SVNJ Working Paper
2018-1

Abenomics and Japan’s Entrepreneurship and Innovation:
Is the Third Arrow Pointed in the Right Direction for Global Competitionin the Digital Era of Silicon Valley?
Kenji E. Kushida, Stanford University

Abenomics and Japan’s Entrepreneurship and Innovation: Is theThird Arrow Pointed in the Right Direction for Global Competitionin the Digital Era of Silicon Valley?

Kenji E. Kushida, Stanford University

Introduction
As Japan’s political economy evolves over time, a critical question is whether or not it isadjusting effectively to dynamics of global competition. The relative position that Japanese firms
occupy in global value added activity has serious implications for not only the country’s
economy, but also its internal political dynamics and international relations. For example, areelectoral dynamics shaped by a backdrop of economic growth and dynamism, or stagnation andcrisis? Or in the regional context, for example, is Japan, an economically strong nation next tomassive and fast-growing China, capable of some regional leadership on select issues, or is it aweak follower in a new regional order? While macroeconomic factors certainly play a key role ineconomic growth, the underlying competitiveness of firms in global markets is critical.
Corporate strategies of industries and firms are, in turn, shaped by national contexts.
Markets do not exist in a vacuum, but are shaped by regulatory architectures, local economic
contexts, social factors, political dynamics, and the underlying institutions that coordinate
activities in any national context.1 Domestic contexts can significantly influence firms’international strategies, which can in turn shape global competition—global markets are often

1See, for example, Zysman, J. (1983). Governments, Markets, and Growth: Financial Systems and the Politics ofIndustrial Change. Ithaca, NY, Cornell University Press, Granovetter, M. (1985). "Economic action and social
structure: The problem of embeddedness." American journal of sociology 91(3): 481-510, Perez, C. (2009).
"Technological revolutions and techno-economic paradigms." Cambridge journal of economics: bep051, Vogel, S.
K. (2018). Marketcraft: How Governments Make Markets Work, Oxford University Press.

1

national markets that play out on a global stage. 2 Winners and losers in global competition are
therefore influenced by domestic contexts. 3
Historically, Japan shifted decisively from its status as one of many countries aiming tocatch-up to global leaders, to becoming a leader in many areas of global competition, and then to
being disrupted and commoditized in key areas. Global leadership can be thought of in general as
firms (1) shaping the technological trajectories of industries; (2) re-organizing global
competition by transforming industries or creating new industries; and (3) introducing newparadigms of industrial production. In the 1970s and 80s, Japanese firms shaped technologicaltrajectories by successfully commercializing various technologies not necessarily invented inJapan, but whose inventors had been unable to successfully commercialize them, and setting
trajectories of miniaturization with high manufacturing quality. 4 These firms re-shaped global
competition by becoming strong global competitors in areas such as semiconductors, consumer
electronics, and automobiles. With the “lean production” model of manufacturing, they forced
manufacturers around the world to adjust to new information flows by holding little inventory
and utilizing factory floor workers to enhance production quality. 5
More recently, global leadership has shifted to the economic ecosystem of Silicon Valley.
Driven by a comeback in the 1990s fueled by the computer industry, American firms reshaped
technological trajectories by shifting value to constituent elements of final assembly in products
and enabling software to add value.6 Such firms reshaped global competition as they createdwhole new industries surrounding information technology (IT), and became the world’s mostvaluable companies and cash holders. 7 New models of production, designed in Silicon Valley
with outsourced manufacturing, and “open” innovation in the form of purchasing startup firms toreplace or augment traditional in-house R&D became a new production paradigm to which the2

Breznitz, D. and J. Zysman, Eds. (2013). The Third Globalization: Can Wealthy Nations Stay Rich in the TwentyFirst Century?, Oxford University Press.
3
Dosi, G., L. Tyson and J. Zysman (1989). "Trade, technologies, and development: a framework for discussing
Japan." Politics and productivity: how Japan's development strategy works. NewYork: Harper Business.
4
Johnstone, B. (1999). We were burning : Japanese entrepreneurs and the forging of the electronic age. Boulder,Colo., Basic Books.
5
Womack, J. P., D. T. Jones and D. Roos (1991). The machine that changed the world : the story of lean production.
New York, N.Y., HarperPerennial.
6
Borrus, M. and J. Zysman (1997). "Globalization with Borders: The Rise of Wintelism as the Future of Industrial
Comptetition." Industry and Innovation 4(2): 141-166, Baldwin, C. Y. and K. B. Clark (2000). Design rules.
Cambridge, Mass., MIT Press.
7
See appendix for SMBC graphs2rest of the world had to adjust.8 By the 2000s, Silicon Valley emerged as the decisive area giving
rise to firms that commoditized others around the world, including Japan.
Beyond a place, Silicon Valley represented a model, a specific set of complementary
institutions that mutually enhanced each other – a core model in comparative institutional
analysis.9 From this model emerged yet more new principles of competition that accelerated
commoditization elsewhere. Platforms, in which third parties could utilize the resources provided
by the platform player, which enhanced both the value of the third parties as well as the platform
provider, but conferred greater benefits to the platform provider, emerged as a critical driver ofglobal competition since the 2000s.10 Once platforms were established, network effects enhanced
their value until they were disrupted by a separate set of platforms – computer operating systems
to mobile operating systems with integrated app store markets and ecosystems, for example. 11
As Japan was hit in the 1990s by the bursting of the asset bubble and the new dynamics
of competition in global markets delivered by the US computer industry, both the overall
Japanese economy and firms’ global competitiveness suffered. Electoral politics took place inthe context of economic and corporate challenges. From the mid-to late 1990s, the Japanesepolitical economy began to adjust and transform. 12 Regulatory changes shifted industry
dynamics, enabling the rapid entry and expansion of foreign firms into previously protectedareas, and shifts in corporate law, employment law, and industry-level regulations allowed newmodels of corporate governance and employment structures. A useful concept is “syncretism,” inwhich traditional, new, and hybrid forms of organization and practices coexist. 13
During the first decades of the 2000s and through 2012, Japanese political dynamics
entailed rapid turnover of Prime Ministers, as well as a historic, though brief change in the rulingcoalition as the Democratic Party of Japan (DPJ) unseated the Liberal Democratic Party (LDP)8

