium and small size enterprises, where dwellings and factories are mixed”（ Fujimori, 1980, 86）. In reality, the scale of its factories is extremely small and there are numerous firms occupying tiny sites（ see Figure 1）. Table 3 shows that in year 2008, 42.4 per cent of manufacturing establishments had only 3 employees or less （the so―called “micro” factories） and 75.3 per cent had no more than 9 employees. Indeed, only 0.8 per cent of factories in the city had more than 100 employees. The “micro” factories of Higashi Osaka provide both small―batch and mass production, and in some cases they offer a foundation for innovation and prototype development（ Fujita and Hill, 1998, 186）. ― 27 ― 510 Japanese Journal of Human Geography 63―6（2011）

Historical Development How did Higashi Osaka develop into such a high―density industrial district ? The city with its current boundaries was formed only in 1967, from a combination of three former municipalities ; Fuse, Kawachi and Hiraoka（ see Figure 2）. Much of this area before 1945 was farmland, then lying on the eastern fringe of the Osaka metropolitan built ―up area. The present city at that time also contained many local rural industries, some of which existed during the pre―Meiji period （i. e. prior to 1868） Figure 1. Typical micro ―scale rental factory in the Takaida district specializing in daily goods for the large Osaka （ photo by K. Nagao） consumer and industrial markets. Typical examples from the pre―Meiji period include household brushes manufactured in the nearby township of Yao, lying to the south（ see Figure 2）, wire products and barber’s hairclippers in the Hiraoka area, and cotton and textile production th th together with ironware in Kawachi from the 17 to the 19 centuries（ see Figure 3）. When these latter industries declined, the children of cotton and ironware producers worked as apprentices in Osaka city factories and then returned to this area to start manufacturing metal utensils and kitchen appliances. Casting and forging skills came first to Osaka and then to Kawachi from the Netherlands via Japan’s southern island, Kyushu. From such traditional processes and technologies came the later production of screws, nuts and bolts as well as industrial hand tools （Higashi Osaka City, 2000）. Figure 3 shows how these and other industries （wire netting, and sewing machines） developed from skills and occupations connected with the three original products that had deep roots in the locality ― local Kawachi ironware and cast metal items, Kawachi cotton, and wire manufacturing. In sum, Higashi Osaka differs from many other industrial districts in Japan due to its interesting pattern of overlapping types of manufacturing from the 14th century to the modern period. On top of these pre―World War II industrial patterns Higashi Osaka also gained factories and workshops from the general post―1945 expansion of industry in metropolitan Osaka. As orders

Table 3. Manufacturing Establishments by Employment Size Category, Higashi Osaka, 1965―2008

Firm Size 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008 1 ―3 784 1,619 4,108 4,099 4,232 4,154 4,018 3,712 2,821 2,548 4 ―9 1,543 2,531 3,513 3,524 3,746 3,630 3,101 2,781 2,187 1,986 10 ―19 795 1,097 1,130 1,024 1,046 1,093 960 877 793 836 20 ―29 319 305 298 415 447 504 470 366 346 337 30 ―49 275 261 209 175 214 191 168 168 144 143 50 ―99 178 192 137 141 161 156 151 120 115 119 100 ―299 103 82 73 60 76 72 54 47 46 41 300＋ 14 22 11 12 11 10 11 7 3 6 Total 4,011 6,109 9,479 9,450 9,933 9,810 8,933 8,078 6,455 6,016 Employment 78,293 90,473 88,894 86,522 93,906 92,885 82,851 70,822 41,482 58,681 Output（ billion yen） 0.25 0.57 0.82 1.39 1.68 2.01 1.63 1.34 1.18 1.29

Source : Census of Manufactures

― 28 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 511

Figure 2. Manufacturing establishment densities in Higashi Osaka, 1995 （ source : data provided by the City of Higashi Osaka）

Figure 3. History of local industry, Higashi Osaka （source : based on materials in Higashi Osaka Chamber of Commerce and Industry. 1998） ― 29 ― 512 Japanese Journal of Human Geography 63―6（2011） grew for a wide variety of parts from the region’s major factories, so small metal and machine plants proliferated in the 1950s and 1960s, and eventually these spread eastwards into Higashi Osaka. This period was also associated with a tendency for engineers and skilled machinists to “spin ―off” their own firms from the bigger established manufacturing enterprises, and the ready availability of rental space for factories in the eastern suburbs helped this process. The eastern side of the metropolis then provided the only cheap land for new small―scale firms to establish production. As suburban and inter ―city highways cut through their land, farmers built small workshop building to rent out as factories as an alternative to farming（ Onishi, 1989）. According to a survey conducted by Higashi Osaka City in 1999, these rental buildings continued to play a strong role in the city, especially for the smaller “micro” factories of less than five employees. At the time of the City’s survey they numbered around 500 and were used mainly for metal and machine shops, with an average floor space of just 12 ―15 tsubo （approximately 40―50 square meters）（Higashi Osaka City, 2000）.

