Japan: IT or Bust!

Haraguchi Kazuhiro,Japanese Minister of Internal Affairs and Communications gave a dire warning today. The Business Times Singapore today quoted his fear for the nation and economy.

"Follow Singapore’s lead by prioritising the use of information technology or prepare to lose its status as an economic superpower within mere decades!

What is this warning premised upon?

"Japan risks falling to No. 8 by 2050 from its current ranking as the world’s second largest economy", he bluntly told the Foreign Correspondents Club of Japan yesterday.

Asked how Japan could achieve the “sustainable annual economic growth of around 3 per cent” that his ministry is targeting in about 10 years from now, Haraguchi replied that “the answer lies in Singapore”.

He acknowledged valuable help that he said he had received from academic friends in Singapore in formulating his ideas of how Japan could raise its lagging productivity trends.

Haraguchi cited what he called Singapore’s transition from a “concrete road” of industrial development to a “road of light” through the widespread use of fibre-optic and other forms of IT communications promoted by the Singapore government.

According to the Infocomm Development Authority of Singapore, Internet penetration among Singapore households in 2008 was at 76 per cent of the population.

In contrast, only around 30 per cent of households in Japan are linked to the Internet, Haraguchi said. Japan needs to catch up on the use of IT in education, government and business in order to boost productivity, he stressed.

Haraguchi also suggested that Japanese society is suffering from an “excess of government paternalism” that is stifling individual effort and innovation.

While the most competitive and export-oriented industries have achieved high productivity through competition and cost cutting, a “second layer” of manufacturing and service sectors suffer from low productivity and high costs, he added.

If these industries continue in this low-growth mode, the country’s economic growth rate could be dragged down to around one per cent annually over coming decades, the minister warned.

"Better use of IT communications could help make such laggard sectors more competitive and raise their productivity dramatically, he suggested.

Likewise, an easing of central government regulation that stifles such innovation is needed if Japan is to retain its high ranking as a global economic power, the minister said.

Prime Minister Yukio Hatoyama’s Democratic Party of Japan-led coalition government is dedicated to improving the autonomy of local governments in order to help unleash the currently untapped power of the people, Haraguchi added.