The major industrial sector in Japan has been shifting to tertiary industries under the progress of service- and software-oriented economy and the transformation into high information society. Japanese regions have been facing sever regional disparities in terms of economic growth and employment creation since the collapse of bubble economy. The rehabilitation of local economies has been a crucial issue of concern in Japanese Government. The input-output analysis is a useful tool to examine the economic structural problems concerning economic growth, industrial structure and employment creation. This paper aims to identify the impact of service- and software-oriented economy on the economic growth and the employment creation in Japanese regions. The study employed regional input-output models with detailed tertiary industries for years 1980, 85, 90 and 95. The empirical study has revealed that a sharp growth of inter-regional trade in business services and knowledge services is a major factor of regional disparities on empolyment creation. While Kanto region has shown a high employment growth under the accumulation of business services and knowledge services, local regions have been losing their economic vitalities due to the lack of advanced service industries.

JEL classification : R11, R13, R15