Spatial Patterns The number of industrial firms in Higashi Osaka expanded from around 2,000 in 1955 to over 9,000 by 1975, and at its peak of post―war expansion in the mid―1980s the city contained nearly 10,000 manufacturing establishments（ see Table 3）. However, the distribution of factories has not been uniform. Figure 2 indicates that Higashi Osaka has four distinct clusters of factories and workshops, each having its own spatial pattern and history of development（ this section is based on an interview with J. Kimura, Department of Economic Development, City of Higashi Osaka, July 1999）. First, major plants in the city are concentrated in the two districts in the former Fuse city area in the west, closest to the Osaka City boundary. The Takaida district, in the north―west （see Figure 2）, has been known particularly for its high concentration of small ―scale workshops, and today is often called kojogai （meaning “town of factories”）. Takaida began to attract factories from adjacent Osaka City during World War II when a major road was constructed linking Osaka to Hiraoka, the present eastern section of Higashi Osaka that adjoins Mount Ikoma at the eastern extremity of Higashi Osaka（ Sawai, 2002）. At that time, Takaida was still a rural area with paddy fields laid out in a regular grid pattern. As already noted, it was relatively easy for farmers to lease or sell land for small ―scale factory development. Second, a cluster centred around the Shibuwa and Kashita districts in the south―west of the city also has a high concentration of small ―scale workshops and factories, and was formed by a general expansion of Osaka’s suburban expansion into the adjoining city（ see Figure 2）. Today it is characterized by a complex mixture of both workshops and residential uses, especially when compared with the more industrial Takaida district. Third, another factory area can be observed in the north―east section of Higashi Osaka along the National Highway number 170, running north―south （Figure 2）. Overall, the industrial plant density of this area is not as high as that of the previous two areas due to the larger average size of factories. Since the Meiji period, this area hosted locally ―based industries producing for the Osaka market （such as metal wire production） and it developed through the use of locally ―obtained electric power generated by hydro―power station situated at the western foot of Mount Ikoma. However, its post ―war expansion shifted further westward as the source of power changed from hydro to the national grid during the 1960s. Later on, easier access to the Osaka port was also provided by the construction of National Highway number 170（ popularly known as the “outer loop line” in Osaka） on the occasion of the 1970 Osaka World Fair, and this further stimulated the building ― 30 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 513 of factories and workshops in the area. Fourth, there lies an area of high concentration of plants in the southern section of the city adjacent to Yao City （Figure 2）. As noted earlier, Yao was originally a classic jiba sangyo―style industrial district specializing in many labour―intensive “cottage industries”, such as brushes. While these industries also expanded in the post―war period, they are more capital―intensive today, and do not depend so much on farm labour. Still, the continuing strength of linkages to powerful Osaka wholesalers and trading companies, as well as availability of raw materials（ such as pig bristle for brushes） and local metal wire drawers in Hiraoka）, has kept these and other specialized industries located in Yao as well as the adjoining parts of Higashi Osaka. In the post― war period other industrial sectors expanded in the Yao district, mainly in the form of small rental factories on farmland. Accordingly, the area adjoining Higashi Osaka became one of mixed farmland and factory land uses, as opposed to mixed residential and industrial land uses closer to Osaka City. Together, these clusters play a wide variety of industrial functions. About one ―third of firms in the city as a whole comprise independently owned enterprises that assemble their own final products for both domestic and export markets. Indeed, some 113 assembly firms in Higashi Osaka hold the top market share for their particular product in Japan, including packages and labels, bolts and nuts used for aluminium car wheels and industrial cranes（ Higashi Osaka Chamber of Commerce and Industry, 2007）. Another 48 per cent of factories comprise subcontractors supplying various parts and components under with long ―term contracts for larger assembly firms elsewhere in Osaka. Yet another 20 per cent provide “fee for service” operations, such as repairing, polishing or the upgrading of brought―in industrial products, such as metal pipes and other equipment. In these two latter cases, markets and customers tend to be more local and often within Higashi Osaka itself （Nagao, 2000）. This diverse profile of industrial operations illustrates a distinctive characteristic of Higashi Osaka, especially by comparison with Ota ward in southern Tokyo （another metropolitan―based industrial district）, where sub―contracting activity for larger firms outside of the local area is more the norm. Indeed, Higashi Osaka has a more complex industrial structure than many other Japanese industrial districts, as there are a wider mix of industrial products manufactured here and inter ―firm cooperation is more likely to occur across（ rather than within） industrial categories（ ibid.）. As can be seen by Figure 2, the very highest densities, sometimes reaching up to 750 factory sites per square kilometer can be found in the north―west part surrounding the Takaida district, and in the southwest surrounding the Shibukawa and Kashita districts. These are distinctly industrial areas, but in many other areas of the city the factories are interspersed with houses. Mixed factory and residences at high overall densities are particularly severe in the western parts of the city, where population density is also high, often over 10,000 persons per square kilometer. Here, factory workers and managers live very close to their work and so do not generate the “commuter rush” of a large city. In general, the smaller the factory, then the stronger is this tendency. Of course, there are some people who commute to central Osaka as office workers, but over two―thirds of employees in the city of Higashi Osaka either work at home or live close to their place of work （Higashi Osaka Chamber of Commerce/Japan International Cooperation Association, 1998）. This can be compared to other outlying suburban municipalities in Osaka prefecture, such as Toyonaka, Suita and Fujidera, which are typical ‘bed towns’ where less than half of employed persons work at home or locally and a larger proportion commute into Osaka city （see Table 4）. Finally, a large number of service industries and retailers are located in ― 31 ― 514 Japanese Journal of Human Geography 63―6（2011）

