The great Tokyo exodus | Financial Times

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When Akiteru Teraoka, 37, was working as a sales manager at the Tokyo headquarters of one of Japan’s largest employment companies, Pasona Group, he would leave home at 7am. Five days a week he endured an hour’s journey on a jam-packed train. Now, since moving last October to a remote resort island 600km away, he enjoys sea views on his 10-minute drive along the coast to work, after a relaxed breakfast with his wife and two sons.

Teraoka heads a team of 110 people on Awaji island in western Japan. He still deals with his Tokyo-based clients but remotely — arranging recruitment meeting schedules, formatting CVs of job applicants and working closely with his former colleagues in the Japanese capital. “Not only can I now spend more time with my family, I can continue building my career within the company from Awaji,” he says. “I am doing tasks that I previously thought were only possible in Tokyo.”

Teraoka is one of nearly 350 Pasona employees to have moved to the island since the company made headlines in September 2020 by announcing a plan to relocate many of its headquarters’ functions there, along with 1,200 staff, by May 2024. Pasona is just one example of how Japanese companies, ranging from entertainment agencies to beer breweries to software developers, are rethinking their working patterns as a result of the coronavirus pandemic.

In his office on Awaji, with panoramic views of the blue Seto Inland Sea, Pasona group chief executive Yasuyuki Nambu says younger generations of staff, especially those with small children, “are increasingly changing their values, from being Tokyo-centric to looking for an environment surrounded by sea and mountains”.

Yasuyuki Nambu, group chief executive of Pasona
Yasuyuki Nambu, group chief executive of Pasona

While hybrid and remote working have changed workplace cultures all over the globe, the changes are particularly striking in the world’s third-largest economy. Japan is known for its long work hours and low productivity, where being in the office — and leaving after your boss — has often been more important than what is actually achieved.

A series of natural crises, most notably the 2011 Tohoku earthquake and tsunami that triggered the Fukushima disaster, had already served as wake-up calls to CEOs in Japan of the need to diversify risks. This has aligned with government policy, which offers subsidies for business relocation, primarily to bolster the regions and “de-risk” the capital. Yet before the pandemic, the country’s decades-old working habits had made the idea of leaving Tokyo seem all but impossible, as clients, universities and ministries are all concentrated there.

Now, that entrenched belief is being dismantled. According to business information company Teikoku Databank, more than 350 companies moved their main offices from Tokyo and its neighbouring prefectures to the countryside last year — a record high. Also, for the first time in 11 years, more companies left the capital than moved into it. This backed up population trend figures from the Ministry of Internal Affairs and Communications, which showed that in 2021 more people left Tokyo’s central 23 wards than arrived, for the first time since records began.

“The trend of companies relocating to regional areas is unlikely to stop. Companies will carefully select what works best in Tokyo,” says Yutaka Okada, a senior research officer at Mizuho Research & Technologies. Today, with heightened uncertainty amid the pandemic and Russia’s invasion of Ukraine, “the rest of the work is expected to be shifted elsewhere in cost-cutting efforts” in order to brace for the future, he adds.

Pasona’s Nambu, who moved to Awaji island in 2020 and has barely returned to Tokyo since, said the earthquake risk had always been one of the issues keeping him awake at night. He embraced the new working habits sparked by the pandemic to finally help him move the head office away from the capital. As the company had been engaged in agriculture and tourism in Awaji since 2008, the island was the option he had in mind. Nambu says executives from various industries have visited Pasona’s new offices to understand how the operation works.

Awaji Island
Awaji Island © Sean Pavone/Alamy

Since announcing its relocation plans, Pasona has opened five offices on Awaji island, which has a population of 130,000. Some employees moved into a new head office opened in May, but the company left the other offices open. The company — which has not changed the pay of relocated employees, despite the lower cost of living compared to Tokyo — had to overcome challenges in everything from internet connectivity to the availability of schools and hospitals, and bought land to build apartments to bridge the shortfall in accommodation.

Being a pioneer of the relocation boom has brought unexpected benefits. Companies still hesitant to move their head offices from the capital have started outsourcing accounting and other back-office functions, to gradually reduce their operations in Tokyo. Pasona has capitalised on this demand, boosting its business process outsourcing services and expanding facilities by renting a floor of the island’s large commercial centre.

Nambu says the company is catching the attention of technology engineers who want to return home to the island, enabling Pasona to start new businesses involving avatars and the metaverse. “We couldn’t attract these engineers in Tokyo, even if we paid high wages,” he says. The company intends to hire about 10 per cent of its planned 1,200 staff locally on the island.

Other companies that have moved away from the capital are also creating new businesses. In July 2021, Tokyo-based listed talent agency Amuse set up a new headquarters combining studios with training rooms at the foot of Mount Fuji, about two hours drive away.

The company has kept its Tokyo offices — significantly reducing them — as a “transit area” to prepare documents when meeting clients, for instance. “The new head office functions as a workshop for creative content,” said Nobuhiro Kashiwagi, an executive officer. “It is not that we intend to shift the whole operation in Tokyo to the foot of Mt Fuji, but we want to encourage the workstyle where places don’t matter.” So far, 20 people have moved to the mountain area, but others mostly make a trip when necessary from their home in the capital.

Not everyone is enthusiastic about relocating. Experts warn it cannot succeed without proper consultation with employees, including offering allowances to enable them to visit Tokyo regularly. “Management should spend ample time explaining the purpose of the relocation, because it means forcing staff to change their life plan,” says Yuji Kobayashi, principal researcher at Persol Research and Consulting. As people still wish to live in the thriving capital, “companies could even be seen to be using the relocation as a pretext for laying off employees,” says Takeshi Hioki, a management consultant.

Amuse set up a new headquarters  at the foot of Mount Fuji
Amuse set up a new headquarters at the foot of Mount Fuji

Although Nambu says living in Awaji is contributing to the “spiritual wealth” of employees, some of those working in Tokyo have mixed feelings. “I won’t be heading to the island,” says a Pasona employee in her forties. “I have my family with a kid here, and frankly speaking, I don’t have any problem living in Tokyo.”

Building relationships with local authorities and businesses is also key to successful relocation. “We were overwhelmed at first by waves of questions like ‘Are you sure of the decision?’, ‘Will you stay here for a long time?’, ‘Won’t fish in a nearby lake be harmed?,’” says Amuse’s Kashiwagi, who took months to convince local people. Nambu echoes the challenge, saying the community initially thought Pasona would leave if things did not work well.

“Just relocating a company to a remote area cannot be the goal of stimulating regional areas,” like the government had hoped, says Keisuke Muramatsu, who heads the public sector business at KPMG Azsa. Although he believes more companies will make the decision to move away from Tokyo, areas welcoming these newcomers are expected to play a vital role in arranging infrastructure and providing public services. How closely private and public sectors can work together, he adds, will determine the future of decentralising Tokyo.

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