Japan once led global tech innovation. How did it fall so behind?

When I first moved to Japan in the late 1990s, Japan’s technological achievements were envied. In 2001, at a book launch in New York, I recorded a video of fellow revelers on my Japanese cellphone. The model had just been released: a squared-off clamshell of sparkly, maroon plastic, with an impressive color screen and emoji-like graphics. I emailed the video instantly to publishing friends in Tokyo, which was then home to the world’s second-fastest internet speeds. They responded just a few minutes later, flashing victory signs. My friends in New York cooed as if we’d just watched a new moon landing.

But almost exactly twenty years later, vast regions of Japan’s digital universe are stuck in the early aughts. Online banking, airline booking, major newspapers, you name it: Services that have been streamlined by the digital revolution in much of the world are, in Japan, still plagued by convoluted drop-down menus that lead to dead ends, and detailed forms that need to be printed, filled out by pen, and even returned by fax. In a country that justifiably prides itself on excellent customer service, something happens when it comes to relaying information through a user interface displayed on a flat screen.

Japan’s high-quality, mostly physical public infrastructure has actually long disguised its sclerotic digital systems. The juxtaposition is jarring between the country’s clunky digital interfaces and its unrivaled engineering prowess — trains that depart on the minute, escalators and elevators that rarely break down, and heated toilets that will hide your sounds, clean your nether parts and sometimes talk, even sing to you. Why the disconnect?

Forty years ago, Asia scholar Chalmers Johnson coined the term “developmental state” to describe the Japanese government’s hands-on role in its post-war economic growth spurt. A so-called “iron triangle” linked the Liberal Democratic Party – which remains in power today – with big business and the bureaucracy, creating well-engineered public infrastructure and jobs to roaring economic success. In Western media, this was sometimes labeled “Japan Inc.,” a pejorative phrase implying a public-private partnership rooted more in government-led collusion and coercion than competition. But it also gave birth to systems like the Tokyo metro and its accompanying FeliCa-pass technology, produced by technology giant Sony and embedded throughout the transport network. 

State-backed innovation was so effective because it reduced uncertainty. But when a new breed of software entrepreneurs began to lead innovation elsewhere in the world, Japan’s own private sector found it hard to follow. The iron triangle had ossified, locked in something resembling an immovable jiu-jitsu hold. If one player moved an elbow an inch one way, they were all at risk of a stumble; if a corporate actor tried something new and moved their elbow, the politician’s might get broken. On balance, it was better to stay in one place: Even if the match was boring and nobody was making progress, at least you were holding a position. 

By any metric today, Japan’s digital performance is dismal. Among the Organization for Economic Cooperation and Development countries, Japan is now ranked 27th in digital competitiveness and 22nd in digital talent by the International Institute for Management Development — embarrassingly low for the world’s third-largest economy. A recent McKinsey & Company study revealed that two decades after the government launched its first digital initiative, “e-government,” only 7.5% of its procedures can be completed online. IT and software engineering degrees are less prestigious than those in economics or management, and batches of developer talent are hired from overseas. 

In 2022, these numbers have serious ramifications. Japan’s initial vaccine rollout last spring was slowed partially by inefficient analog systems, poor communication between governments and clinics, and a paper mail-based coupon campaign. When Covid-19 hit two years ago, most Japanese corporations had no contingency plans for remote work, and few had experience with platforms like Zoom. 

Yes, you should work from home, some said, but you need to show up at the office to stamp your personal seal (hanko) to prove that you worked. It was Covid-19-meets-Kafka: some employees commuted by train, risking infection just to stamp their seals and go back home. Last summer’s Tokyo Games saw international athletes and media griping on Twitter about the reams of Japanese-language print documents they were required to sign and array of apps to download — many of which were buggy and dysfunctional. (A year on, there’s progress: a recently introduced fast-track entry app has many pleasantly surprised.)

In what looked like a panic-stricken move, the Japanese government launched its first “Digital Agency” in September 2021, shortly after the Tokyo Games ended and just before a national election. But few announcements have followed, and the agency’s current English website looks more like a hastily-penned government memo nailed to the internet. Lack of cohesion at various levels has fed into a lack of momentum, too. As of December 2021, the world’s third-largest economy has produced six tech unicorns — despite the existence of various incubator programs, including the ambitious government-backed J-Startup. Last year’s total venture capital funding, at around $9 billion by one count, remained a fraction of the amount invested in the U.S.

The barrier to change, at least for me, is that the irritation passes. A startup founder might be rightly frustrated by the still-nascent ecosystem. But as an ordinary consumer, there are workarounds; using Amazon over the visually-challenging Rakuten, or embracing the habit of paying bills at the convenience store over automated direct debits. And even when you travel to a shinkansen station with your digital PASMO — a prepaid transportation card — and it prevents you from using the ticket machine, forcing you to line up at the manned booths, you still glide down the escalator, where a bullet train speeds you to your destination, on time to the minute. 

When the product at the end functions infallibly, the old ways of communicating and consuming are kind of quaint: comforting signs that one of the world’s most aging nations, home to most of the world’s oldest companies, is behaving in character.

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