Table 4. Place of work of employed persons who live in Osaka city and inner suburban cities, 2005

Those who work Those who work Those who work in employed persons within the city （％） at home （％） Osaka city （％） Osaka city 1,159,848 953,426 82.2 127,015 11.0 ― ― Higashi Osaka 233,713 141,974 60.7 24,044 10.3 56,937 24.4 Sakai 370,147 215,266 58.2 28,628 7.7 96,063 26.0 Amagasaki 213,452 120,721 56.6 15,603 7.3 45,614 21.4 Yao 122,028 63,257 51.8 11,402 9.3 32,159 26.4 Kadoma 60,789 28,536 46.9 5,829 9.6 13,554 22.3 Moriguchi 66,236 31,009 46.8 7,241 10.9 17,270 26.1 Settsu 41,427 19,094 46.1 3,278 7.9 9,412 22.7 Matsubara 56,072 24,768 44.2 5,069 9.0 17,223 30.7 Daito 59,646 26,242 44.0 4,310 7.2 14,394 24.1 Toyonaka 179,550 75,928 42.3 12,353 6.9 58,341 32.5 Suita 163,946 64,445 39.3 9,086 5.5 58,945 36.0 Fujiidera 29,014 9,568 33.0 2,299 7.9 8,285 28.6

Source : Census of Population

Higashi Osaka. These depend upon the city’s residents for maintaining their business, including shops, restaurants, as well as community activities such as schools. This kind of mixture of activities in the city presents a “two ―edged sword” for factory owners, as it facilitates short― commuting times between work and home, but at the same time land use competition is severe （interview with J. Kimura, Department of Economic Development, City of Higashi Osaka, July 1999）.

