Economic Analysis of New Industrial Clusters with Digital Technologies Under the COVID-19 Pandemic and Declining Population in Japan for 2011–2040: A Dynamic Four-Region CGE Model Approach

In the former part of this chapter, based on the premise that in addition to the aging and declining population, fiscal consolidation of both the national and local governments will be achieved by 2030, we assess the impacts of Scenario A for the development of new industrial clusters as potential sources of innovation, Scenario B for the productivity improvement of digital technology diffusion, and Scenario C for the development of new industrial clusters plus productivity improvement of digital technology diffusion. Furthermore, as the COVID-19 outbreak in 2019 had a significant negative impact on the regional economy, in the latter part, we assess the impacts of the COVID-19 pandemic on the regional economies and the industries under declining population as the base case (Scenario D0) and then implement the above three policy scenarios for 2020–2040: Scenario D1 for the productivity improvement of digital technology diffusion, Scenario D2 for the development of new industrial clusters, and Scenario D3 for the development of new industrial clusters plus productivity improvement of digital technology diffusion and analyze the economic impact of each of them as countermeasures. In order to achieve these objectives, we conduct a simulation of the ripple effect of new industrial clusters with digital technology on the regional economies in the Tokyo area and the other areas for 2020–2040, using a dynamic four-region CGE (D4SCGE) model.