(Bloomberg) -- Japanese Prime Minister Fumio Kishida’s ambitious ¥4 trillion ($27 billion) spending spree to revive the nation’s semiconductor industry also aims to help re-orient the economy back to a positive growth cycle sought by the government and central bank.

Already there’s anecdotal evidence emerging from the northern island of Hokkaido and from Kumamoto in the south that the new chip projects are starting to impact the local economies and stem the tide of people flocking to Tokyo for better jobs and schooling. 

Yuto Oikawa, a realtor in Chitose, Hokkaido, can’t keep up with calls as the city transforms from a backwater to one of the nation’s hottest real estate markets thanks to the construction of a¥2 trillion semiconductor foundry subsidized by Kishida’s chip plan.“We are completely short-handed,” said Oikawa, 32. “It’s blown me away.”

The foundry is part of government-backed Rapidus Corp.’s plan to make a giant leap in chip technology and reestablish Japan at the forefront of semiconductor expertise.

Read More: Japan Bets $67 Billion to Become a Global Chip Powerhouse Once Again

Kishida calls chips “a driving force” to help lead Japan out of its deflationary malaise of sluggish growth once and for all. A boost to wages is seen as critical to the Bank of Japan scrapping its negative interest rate, as is widely expected in March or April, and to further increases after that.

“I hope the chip industry will take a lead on pay hikes in regional economies,” Kishida said in a video message at a chip expo in December. “The Japanese government will continue to give its full support to investment in the mass production of chips in our country.”

The hope is that the latest chip strategy will help fill an economic void left by the legions of companies that shifted production abroad when the yen was around twice its current strength more than a decade ago. That hollowing out of industry drained communities of spending power and employment opportunities, prompting many young people to leave.Yet success isn’t guaranteed. The 2012 bankruptcy of Elpida Memory, a government-backed maker of DRAM memory chips, shows that an initial interventionist hand from the public sector can still end in failure.

Hideo Kumano, executive economist at Dai-Ichi Life Research Institute, warns that the global competitiveness of the chip industry means the latest strategy is far from certain of success. “These subsidies are massive. But as fiscal stimulus measures, it’s possible they don’t end up paying off in the long run.”

The wave of people heading to the cities has resulted in four key urban areas surrounding Tokyo, Nagoya, Osaka and Fukuoka accounting for around 54% of Japan’s population and 60% of national output. Between 2000 and 2020, the number of people living in Tokyo rose 16%, while the national population shrank.

The combined number of residents in Hokkaido and Kumamoto fell 7.7% during that period, while the size of their combined regional economies contracted 2.9%. The cheap yen has invited a wave of tourists to Japan, helping bring money into regions with sightseeing hotspots, but more needs to be done for areas off the beaten track.The main goal of the government’s chip strategy is to triple domestic chip sales to around ¥15 trillion by 2030 and regain ground lost to Taiwanese and South Korean rivals. The government’s spending spree to fund projects across Japan has already attracted foreign companies, such as the world’s biggest chip maker  Taiwan Semiconductor Manufacturing Co. 

The Taiwanese giant has two factory projects in Kumamoto and there’s talk of another to come. Kishida has highlighted the impact on the local community as TSMC bumps starting salaries 20% above the national Japanese average. The plant will generate an overall economic impact of¥7 trillion and more than 10,000 jobs, according to Kyushu Financial Group Inc., with an even bigger boost expected from the second TSMC foundry.

The subsidies for foreign firms are an indication of how the Ministry of Economy, Trade and Industry has changed tack this time around in a recognition that Japan also needs to lean on the expertise of its allies abroad. Micron Technology Inc, which bought Elpida, is among the overseas firms benefiting from the latest subsidies to make chips in Hiroshima and generate jobs.In the north, the hopes are built on the Rapidus foundry that’s set to get up and running in 2027. The venture has yet to announce a roadmap toward profitability. Rapidus envisions creating an ecosystem with suppliers that stretches from the northern coastline town of Ishikari to the southern port town of Tomakomai, with Chitose in between.

Rapidus executive Atsuo Shimizu shared that idea with about 200 people at a town hall event in Eniwa, a city near Chitose, in late December. “We want Hokkaido Valley to be like Silicon Valley,” Shimizu told the crowd. Read More: Japan-Backed Startup Woos Suppliers to Make Chip Hub in HokkaidoLocal researchers estimate the economic impact of Rapidus could be up to ¥18.8 trillion yen over the period through fiscal 2036 with an additional 70 companies moving in along with 3,600 workers.

The outlook would brighten the future for Rena Okuno, a 21-year-old junior at Chitose Institute of Science and Technology near Rapidus’s construction site. She’s bucked the cultural norm that kept women from pursuing engineering and wants to work for a local chipmaking company.“I would like to show a way for other female students because women are so scarce in industrial sectors,” she said, adding that she hoped to do that without moving. “I love my hometown.”

Still, a shortage of workers, especially chip-sector engineers, combined with dated local infrastructure and limited specialist services could easily derail such plans. 

Chitose Mayor Ryuichi Yokota, 68, is scrambling to meet the infrastructure and housing needs.“This is a once-in-a-lifetime opportunity for us,” Yokota said. “I want this to be a turning point for the next generation.”

--With assistance from Erica Yokoyama.

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