III Current Problems and Challenges

From its early history Higashi Osaka grew continuously, and then “matured” as a tightly woven industrial district during the 1970s. Yet as indicated in Table 3, from 1985 both establishments and employment levels stabilized and afterwards recorded negative growth ; the number of factories fell to under 9,000 by 1995 and dropped further in subsequent years. Total production output by value also declined rather sharply in the city after the bursting of Japan’s “economic bubble” in 1991. This shrinkage of manufacturing also reflects the lack of any new establishments locating in Higashi Osaka since the growth period of the post―war period and the gradual closure of the city’s small―scale factories. Surveys conducted by the city found that while more than half of the city’s industrial establishments were set up in the years from 1956 to 1979, very few new firms were established in Higashi Osaka after 1980 （Higashi Osaka, 2000）. Between 1990 and year 2008, Census of Manufactures data indicated that production plunged by a full 35.8 per cent, the total number of establishments fell by 38.7 per cent, and employment in the manufacturing industry declined by 36.8 per cent（ see Table 3）. For a city that experienced 40 or so years of uninterrupted growth, these are alarming figures. Yet, in this regard Higashi Osaka appears to have only followed production trends apparent in many metropolitan areas in Japan, which in some cases started to fall from the time of the 1970s “oil shocks”, and subsequently recorded an accelerating decline during the 1980s and 1990s（ Edgington, 1994, 1997, 2008）. Two changes in the operating environment of small― and medium―sized firms appear to have been at the root of the turnaround in the fortunes of Higashi Osaka. The first involves the influence of globalization and the stronger Japanese currency which occurred around 25 years ago. Until the mid ―1960s, the city’s industries supplied mainly local and other domestic markets, ― 32 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 515 but there was also a significant export sector due to relatively low production costs. However, following the oil shock of the 1970s and the increasing value of the yen in the 1980s, foreign demand fell away as production costs within Japan increased, and as local manufacturers shifted their focus back to the domestic market. Indeed, in the wake of the high yen after the Plaza Accord of 1985, exports fell dramatically and in the mid―1990s were estimated to account for only 6―7 per cent of production in Higashi Osaka （Higashi Osaka City/Higashi Osaka Chamber of Commerce and Industry, 1998b）. Moreover, after further revaluation of the yen’s value to around 80 yen to the US dollar （in the spring of 1995） there was a tendency of many large and mid ―sized enterprises to move significant production capacity out of Japan, including the shift of consumer electronics production to Southeast Asian countries and also to China. This relocation of many important end―use customers, together with the economic recession in Japan, impacted on Higashi Osaka’s small factories. Surveys conducted by the Higashi Osaka Chamber of Commerce and Industry reported that 70 local companies had themselves begun a total of 105 overseas operations by the mid―1990s in order to follow their customers into Asia（ ibid.）. In addition, the high―yen period led to the procurement of more parts from cheaper overseas locations whereas previously these were likely to have been purchased locally. Such a growing commitment to engaging in overseas subcontracting work and the entering into “borderless business relationships” has meant a “squeeze” on the numerous small firms that supply major assembly firms located in Higashi Osaka and areas close―by in the Osaka region. As a result of these trends, many companies of the smallest size class have been ruthlessly “weeded out”. The number of customers has decreased and remaining clients have demanded reductions in the unit price of items ordered（ interview with T. Naruse and N. Umezaki, Executive Officers, Higashi Osaka Chamber of Commerce and Industry, July 1999）. The high yen has also improved the export competitiveness of many East Asian countries in industries similar to those sectors found in Higashi Osaka （e. g. machinery and equipment）, eroding further the export advantage of Higashi Osaka firms. Due to stronger competition with firms in South Korea and Taiwan, most companies have given up competing on price alone. Others have survived by diversifying their production activities and their customers. The most challenging issues facing local manufacturers have therefore been how to improve manufacturing quality, develop new products, and add value to existing lines. Over two ―thirds of firms indicated in the mid―1990s that they planned to advance into new business lines and about half intended to expand their current business （Higashi Osaka City/Higashi Osaka Chamber of Commerce. 1998b）. A second problem causing a loss of competitiveness derives from more local factors, especially anti ―pollution regulations and city planning zoning arrangements. Figure 4 shows the various planning zones designated by the city planning office of Higashi Osaka in 1996. While the original city zoning plan was set out under national legislation enacted in the late 1960s, this has recently been amended. There are a total of 11 types of land use zones which specify the preferred mix of land uses for particular areas within Higashi Osaka ; these comprise six types of residential districts, two types of commercial districts, and three types of industrial districts. Figure 4 indicates the broad―scale spatial distribution of the major types of industrial planning zones in the city（ i. e. exclusively industrial zones ; general industrial zones ; and semi―industrial zones）, together with the city’s residential and commercial zones. Higashi Osaka developed predominantly before Japan’s 1968 City Planning Act, and so the spatial distribution of current planning zones has tended to mirror existing land use conditions. For instance, commercial zones cover existing clusters of shops and small offices that grew up around train and subway stations, together with ― 33 ― 516 Japanese Journal of Human Geography 63―6（2011）

Figure 4. City planning zones in Higashi Osaka, 1996 （source : derived from material supplied the City Planning Office, City of Higashi Osaka）

the city’s Aramoto redevelopment area（ Figure 4）. Industrial zones, which allow the exclusive use and building of factories, correlate closely to the four major industrial clusters in the city described earlier. There are also large factory areas zoned “industrial” or “exclusive industrial” in the northern section of the city along the Kinki Highway and the Central Loop Rail Line. In addition, special factory districts have been zoned exclusively for industry in the Kano industrial district in order to allow for designated industrial parks （Figure 4）. In this way a number of polluting industries （e. g. metal works, wire production, and specialized metal heat treatment） can be located away from the city’s existing residential areas. Industrial zones, therefore, are the most suitable for factories and workshops in Higashi Osaka as they expressly prohibit the development of incompatible uses, such as residences and farms. Nonetheless, based upon a questionnaire conducted in Higashi Osaka and adjoining Yao City, 59.8 per cent of responding factories （237 of 396） were located in “semi―industrial zones”（ Osaka Small Business Information Centre, 1996）. These semi―industrial zones are specified more vaguely, so as to cover existing “mixed―use” conditions, and were designed to reflect the pre ―planning “status quo” situation, namely the rapid development period in which small workshops and factories sprung up among residences and farm land. Such “mixed ―use” zoning has been used for areas surrounding the core industrial clusters throughout Higashi Osaka（ see Figure 4）, yet it gives rise to a number of serious problems. For example, factories in these zones are more constrained in terms of noise controls and face restrictions on 24―hour operations. In addition, even in areas of high industrial concentration, the building of residential apartments on land where factories formerly stood is permitted in this type of zone （see Figure 5）. This type of arrangement has ― 34 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 517

