Why is digitalisation in Japan behind that of the West?
It seems like everywhere you look in Europe and the North America, you’ll see talk of digitalisation. In some sectors, such as manufacturing, we’ve evolved past that and now we’re seeing AI and machine learning coming to the fore – this is the next phase of digitalisation in many senses, with digital and modern technology evolving to become truly helpful and integrated.
In Japan though, digitalisation has been slower to be so warmly embraced and there are still many areas of the economy where digitalisation is a conversation, rather than a reality. This may be surprising for some, given the Japanese love of technology and the many pioneering technology firms that have come out of Japan. Indeed, back in 2013 a study found that 99.5% of those aged between 15 and 24 in Japan could be classed as digital natives, meaning they were used to interacting with digital technology from birth. In fact, only Korea had a larger proportion of digital natives, and then at just .1% higher.
Why then does Japan still lag behind western nations when it comes to full digitalisation?
The EU-Japan Centre for Industrial Cooperation examined this in a working paper entitled Digital Economy in Japan and the EU: An assessment of the common challenges and collaboration potential. This piece of independent research says that much like in many other countries, “the full potential of the Digital Economy is far from being reached due to a mix of domestic challenges, bottlenecks and increased external competition.”
The report, which was carried out in 2015, interestingly notes that in Japan, just 16% of companies use ICT to increase profits, the majority use it to cut costs. Could a shift in thought processes lead to a faster rate of digitalisation?
In the newspaper industry this appears to be garnering credibility; traditionally printed newspapers are a staple ritual and focal point of media consumption, with tens of millions of newspapers sold each day. Today, we’re seeing a very real shift with more and more newspapers actually digitalising their news and going online. Some issue daily email bulletins and subscriber numbers are rising.
Ultra high speed broadband internet connection is available in more than 99% of Japanese homes according to the EU-Japan Centre research, meaning consumer technology shouldn’t be a barrier to the digitalisation process.
In some industries, competition has also hampered growth. The telecoms industry for example is saturated, but those embracing digitalisation could unlock new growth chances.
Traditionally, Japan has excelled in the service sector but has faced strong challenges to this dominance, leading competitiveness to be sacrificed. Focus has been on remaining relevant rather than innovating, which could be another reason that digitalisation uptake has been slow.