Digitisation in Japan: From doldrums to a new dawn?

Once upon a time, Japan was synonymous with technological advancement. It is the country that brought us the latest high-tech advancements in chips, cameras, audio devices, gaming consoles and even toilet seats. Those familiar with Sony’s Walkman and Discman will remember how they were the cool devices to be seen with.

It seemed only natural for the government of a high-tech nation to lead by example. Digital transformation has been part of Japan’s plan since 2001 with the e-Japan Strategy. It was then replaced with the i-Japan Strategy 2015 a few years later and was intended to be completed in 2015. Since then, policies and plans were made but not much came to fruition. It was simply not a political focus that won elections and hence, fell by the wayside.

Fast forward to today and it is ironic that COVID-19 has revealed many technological shortcomings in Japan.  Businesses and the government were caught off guard.

Digitisation Doldrums

A recent report by the Tokyo-based think tank Asia Pacific Initiative on Japan’s coronavirus response, revealed that one of the main vulnerabilities that COVID-19 has uncovered is its lack of digitisation.

Upon taking office in September 2020, Japan’s new Prime Minister Yoshihide Suga acknowledged that the e-government services were not ready to handle the pandemic. Each local government had developed their own IT system and worryingly these systems were not integrated with the central government. In fact, since the outbreak, healthcare facilities from all regions of Japan have been reporting the number of confirmed pandemic cases to the government by manually filling in paper forms and faxing them. This is a slow process, prone to errors, and cannot produce real-time results.

Local governments were also slow to implement an electronic system that was introduced in May. Problems with e-government services caused big delays in paying out COVID-19 aid to individuals and SMEs, in some cases even resulting in bankruptcies.

A new digitisation dawn?

Digitisation has become a priority for Japan’s new Prime Minister, Mr Yoshihide Suga.  Previously Chief Cabinet Secretary of the Abe administration since 2012, Suga succeeded former Prime Minister Shinzo Abe in September 2020 in the midst of the pandemic. He has announced that he will continue the previous administration’s policies or Abenomics, focusing on boosting stock prices, inflation and growth. To cope with the pandemic, the traditional economic policy tool of more government spending is expected. These policies favour big businesses as usual.

Currently, a lot of administrative work in both private and public sectors still follows the traditional paper-based, in-person workflow. For example, official documents require a series of approvals documented by hanko (personal seals) pressed on paper. Such culture does not fit with the new tele-working norm.

Realising the changes in the business landscape, digital transformation is one of the key policies of the Suga administration with a new Digital Minister appointed. To facilitate e-commerce and e-payments Suga aims to deregulate the telcos further. Previously, Suga had pushed for mobile phone charges to be lowered, and now wants more reductions, including telco-switching consumer charges. Digital transformation poses new challenges to the incumbents but also creates a lot of opportunities.

The time factor

With the general election coming next year, Suga does not have much time to implement new policies, improve economic efficiency, and show results. Also, to change corporate culture and practices in a country with a long tradition like Japan requires a great and sustained effort.  For now, however, Suga, who is neither the heir of a political dynasty nor a member of any LDP faction, seems poised to steer the economy in his usual calm manner. And COVID-19 may be just the push that Japan needs to progress.