Figure 5. Rental apartment near factories in the Takaida Figure 6. Craftsman and machinery district （ photo by K. Nagao）（ photo by K. Nagao）

tended to encroach on the operations of certain workshops and so prevents further expansion of industry in the city. This is especially so as more and more residential owners argue for less manufacturing, more controls, a better environment and a higher quality of community lifestyle （interview with K. Kawano, City Planning Bureau, Higashi Osaka City, July 1999）. Other local obstacles that constrain factory production relate more broadly to the sustainability of industry in Higashi Osaka and these are linked to its position within a busy metropolitan region. To begin with, higher levels of traffic congestion over time along the district’s narrow roads have induced higher production costs. Second, there is a problem concerning the relationship between the productivity of industrial plants, high factory land prices, and taxation. If the utilization of land and the high land tax that must be paid is merely judged by productivity, then manufacturing and the industrial community in Higashi Osaka will likely be invaded by other more profitable uses eventually（ e. g. residential and commercial uses）, unless there is the maintenance of exclusive industrial zoning（ interview with Kawano, op. cit.）. A third type of problem is the difficulty of finding younger employees and the negative change in the values of the younger generation towards entering manufacturing that threatens the existence of industrial areas in all large cities of Japan. The success of manufacturing industry in Higashi Osaka is due largely to the technological know ―how of skilled craft workers together with sophisticated machinery （see Figure 6）. Therefore, it is essential for the city’s survival that these skills are passed on to the next generation through on―the―job training with experienced workers and understanding tacit knowledge on the “factory floor” （genba）. However, the leadership of many factories is rapidly ageing. One survey found that among the ‘micro’ factories over 80 per cent of company owners were over aged 50 years and older（ Higashi Osaka Chamber of Commerce and Industry/Japan International Cooperation Agency, 1998）. All told, due to many challenges the number of firms in Higashi Osaka decreased markedly in the past 25 years or so. As factories rely in good measure on inter ―firm relationships for their competitive edge, there is the danger that these important links might wither should current trends continue. Moreover, local manufacturing firms can no longer provide jobs for Higashi Osaka residents. The local job―opening to jobs―available ratio in 2010 was 0.44 in the area of Fuse Labor Office（ Higashi Osaka City and Yao City）, while the figures of Osaka prefecture and Japan were 0.56（ source : Fuse Labor Office）. ― 35 ― 518 Japanese Journal of Human Geography 63―6（2011）

Table 5. Summary of interviews with firms in the nuts, screw and bolt sector

COMPANY A B C D Date of 1972 1945 1922 1968 Establishment Products nuts and screws specialized bolts machinery machiner y/mag ne tic parts No. of Employees 115 70 11 43

End Markets : local/non―local local/non―local local/non―local local/non―local ⑴ local/non―local ⑵ sold through whole- 80％ shosha : 20％ direct shosha direct orders direct orders salers （shosha）/direct to customers

Suppliers : mainly local local and non―local local and non―local local and non―local （local/non―local）

Challenges limits on the expansion lack of interaction with factory renovation and need to diversify of production inside Hi- end―users maintaining quality gashi Osaka

―Innovations and change working directly with new markets through an communications with New machinery ; links in business policy end ―users ; establishing alliance strategy （i. e. customers ; craftsmen with suppliers, end―users third factory in Mie pre- working together with skills and university research fecture ; improving quali- shosha, suppliers and ty in high end products ; machine tool makers） sourcing from overseas for standard products

IV A Case Study of the Industrial Screw and Nut Production Sector

In this section we search for evidence whether or not Higashi Osaka firms have undertaken a significant process of restructuring and exactly how they have adapted to new market conditions since the 1990s. Up to now, case studies of Higashi Osaka city have often focused on the more successful firms that have achieved spectacular innovations and moved into new types of products and production（ see Isobe, 1998 and Ibata―Arens, 2005）. By comparison, our focus is on four enterprises involved in the manufacture of industrial nuts and screws, and associated machinery, which is a sector that has long been associated with local wire drawing technologies（ see Figure 3）. While the firms studied below may not be as spectacular in nature as certain engineering enterprises, it is worthwhile exploring how a more mature sector of the city’s local economy has dealt with the changes in the manufacturing environment mentioned earlier. Our survey is not representative of all firms in the industrial screw sector, yet we believe there is much value in clarifying the challenges that companies face and their strategies for improving their competitive strengths through in―depth interviews carried out in October 2011. During the interviews with factory managers and company executives we asked questions relating to the ties that bound them to Higashi Osaka （e. g. markets and suppliers） as well as their problems and any recent modifications in business policy. A summary of our findings is shown in Table 5.

