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The case of a bankrupt city

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This is the story of a small Japanese city that pulled itself back from the brink of financial collapse, learning some valuable lessons in the process.

Back in the summer of 2007, the global financial crisis was still a nightmare waiting to happen. The world chugged along happily, doing its thing, mounting up enormous debts like there was no tomorrow. But for the city of Yubari, in Japan’s Hokkaido prefecture, financial ruin was already a reality.

In Yubari’s 1960’s heyday, coal mining made the town prosperous. But when the Japanese government made oil the nation’s main energy source, Yubari not only lost its main economic driver, but also began losing its direction as a city. As the coal mines disappeared so did the residents, seeking greener pastures elsewhere.

A combination of factors, including Yubari’s ageing population, dwindling workforce, declining (or non-existent industry), costly medical care and the expense of supporting people via welfare, plus a generally apathetic spirit, led to a major downturn.

By the 1980s, Yubari was in the doldrums. Backed by a round of central government subsidies, attempts were made to revive the city’s economy by introducing theme parks and resorts, in the hope of attracting visitors and creating jobs. But these attempts failed miserably, serving only to further drain Yubari’s dwindling financial reserves. As June 2007 rolled around and Yubari finally declared bankruptcy, the city’s debts were sky-high – more than 35 billion yen.

Six years later, Yubari is making progress as it works hard to pull itself back from the brink. To their credit, the central government of Japan sprang into action and passed a ‘No More Yubari’s’ law, complete with a set of early warnings and contingency plans to ensure no more Japanese cities could fall unchecked into economic ruin.

The law also proposed increased transparency of cities’ financial affairs, which is a wise move by anyone’s standards. And it seems to be working, slowly but surely. By July 2013, Yubari had already paid back 3.8 billion yen of its debt. 2030 is set as the deadline for full repayment and will hopefully herald a return to health.

In terms of city branding, what can we take away from the Yubari experience? Obviously bankruptcy is a huge blow to any city’s image. But when disaster is truly inevitable, are there ways to mitigate the negative impact?

One reason among many for Yubari’s original troubles was failing to market itself effectively. With lethargic citizens lacking faith in the city or enthusiasm for its future, something was desperately needed to reenergise people and begin rebuilding brand Yubari from the ground up.

From a branding point of view, Yubari offered practically nothing to work with. Or so it seemed.
Tasked with the challenge of rebranding Yubari, Japanese communications agency Beacon Communications did some digging and discovered Yubari has Japan’s lowest divorce rate. This led to the slogan “Yubari: No Money, But Love”, with Yubari positioned as a destination for happy couples.

The honesty, yet optimism embodied in the slogan, combined with one of the cute mascots beloved by many Japanese, helped generate a notable level of positive PR for the city. The results were encouraging too, with tourism increasing by 10% and 31 million dollars generated to help relieve Yubari’s debt.

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