National results for Japan reflect the combined results
for two major cities: Osaka and Tokyo. Total business
costs in Osaka are 1.8 percentage points lower than in
Tokyo. Since 2014, reported labor cost differentials have
shrunk between the two Japanese cities, with labor
costs increasing in Osaka while Tokyo experienced
a marginal decline. Construction costs for industrial
facilities have also risen in Osaka and declined in Tokyo.
Combined, these factors result in a narrowing of 5.8
point cost advantage that Osaka held over Tokyo in 2014.
Consistent with its overall ranking, Japan ranks ninth
among the 10 countries in the corporate services and
manufacturing sectors, but moves into eighth place for
digital services and R&D services. Relative differences
in facility costs drive these sector results—Japan ranks
last among the 10 countries for industrial facility costs
(lease or own), ninth for downtown office costs, but
eighth for the types of suburban office space utilized by
the digital and R&D firms examined.
The rise in value of the US dollar relative to the yen in
2015 is the primary driver of Japan’s improved cost index
in 2016 and the significant improvement in rankings for
the two Japanese cities. However, other cost trends
as noted in the table also contribute to Japan’s overall
results in the current study.