Company A This company produces nuts and screws for automobiles and houses. About 80 per cent of its output is sold on to local trading companies （shosha） who are specialists in dealing with end― users, with the remaining 20 per cent being direct deliveries to various industrial clients, usually ― 36 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 519

involving custom―designed products. The company president we interviewed noted that working directly with end―users played an important role in the joint development of new and improved products and in maintaining the company’s competitiveness. Consequently, ensuring good communication with clients was a most critical challenge. Thus, for those customers located far from Higashi Osaka City （such as in Shizuoka Prefecture or Aichi Prefecture）, the plant manager would often visit the client’s factory so as to handle an order and to exchange views on how to improve the quality and design of nuts and screws. Indeed, maintaining and improving quality and considering new types of products, as opposed to issues of price, were especially important in the case of products that were supplied directly to clients. As for delivery, Higashi―Osaka City was considered to be very convenient as a distribution center. The head office of this company was located south―west of and about 15 minutes walk from Yoshita Station on the Kintetsu Higashi―Osaka train line, and this site also doubled as a distribution center. The distribution center could provide “same―day shipping” through a computer―controlled system and an automatic―rack warehouse. The area where this center is located is designated a type ―2 medium/ high ―rise special residential district in the local planning scheme and consequently no production could be carried out here. With regard to supplies of raw materials, steel materials were procured from major Japanese steel makers, but wire rod was obtained from local wire drawers centered in the Hiraoka district of the city. This link with local suppliers was considered vital to maintaining the high quality of production required for custom ―designed items. However, some of Company A’s more standard products were now sold by trading companies overseas, for example to housing and construction industries in the United States. Consequently, some raw materials for these standard products were sourced from overseas to survive price competition in the U. S. market. In the event that a technically advanced supplier was needed, then the factory manager noted that links with local suppliers were important, as the expertise and characteristics of prospective supplies had to be well understood. The location of the firm’s suppliers was as follows : suppliers of heat treatment operations were located in the nearby cities of Habikino, Tsurumi, and Yao ; two metal―plating suppliers were in Osaka and one in Kyoto ; three tool suppliers were in Higashi ―Osaka City and one in Hirakata ; and one punch supplier were located each in the Ayabe city（ Kyoto prefecture） and at Akita in the Tohoku region. The company operated two factories : the main plant completed in 1984 and the other plant completed in 1987. These had an advantage within Higashi Osaka as they were both located within a designated industrial district and so did not suffer from the land use competition with residential or commercial uses, which was mentioned earlier. Before completion of the main plant, production was carried out in nearby Neyagawa City, but as housing increased around that plant, it was decided to make a complete move. The plant manager noted that as the noise caused by small ―screw pressing and rolling processes must certainly be annoying, and considering that the plants adopt a two―shift system for twenty―four hours operation, the location of the company factories within an industrial district made operations all the more easier. This company had recently hired new university graduates, although as with most companies producing nuts and screws it faced the problem of an aging of its industrial craftsmen. Based on on ―the―job training, skills were gradually transferred from the older generation to the younger generation. A third plant was set up in 1997 in a rural part of Mie prefecture not far from the Meihan national highway adjoining Ueno City. During the 1990s the company had considered ― 37 ― 520 Japanese Journal of Human Geography 63―6（2011） commencing manufacturing in Southeast Asia to reduce its production costs, but this idea was discarded as being impractical for a small―scale company. The Mie plant deals mostly in nuts for automobiles and cold and warm pressed parts, producing them with new and powerful machines and large―scale equipment. An allied metal―plating plant located close―by in Higashi Osaka was also used as an outside supplier, but most of this kind of processing was subcontracted out to firms located in the Osaka metropolitan area. The company president admitted that further expansion at plants in Higashi Osaka was limited. In sum, although Company A recognized the advantage of the Higashi Osaka industrial district, its strategy for expansion involved a new factor in a rural area of Kansai region, Japan.

Company B This firm manufacturers specially shaped screws and long―size bolts. Similar to the previous company, its main office was located south of Yoshida Station on the Kintetsu Higashi Osaka train line about 15 minutes on foot. This area was designated a type ―1 residential district, and while no production is performed here, the office building doubled as a shipping and distribution site. The company’s production was handled by Plant No. 1 and Plant No. 2, located in the Mizuhai industrial district, in the eastern part of Higashi Osaka City near Hanshin express way. The company had about 150 clients comprising local wholesalers （shosha） in Osaka. The factory manager mentioned that one current problem was that the needs of end―users were not being fed back by the trading companies. Furthermore, while trading companies had in the past took on the burden of holding inventory, they could not be expected to do so at present. Regarding supplies, wire materials were procured from a local wire drawer, and supply orders for these and other suppliers were processed through trading companies. The composition of the company’s customers had changed dramatically during the last decade. For instance, the share of screws and bolts supplied to the construction industry had declined from about 60 per cent down to 15 per cent, while the share accounted by the automobile industry had grown to around 60 per cent. Most customers in the automobile industry were second ― and third―tier supply firms. The demand for quality products in the automobile sector was much higher than that in the construction industry, and to meet the new quality standards Company B had invested about 1.5 billion yen to introduce new machines. In order to improve their products, the company had formed an “alliance” with a major material supply firm, a firm that produced machinery and a major trade company in order to supply new customers. This inter―firm network was not local, but spread across central and western Japan. The subcontracting rate for this company was about 30 per cent, and quenching and metal plating operations were normally subcontracted. To cut costs, other processes such as reaming, cutting, bending, and pressing might be subcontracted to local firms as the situation warranted. On the other hand, in―house manufacturing was also being stepped up in preparation for the discontinuing outside suppliers. At the time of our interview, outside suppliers were made up of about 270 companies. Of these, about 60 per cent were located in Higashi Osaka City, about 10 per cent in Yao City, about 4 per cent in the nearby Ikuno ward, Osaka, and about 3 per cent each in Higashinari and Hirano wards in Osaka. The company policy was that “one big customer” should not be more than one―quarter of total sales. This customer diversion strategy was necessary as small manufacturers such as Company B, which typically acted as a “captive plant” found it very difficult to survive in the “shrinking” situation of the Higashi Osaka industrial agglomeration. As noted, this company was ― 38 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 521 also flexible to increase its in ―house production in the face of the closure of its local subcontractors. These kinds of behavior are clues to understand the survival of firms in the new market situation.

