Chapter 3. Country case studies
3.2 Japan
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perspective. This would rather fit in the VoC category of liberalization in a sense of
‘less restriction’ but not necessarily less ‘government’. This may also reflect the scope of the general lack of coherent definitions across the region as discussed in chapter 2.5 on policy scopes for digital trade.
3.2 Japan
3.2.1 Conditions for data-derived value
Few governmental strategies to link artificial intelligence with the future of their country has been formulated as clearly as by Japan. This response is due to the fact that Japan realized it would quickly fall behind in the digital economy, as expressed by the Ministry of Economy, Trade and Industry (METI) in 2016:
“… consumers [in the 1970s and the 1980s] required highly technological products, and technologies themselves created value. However, customer needs have become diversified due to progress in globalization and market maturity, and commoditization of individual products by the use of IT has made it difficult to create value only with product performance. Nevertheless, Japanese companies have not been able to respond properly to environmental changes for acquiring new customer value.” (METI, 2016, p. 1)
Therefore, one of the main goals of premier Shinzo Abe’s endeavors is to realize Society 5.0 beyond industry 4.0 through his economic revitalization program coined Abenomics, which integrates society and human life with cyber-physical spaces through various government initiatives (Government of Japan, 2018). There are two key ambitions of Shinzo Abe’s economic strategy Abenomics: sustainable growth and the transition to the super-smart society 5.0 where cyber-physical spaces are highly integrated with people’s lives in order to leverage economic progress to solve social issues, for instance, job displacement poses less of a problem regarding that
automation and smart devices give hope to actually solve issues around Japan’s aging society (Waldenberger, 2018).
Immigration, among other reasons, is very limited so that the digital economy with smart connected devices producing data on people’s needs (human-centered) is seen as one of the remedies to the shrinking labor force. Thus, fundamental research budgeting prioritizes research fields in productivity gains, health care, well-being, mobility, and security; especially medical-related fields and elderly care are adopting Japan’s human-centered approach to artificial intelligence as a service (AIaaS) that exploits data for primarily social reasons coupled with its economic rationale
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(Strategic Council for AI Technology, 2017). In Japan, a sociocultural driver for AI adoption in these fields may be the people’s cultural open-mindedness towards interactions between humans and machines - something that Western cultures are markedly having more struggles with (Strategic Council for AI Technology, 2017).
Japan does indeed have strong potential to leverage big data, with one of the largest amount of internet users in the world, though aging, 36 of the most powerful computing facilities in the world with Japan-built AI Bridging Cloud Infrastructure among the top ten (Strohmaier et al., 2019), all of which gives the country access to a lot of high-quality public data and computing capacity. Additionally, The Ministry of Finance recorded in its draft for the fiscal year 2019 US$270 million funding for promoting medical ICT “for building the efficient medical care provision system by standardization of electronic health record and introduction of online qualification check” (Ministry of Finance, 2019a, p. 11) which was stocked up in the 2020 budget draft to annually US$700 million (Ministry of Finance, 2019b, p. 9).
So far, the private sector in particular has made the bulk of research spending.
For AI only, the Japanese government’s draft budget in 2018 was announced at US$720 million, which falls short in the face of other strong economies in the region such as China with US$4 billion government funding; however, Japan’s private sector invests about US$5.5 billion per year specifically into AI-applications, which roughly equals Chinese more or less private companies’ investments (Kyodo, 2018).
Additionally, Japanese corporations and multinationals have a strong position in hardware but lack in innovative software development and startup culture. This may be due to conservative employment patterns known as the ‘salaryman’ system with remuneration upon seniority instead of performance-based salaries, which renders many younger people and employees incapable of making a living in freelance jobs that would be needed for innovative business models or startup ecosystem.
3.2.2 Institutional framework
Shinzo Abe’s party enjoys a majority in both houses of parliament, which is conducive to effectively implementing Society 5.0, with ministerial departments including AI in their strategies, for instance, through the Integrated Innovation Strategy and the Japan Revitalization Roadmap (Waldenberger, 2018). The
institutional parameters and conditions for innovative R&D and budget allocation are set out by the Council for Science and Technology and Innovation (CSTI) chaired by
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the prime minister and the ministries following the CSTI guidelines. Abe founded the Strategic Council for AI Technology in 2016 to coordinate ministries’ and their respective research centers’ actions, including the Ministry of Interior and Communications, the Ministry of Education, Culture, Sports, Science and
Technology, and the Ministry of Economy, Trade and Industry. The council also includes ministry representatives for health and work, land and infrastructure, transport and tourism, and agriculture and fisheries, as they have large amounts of data (Mitomo, 2020; Strategic Council for AI Technology, 2017). In addition to promoting R&D, the council coordinates with AI-using exit industries and promotes the social fields of AI application. This strategy calls for an industrialization roadmap that combines experiences of industry, science, and the government to derive
consistent approaches to research, commercialization, and social AI implementation.
