Resurgence of Osaka Sub-Capital Initiative: Is Japan’s “Second Capital” Vision Becoming Reality?

Liberal Democratic Party Accepts Ishin’s Demand for Osaka Sub-Capital
Osaka Aims to Build Second Growth Axis through Industrial Diversification and Infrastructure Expansion
Concerns Mount over Decline Risks and Financial Burden

In the process of forming a coalition government between Japan’s ruling Liberal Democratic Party (LDP) and the Japan Innovation Party (Ishin), the long-discussed “Osaka Sub-Capital Initiative” has resurfaced. The initiative seeks to prevent a national paralysis of Japan’s core administrative functions in the event of a major disaster or terrorist attack in Tokyo by legally designating Osaka as the “secondary capital” and decentralizing central government functions. However, resistance within the LDP and funding challenges remain major obstacles, casting doubt on the plan’s feasibility.

LDP–Ishin Coalition Agrees to Legalize Osaka Sub-Capital Plan

According to Asahi Shimbun and other local media outlets on the 22nd, the coalition agreement signed on the 20th explicitly states that both parties will pass legislation enacting the sub-capital initiative in next year’s Diet session. The coalition was made possible by the ideological alignment of the two conservative parties. Ishin had set the sub-capital plan as a non-negotiable condition for coalition participation, which the LDP accepted.

The most likely candidate for the sub-capital is Osaka, Ishin’s political stronghold and power base within the Kansai region. Ishin leader Hirofumi Yoshimura currently serves as Osaka Prefectural Governor, and co-leader Fumitake Fujita represents Osaka’s 12th constituency. Of the 35 Ishin members in the House of Representatives, 19 hail from Osaka and nearby districts. Rooted in public distrust toward establishment politics, Ishin has expanded its influence with reformist pledges for “small government,” administrative restructuring, and a reduction in the number of parliamentary seats.

Ishin argues that the sub-capital initiative would safeguard Japan’s core functions from collapse in the event of a Tokyo-area disaster. It also aims to form an independent economic sphere distinct from the Tokyo metropolitan region, thereby alleviating Japan’s chronic “Tokyo overconcentration” and driving national growth. The party’s legislative draft for the sub-capital defines eligibility as areas where a “special ward” system, under the Local Autonomy Act on Special Metropolitan Districts, is established. Tokyo’s special-ward system, introduced in 1947, is cited as a successful model: while the Tokyo Metropolitan Government handles high-cost, large-scale infrastructure and urban planning, individual wards manage welfare and sanitation—allowing for clear administrative division and efficiency.

Furthermore, Ishin envisions the sub-capital project as a catalyst for regional revitalization and economic diversification. By developing Osaka into a “twin growth engine” alongside Tokyo, the party seeks to enhance Japan’s overall growth potential. Osaka, with its robust industrial ecosystem, affordable real estate, strong transport network, and diversified economic base, is viewed as an ideal candidate. The region’s assets—including Kansai International Airport, the Shinkansen rail network, and Kyoto’s advanced technology infrastructure—could collectively form a powerful alternative economic hub to the Tokyo area.

Rejected Twice in 2015 and 2020 Local Referendums

The Osaka sub-capital initiative has been Ishin’s long-held aspiration, first gaining traction after the 2011 Great East Japan Earthquake raised concerns about the vulnerability of Tokyo’s central functions. At that time, then Tokyo Governor Shintaro Ishihara and Osaka Governor Toru Hashimoto (Ishin’s founder) agreed on the principle of “Tokyo as the capital, Osaka as the sub-capital.” The concept, however, faded amid political turbulence—until now, 14 years later, it has reemerged through the new coalition talks.

The proposal was previously rejected in two local referendums, in 2015 and 2020. In the November 2020 vote, the main reasons cited by supporters were expectations of resolving administrative overlap (21.9%) and stimulating economic growth (12.2%). Opponents, however, were concerned about potential deterioration of public services (16.9%), fearing that the integration of Osaka Prefecture and Osaka City might reduce access to welfare and healthcare.

Ishin now seeks to leverage the sub-capital issue as a national agenda to justify a third referendum. Yomiuri Shimbun, citing experts, reported that the proposed legislation assumes the abolition of Osaka City and the establishment of special wards—effectively implementing the earlier “Osaka Metropolis” concept. While the earlier debate focused on improving administrative efficiency by restructuring the overlapping authorities of Osaka Prefecture and City, the new version represents a broader national restructuring aimed at strengthening Japan’s long-term growth foundation.

$50 Billion in Funding Required; Internal LDP Opposition a Key Risk

Despite Ishin gaining a political ally in the LDP, prospects for realizing the sub-capital plan remain uncertain. The party’s stipulation that only “areas with special-ward status” qualify for sub-capital designation has drawn criticism. Asahi Shimbun warned that the plan risks being seen as funneling benefits to Ishin’s Osaka stronghold. Internal dissent within the LDP is another obstacle, as the party’s Osaka branch has long opposed Ishin’s Osaka Metropolis vision and competes directly with it in elections. Yomiuri also noted growing concerns that the plan could influence upcoming House of Representatives elections.

Some experts caution that Osaka could face accelerated decline instead of revitalization. Tomoya Mori, an economist at Kyoto University’s Institute of Economic Research, simulated Japan’s urban structure a century into the future and found that Osaka’s decline began in 1992 with the launch of the Shinkansen “Nozomi” super-express, which reduced travel time to Tokyo. He warned that the introduction of the faster Linear Chuo Shinkansen could exacerbate the decline, arguing, “Osaka has become a replica of Tokyo. With population decline and the collapse of geographical barriers due to transport and communication advances, there will be no need for two similar megacities.”

The financial burden is also formidable. Although Ishin has not presented specific cost estimates, market projections suggest a price tag of around $50 billion. The estimate, first outlined in a 1997 Ministry of Land, Infrastructure, and Transport panel, assumed relocating half of central government agencies outside Tokyo. Moving only the National Diet would cost about $250 billion, while a full relocation of all agencies would exceed $1 trillion.

The projected $50 billion cost amounts to roughly 3% of Japan’s annual consumption tax revenue (about $4.7 trillion). Takahide Kiuchi, chief economist at Nomura Research Institute, urged prudence, stating, “Given the enormous expense, a careful cost-benefit assessment is essential. Overconcentration of people and businesses in Osaka could trigger real estate inflation and administrative inefficiencies—creating a new set of urban pathologies.” Sankei Shimbun similarly warned that, amid high inflation and rising public burden, “it remains uncertain whether voters outside Kansai will support a project of this magnitude.”