Company C This firm is one of the old manufacturers in the Takaida district in western Higashi Osaka City. The company was established initially in 1922 in the Higashinari ward of Osaka city and moved to its current location in 1937. After the Second World War, demand for machinery grew from local manufacturers which produced screws and Company C began the production of machinery for nuts and screws. During the rapid growth of the Japanese in the 1960s and 1970s the company’s clients diversified to customers in the electronics and automobile sectors in the Kanto and Chukyo region. Since the end of bubble economy in the former 1990s, local demand within Higashi Osaka had decreased. Current customers were firms in East Japan and their overseas plants in East and Southeast Asia. The factory manager reported that business trips to various customers were an important part of keeping in touch with its major customers. In terms of suppliers, local networks were relatively stronger compared with the company’s network of customers. Standard parts could be sourced from remote regions, but proximity with local suppliers in Higashi Osaka was still important for non ―standard parts and processing work. The competiveness of this company was the durability of its machines and the fact that maintenance was not a big burden for customers. “Service free is the best service” was a catchphrase of this Comapany C. However, as noted, frequent visits to major customers were necessary to find ways to improve machinery and to search for innovation. As a machinery company, the skill of the company’s craftsmen was also critical. Only eleven workers were engaged in small batch ―style custom―oriented production. Since the main plant was very old, renovation had to be carried out in the near future. This presented a problem as the number of houses in the Takaida district had grown in the 2000s, representing a challenge for how to operate the factory in this mixed ―use district.

Company D This company provided an interesting case as it had developed innovative machinery for the nuts and screw industry based on technology derived from a completely different sector. In sum, this company specialized in magnetic components used in machinery, and it had applied this technology to assist in the production of nuts and screws. The main business of Company D used to be producing magnetic parts for use in photocopy machines. However, in the 1990s the assembly of many Japanese photocopy machines shifted to China. Consequently, the company had to establish a plant of its own in Guangdong province, China, and an office in Hong Kong. This led to the “hollowing out” of production at its former No. 2 plant in Higashi Osaka. To address this problem a development division was created to create new functions at the company’s home base. Through observation of workshops at the company’s parts suppliers and through face to face communication, the engineers found that the handling of small parts such as screws was problematic for the smooth operation of many small factories. As a result, Company D developed special machinery that lifted up small screws and nuts and other parts using the power of magnets, which ensured a smoother flow of these items in the production line. The new machinery was fabricated based on interactions between the company and other metal ― 39 ― 522 Japanese Journal of Human Geography 63―6（2011）

manufacturing firms, and has been sold throughout Japan as well as into East Asia. Thus while this innovation commenced in Higashi Osaka it has spread from supplying merely local demand to national and export markets.