Japan’s AI strategy and roadmap does indeed target big data analytics as a potential to not only commercialize on but also use for social benefits. For instance, the Next-generation AI x ICT Datability Strategy serves …
“to collect valuable and strategic data from such key fields as linguistics, neural information, and spatial information, as well as various workplace data … that will be the driving force behind the social implementation of next-generation AI, and to promote the arrangement of conditions (ICT datability) to link data sets from different fields and make them available for use by AI securely and conveniently for value creation.” (Mashiko, 2020, p. 188) In the light of this human-centered approach, the Advisory Board on Artificial Intelligence and Human Society was formed under the auspices of the Council for Science and Technology and Innovation to take ethical, social and economic concerns into account before formulating further steps in its implementation. The board agreed on the advantages of AI integration in the very fundament of society outweighing the shortcomings in that new forms of interactions between humans and machines give scope to rethinking the concept of humanity and reconfigure the societal fabric towards more equality and inclusiveness (Advisory Board on Artificial Intelligence and Human Society, 2017).
Additionally, public university research is underfunded and internationally isolated, and translating academic output into industrial input is relatively low.
Nonetheless, this issue has been addressed by the Ministry of Economy, Trade and Industry (METI, 2016, 2018) through the cross-appointment system which allows researchers and developers from public and private sectors to work part-time in the
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respective other sectors. Moreover, the METI also disclosed that the flow of
international research grants into innovative projects was limited and that in terms of disruptive technologies like AI, “each country has been competitively making all-out efforts for R&D, while incorporating domestic and foreign technologies and
knowledge; … the number of researchers in Japan is only 13 percent of that in major countries” (METI, 2016, p. 2). The immigration bureau revised the points-based preferential immigration treatment system in 2017 in order to attract highly-skilled foreign researchers and personnel into Japan by allowing long-term stays, granting the right to hold multiple occupations and a work permit for partners (Immigration
Bureau of Japan, 2018). Also, incentives were set out for universities to engage more closely with the private sector. Additionally, deregulation has been implemented geographically in Strategic Special Zones to decentralize AI research and
development in favor of economically underdeveloped regions.
3.2.3 Regulation and commercialization
Pertaining to the principles of Shinzo Abe’s economic strategy, the commercialization of big data applications and AI targets sustainable growth and the transition to the super-smart society 5.0 where cyber-physical spaces are highly integrated with
people’s lives (Waldenberger, 2018). Japanese corporations and conglomerates have a strong position in hardware but lack in innovative software development and startup culture, partly due to traditionally high levels of risk aversion and the ‘salaryman system’ as discussed above. Having realized that “Japanese companies have not been able to respond properly to environmental changes for acquiring new customer value”
(METI, 2016, p. 1), the regulatory framework for the treatment of data was
particularly targeted since it stands at the core of the digital economy. Grey areas in the law were tackled in order to clarify legal conditions for the sake of predictable and stable economic activity in Japan and abroad. Mashiko (2020, pp. 192-193) points out that the three most relevant acts were amended: The Personal Information Protection Act, The Basic Act on the Advancement of Public and Private Sector Data Utilization, and the Copyright Act.
