In the Kansai region of Japan, you stand on the right of the escalator, not the left. The udon soup is thin and the electricity travels at a frequency of 60Hz, not 50Hz. Such differences are small but matter. They testify to the unity and otherness of Kansai, Japan’s historic heartland.

Like the US east and west coasts, or the north and south of England, the split between Kanto (the eastern region around Tokyo) and Kansai (centred on Osaka to the west) is Japan’s psychological divide. From dialect to diet to stereotypical personality, the differences are deeply felt. Kansai people are held to be outgoing, Kanto people reserved.

While many outside Japan have heard of Kansai cities such as Osaka, Kyoto and Kobe there is less understanding of how tightly they are bound into a regional economic powerhouse of 22m people. If Kansai were a country, its economy would rank just below the Netherlands in size.

The ancient capital of Kyoto is one of Japan’s top tourist destinations and pharmaceutical laboratories dot the region. The diverse products of Kansai research and development include the anti-cancer drug Opdivo, batteries in Tesla vehicles, the video-game hero Mario and even instant noodles.

Yet Kansai wrestles with a problem familiar to regions around the world: the predominance of the nation’s capital. Tokyo is Japan’s undisputed centre of finance, politics and media. “The trend towards overconcentration in Tokyo has not changed,” says Manabu Nojima, head of industrial affairs at the Kansai Economic Federation. “So where Kansai used to be about 20 per cent of Japan’s GDP, now it is about 17 per cent.”

The years of industrial decline after Japan’s bubble burst in 1990 hit Kansai especially hard. As a result the region around Nagoya, home to the car company Toyota, has gained ground as a competing hub. Hence Kansai is on the hunt for a new economic model for the 21st century, one that builds on its traditional commercial strengths but helps it resist the gravitational pull of Tokyo.

“The pillars of business in Tokyo are finance and information technology,” says Ichiro Matsui, governor of Osaka prefecture. “Nagoya has Toyota.” Mr Matsui identifies the business pillars in his prefecture as “biomedicine and tourism,” and argues that Kansai should build on those strengths. Mr Matsui and regional business leaders have plans to achieve that.

Next year, Osaka hosts the G20 meeting of world leaders, which will allow it to highlight its tourist attractions. In 2025, with a healthcare theme, it aims to stage the World Expo. This has a powerful resonance for the city, which hosted the Expo in 1970. “The meaning of the Expo has changed massively since 50 years ago,” says the governor. In 1970, “it was about national prestige: showing that a country defeated in war was growing rapidly as a manufacturing powerhouse”.

Its rivals for the event are Ekaterinburg in Russia, and Baku in Azerbaijan. A decision will be made in November. If Osaka does not win, it will not be for a lack of fervour from its supporters.

Hosting such events will amplify the region’s biggest economic success story: tourism. Even amid a travel boom in Japan, which reached its goal of 20m visitors by 2020 five years early, Kansai has done well. The proportion of foreign tourists to Japan visiting Kansai is up from 33 per cent in 2013 to 42 per cent in 2017, with the absolute number of visitors up from 3.5m to 12.1m. Kansai has a 24-hour international airport, built on an artificial island in Osaka bay and opened in 1994. When the tourist boom accelerated, it had the capacity to handle more flights, and has become the hub for low-cost carriers flying to Asia.

Flourishing: cherry blossom on Kansai’s Mount Yoshino © Carl Court/Getty Images

After years in the doldrums, Osaka’s Minami entertainment district again parties every night — but now it does so in a variety of Asian languages. The fun will become livelier if another of Mr Matsui’s plans comes off and Osaka wins the right to build Japan’s first so-called integrated resort, namely one with a casino. The government of Shinzo Abe pushed through a law to legalise casino gambling in December 2016.

“It was Osaka that proposed bringing integrated resorts to Japan so we regard ourselves as top runners,” says Mr Matsui. The business community is broadly behind a casino, which would be built next to the Expo site on another artificial island. But there are reservations.

“In America, the political centre is Washington and the economic centre is New York,” says Mitsuyoshi Hanaya, head of the opposition in the Osaka prefectural assembly. “So Osaka should be aiming to match New York.”

By the same logic, he says, China’s political centre is Beijing and Shanghai is its economic hub, and Osaka should be looking to “match” Shanghai. He adds: “If you make your living from an integrated resort, won’t Osaka become Las Vegas or Macau instead?” Mr Hanaya wants to build up industry, still the main focus in the area.

According to Takeshi Kuwahara, professor of regional policy at the Osaka University of Economics, “the Kansai economy has three poles” — Kobe, Kyoto and Osaka — “each with a different character.”

Kobe was one of the ports that in the 1860s was first opened up to foreign trade, and retains enduring links with the west. After being hit by an earthquake in 1995, it remains an important port and mercantile centre. Foreign groups such as Nestlé, Procter & Gamble and Eli Lilly, have headquarters in Kobe as do Japanese companies Kawasaki Heavy and Kobe Steel.


The proportion of visitors to Japan who stop off in Kansai

Kyoto is a place of shrines, temples and universities. Home to the emperor from 794 to 1869, Japan’s eighth-largest city is one of its wealthiest and has a strong sense of its own identity. The city has produced Nobel Prize winners, including Shinya Yamanaka in 2012 for the discovery of induced pluripotent stem cells, and Koichi Tanaka, a white-collar worker who won in 2002 for his work on developing mass spectrometry.

Mr Tanaka’s employer, the scientific instrument maker Shimadzu, is one of a number of mid-sized technology groups that form the backbone of the Kyoto economy. Others include Omron, Horiba, Rohm, Nidec, Nichicon, GS Yuasa and Murata Manufacturing, all with strong positions in niche areas of electronics or semiconductors — add to the list the video games group Nintendo.

The question is how to forge Kansai into a more coherent and competitive whole, a challenge exemplified by a magnetic levitation railway that will connect Tokyo to Nagoya (in a journey of just 40 minutes) from 2027, while the extension to Osaka (67 minutes from Tokyo) is not due to happen until 2037.

In one possible future, the railway will start to dissolve the economic boundaries between Japan’s regions. “Japan is a small country so in the future Tokyo-Nagoya-Osaka will be connected in an hour by the maglev as a single region,” says Mr Matsui. That said, “the distance will still be 600km, so each of those three cities will still have its own characteristics”.

As such, economic integration is unlikely to dissolve Kansai’s identity. Visitors using the escalators should remember to stand on the right.



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