V Conclusion

In this paper we have traced aspects of the evolution of the Higashi Osaka industrial district. It appears that a long trajectory of Figure 7. The Creation Core building and City Hall in the Aramoto redevelopment area growth in the city has now come to an end, （ photo by K. Nagao） especially after losing nearly two―fifths of its industrial establishments since the mid―1980s. Our interviews with firms in the screw and nut sector, while admittedly limited in scale, confirm the challenges facing local factories we identified earlier in the paper, such as the loss of many customers overseas and land ―use conflict that impedes the expansion of manufacturing operations. In the latter case, this has led some firms to expand their production away from Higashi Osaka, leaving what were traditional stand ―alone production sites to transform into head offices, showrooms and distribution centers. Importantly, though, the residence of the owner ― managers has remained within the city or nearby. Our survey found that company upgrading and innovations came by utilizing the existing skills of the workforce, together with close cooperation with end―user customers. Some firms have diversified their customer base either to national or international markets. Indeed, taken as a whole, the interviews suggest that the intensity of local linkages within Higashi Osaka, and therefore its strength as an industrial district, depended currently more upon the proximity to firms’ employees and suppliers, as well as wholesalers within the ‘larger Osaka metropolitan region’, rather than to end―use customers within Higashi Osaka. These company interviews provide insights into how mature enterprises have “fought back”. The more mature firms involved in the screw and nut sector cannot innovate their way into new products, but they have “hung on” in Higashi Osaka by getting closer to their end ―use customers, engaging in a spatial division of labor, and providing added ―value services such as just―in―time delivery and improving the quality of their products. Since the mid―1990s, public policy has focused on promoting industry in the city and assisting inter―firm cooperation. For instance, the Higashi Osaka City Government and the Higashi Osaka Chamber of Commerce and Industry jointly published a “Kinboshi （gold star） Higashi Osaka” report profiling those local companies that hold a top market share for various consumer and industrial products as well as the use of unique technologies （see Higashi Osaka City/Higashi Osaka Chamber of Commerce, 1998a, 2007）. This has enhanced the reputation of many small and medium― sized manufacturers in Higashi Osaka that have unique technologies or skills as well as niche― market business policies. Another effort by the City Government and the Chamber of Commerce and Industry has been to encourage networks or groups of small firms gathered from different products or processes （igyoshu koryu）. While production is often interconnected among firms in Higashi Osaka due to specialization of production, innovation often occurs from communication among companies having quite different facilities and specializations. During the decade from ― 40 ― Local Development in the Higashi Osaka Industrial District（EDGINGTON and NAGAO） 523 the mid―1990s more than ten groups have been organized in this way. In 2003, the Higashi Osaka city government and the Osaka prefecture government established a new institution located in the Aramoto redevelopment area, called “Creation Core Higashi Osaka”（ see Figure 7）. This was designed to promote local companies through providing both exhibition―room space to display various products as well as other facilities. Experienced coordinators afford consulting services for local firms, including information on technologies, university research, markets and patents（ Monodzukuri Business Information―center Osaka, 2011）. One remarkable achievement has been the development of a small satellite through the combination of various small and medium ―sized companies in Higashi Osaka. This project originated through cooperation between local engineers and professors from Osaka Prefecture University. The city government backed this high ―technology project because it provided excellent publicity for Higashi Osaka and gave a good example to encourage younger workers and next ―generation entrepreneurs to enter local industries. A Kansai Satellite Office opened in the Creation Core Higashi Osaka building during 2003, providing technical support companies and universities who are interested in thee satellite and “space business”. A small satellite prototype developed by a local consortium was launched by the Japan Aerospace Exploration Agency （JAXA） in 2008. The group plans to mass produce the satellite as a multi ―purpose satellite for disaster and meteorological observation（ Japan Aerospace Exploration Agency, 2011）. In sum, while the adaptability of the Higashi Osaka industrial district and its small firm owners has been tested to the limits since the 1990s, the companies in our survey were not simply passive victims of either internationalization or environmental upgrading and faced various challenges with different business strategies. Overall, it is likely that manufacturing operations will remain, albeit at a lower level, in the foreseeable future. The district continue to face difficult problems, such as the lack of successors and the increasing shift of Japanese production overseas, but endeavors by individual firms together with public institutions will help keep the competitive advantage and innovativeness of firms and craftsmen. This study illustrates that Japanese industrial clusters are not “cast in iron”, but evolve over time. Higashi Osaka is a “big ―city” industrial district characterized by diversity of customers, access to specialized manufacturing supply firms, flexible custom―order batch production organization, and high development capacity.

＊ We acknowledge the generous assistance of officials in Higashi Osaka city government and the Higashi Osaka Chamber of Commerce and Industry, as well as local factory managers interviewed for this study. David W. Edgington wishes to acknowledge the financial assistance of an Osaka City University Fellowship which funded his field research. Cartography was provided by Eric Leinberger.

David W. Edgington is Associate Professor at the Department of Geography, University of British Columbia, Vancouver, British Columbia, Canada, V6T 1Z2, e―mail : edgingtn@geog. ubc. ca. Kenkichi Nagao is Professor at the Graduate School of Economics, Osaka City University, Osaka, Japan 558―8585, e―mail : nagao@econ. osaka―cu. ac. jp.

Notes 1. For further studies on Japan’s industrial districts see Ide and Takeuchi 1980 ; Yamazaki 1980 ; Patchell and Hayter 1992 ; Kobayashi 1993 ; Suyama 1996 ; Izushi 1997 ; Whittaker 1997 ; Fujita and Hill 1998 ; Edgington 1999 ; Funaba et al. 1999 and Oda 2005. ― 41 ― 524 Japanese Journal of Human Geography 63―6（2011）

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