Amendments of The Personal Information Protection Act came into force in 2017 and included a definition of personal information, upon which a system for anonymizing information was set up and regulations on personal data provision to
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third parties overseas introduced (Personal Information Protection Commission Japan, 2016; Shin, 2019). As for international integration, Japan’s object in view is similar to the GDPR set out by the European Union in order to adjust Japan’s data protection law with particular regard to establishing globally valid standards for personal information and AI guidelines, not least due to the EU-Japan Economic Partnership agreement endorsed in 2019, with both parties deeming each other’s data and
information protection as equivalent (Mashiko, 2020; Personal Information Protection Commission Japan, 2018). To standardize treatment and handling of personal
information of EU citizens and Japanese citizens transferred between the two areas, the Personal Information Protection Act was further revised “for the purpose of conducting mutual and smooth transfer of personal data between Japan and the EU”
(Personal Information Protection Commission Japan, 2018, p. 1). In May 2017, it was supplemented in order to promote the collection and sharing of data provided that these are processed in an anonymized form with revisions largely intersecting with the European Union’s GDPR, leading the EU to categorize Japan as a country with
privacy standards similar to those in the EU (Shin, 2019; Takase, 2017). The principle of reciprocal adequacy was incorporated in that EU-based and Japanese companies are liable to recourse within their respective legislation even if data privacy violations are asserted by an entity from the other area (Simmons, 2019). An advantage of connecting globally through common standards in data privacy is that Japan, unlike China in this regard, can export its AI products to EU member countries without legal hurdles. If Japan successfully supplements its hardware focus with skills in software development, the equalization of personal data protection laws with EU regulations bears many prospective advantages for future trade between digital economies.
Through the anonymization of personal data, which is data that cannot be used to identify an entity, their legitimate distribution enables businesses to leverage data with regard to developing competitive big data applications. Moreover, reciprocal
adequacy embodies a trust mechanism to legally secure and expand digital supply chains between Japanese companies and those from outside with streamlined legal conditions regarding data protection. As a CPTPP and RCEP member committed to the APEC Privacy Framework, this could entail repercussions on data protection regulations in regional agreements and negotiations as Japan is bolstering its
influential sphere in the Asia Pacific as a strategic and somehow more stable partner than China with particular regard to ASEAN countries (Wallace, 2019).
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Similarly, the amended Copyright Act gives leeway to the economic utility of copyrighted data in that these can be duplicated for third party information analysis such as training AI algorithms for commercial applications (Mashiko, 2020; Mitomo, 2020). As of January 2019, the extension of the copyright by three new articles went into effect because the government has taken note of the importance of access to data for companies to leverage and innovate on. Japan took it a step further and modeled additional amendments of copyright law to include content created by AI systems into the ‘fair use’ framework. The amendment allows usage and further processing of data, such as data mining or duplication of protected contents, by commercial and non-commercial AI systems to learn and develop sound algorithms even without copyright holders’ consent if no harm is done to the copyright owner, thus, pertaining to the
‘fair use principle’ 7 (European Alliance for Research Excellence, 2018; Matsuda, Kudo, & Konishi, 2019).
Adhering to the overarching concept of the Japanese Society 5.0, the Basic Act for the Advancement of Public and Private Sector Data Utilization follows the vision expressed in the government’s declaration to become the most advanced IT nation in the world (Ando, 2020). Plans involve the entire administration to be digitized and public and private data will be made available to the private sector (Government of Japan, 2018; Granrath, 2017). However, regarding public procurement in the light of these digitally holistic ambitions, the Japanese government ranked 23rd among 137 countries in 2017-2018 regarding government procurement of advanced technology products, according to the World Competitiveness Index (World Economic Forum, 2018, p. 161). Nonetheless, the Basic Act for the Advancement of Public and Private Sector Data Utilization has a strong focus on Japan's pressuring problems of an aging society that is answered by a market-driven approach. It puts forth basic principles of further efforts regarding open-sourcing and effective use of public and private sector data in order to incrementally realize society 5.0 through smart business solutions that would provide citizens in Japan with comfortable environments and smart
7 Interestingly, Japan modeled its fair use principle after United States law and enshrined it as such in its legislation even after the United States withdrew from former TPP negotiations (European Alliance for Research Excellence, 2018), clearly marking Japanese efforts in creating, setting, and pertaining to internationally common copyright standards, as well as potentially hedging towards U.S. regional integration despite ongoing U.S.-China rivalries.
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infrastructures to cope with low birthrates, aging society, and the socioeconomic impact they entail (Mashiko, 2020).
Alongside legal changes and liberalization in data-processing and utilization, a law came into effect in 2018 to designate geographically defined National Strategic Special Zones in locations across the country with tax breaks for resettlement and relaxed or discarded regulations that allowed companies to carry out government-approved pilot projects in regulatory sandboxes, that is deregulated test environments to try out new business models and generate necessary data for further research, commercialization, or nationwide usage, including permissions for robot-human interactions in the streets in Fukuoka, or AI-automated robot taxis in Fujisawa City for disaster or life support services (Shimpo, 2018). Upon success, deregulation could be expanded across the country. The sandboxes do not only provide the space for innovative thinking and creative failure, but they also strengthen structurally weaker regions outside the big metropolitan areas.