Sturgeon, T. J. (2002). "Modular production networks: a new American model of industrial organization."
Industrial and corporate change 11(3): 451-496, Chesbrough, H. W. (2006). Open innovation: The new imperative
for creating and profiting from technology, Harvard Business Press.
9
Aoki, M. (2001). Toward a comparative institutional analysis. Cambridge, Mass., MIT Press.
10
Gawer, A. and M. A. Cusumano (2002). Platform leadership : how Intel, Microsoft, and Cisco drive industry
innovation. Boston, Mass., Harvard Business School Press, Kenney, M. and J. Zysman (2016). "The rise of theplatform economy." Issues in Science and Technology 32(3): 61.
11
Microsoft and Amazon, though headquartered in Seattle, should be considered part of the Silicon Valley model, as
they were venture capital backed startups and draw from similar pool of human capital for software programming,and have significant presences in Silicon Valley to tap into the human resource pool.
12
Vogel, S. K. (2006). Japan Remodeled: How Government and Industry are Reforming Japanese Capitalism.
Ithaca, NY, Cornell University Press.
13
Kushida, K. E., K. Shimizu and J. Oi, Eds. (2014). Syncretism: Corporate Restructuring and Political Reform inJapan, Shorenstein APARC.

3

for the first time in almost 50 years. Yet since the late 1980s, prime ministers rarely served morethan two years, and after Koizumi Junichiro stepped down in 2005, Japan experienced seven
Prime Ministers in seven years. Policy continuity, let alone a cohesive structural reform plan,
was difficult. Lack of a strategic aspect or concrete direction for policies was an often lamented
aspect of Japanese policymaking during this era.
Then, since 2012, when the LDP returned to power, the Abe administration has retained
power—one of the longest prime ministerships in the postwar era. As it assumed power, the Abeadministration put forth a remarkably well branded and enthusiastically promoted economic
reform package, “Abenomics,” consisting of “three arrows”: 1) aggressive expansionary
monetary policy (printing much more money than in previous efforts); 2) fiscal stimulus(government expenditures to boost the economy); and 3) a set of economic structural reforms.
The third arrow, in particular, was a comprehensive reform strategy that recognizedJapan’s need to restructure many aspects of its economy to compete in the current digital,
globalized era. It was, put simply, an unusual opportunity for a comprehensive reform program.
Given that much of the global leadership in value creation over the past couple ofdecades has been driven by the Silicon Valley model – not only a geographic region but adistinct ecosystem of complementary characteristics – the basic question this paper asks is how
far Japan’s Abenomics reforms are pushing Japan towards being able to compete in an era
dominated by Silicon Valley firms.
To answer this, the first section of this paper looks at content of the third arrow of
Abenomics. The second section then distills the Silicon Valley ecosystem into its key
characteristics, sorts each of these characteristics according to the underlying institutions to put
forth a model, and briefly evaluates whether third arrow reforms move Japan closer to a Silicon
Valley model of entrepreneurship and innovation. 14
It is important to note that in this line of inquiry, it would be naïve to proceed on theassumption that if Japan can simply duplicate the institutions of Silicon Valley, it will be more
successful in global markets. Moreover, piecemeal adoption of one or more institutions isunlikely to succeed since the institutions are complementary and dependent on each other, andInstitutions, in this case, are “rules of the game” that actors agree upon to follow for their own benefit, thereby
sustaining the rules Aoki, M. (2001). Toward a comparative institutional analysis. Cambridge, Mass., MIT Press..
14

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Silicon Valley evolved through historically specific conditions. In fact, the world is littered withfailed attempts at initiatives to create local versions of Silicon Valley. 15
Thus the goal for Japan should not be piecemeal adoption but, instead, the strengtheningof the institutional underpinnings that enable Silicon Valley model entrepreneurship andinnovation. Even if it is limited to a specific portion of the political economy—with a syncreticarrangement of the coexistence of traditional, hybrid, and new—ensuring that part of Japan’s
new political economic model develops greater compatibility with that of the Silicon Valley
model will likely help firms harness the dynamics created by Silicon Valley.
Put differently, since it is undoubtedly the set of institutions of the Silicon Valley modelthat have produced wave after wave of cutting edge services, technology, and strategies forcompeting and creating value in the global economy, the question for Japan is whether someparts of its economy are moving towards institutions similar to those observed in Silicon
Valley—to better align Japan to not simply duplicate, but also harness value from Silicon Valley.
The premise here is that if Japan’s economic model diverges greatly from the Silicon Valley
model, it will be difficult even to find mutual benefit between high growth startups and the talent
within large Japanese corporations. In the past, the Japanese model was widely considered an
impediment to adopting and adapting to the Silicon Valley model.
Are Abenomics third arrow reforms moving Japan closer to a Silicon Valley model ofentrepreneurship and innovation? If so, to what degree was Japan already on this trajectory, andare the Abenomics third arrow reforms helping or hindering Japan’s evolution along thistrajectory?
The conclusion, up front, is that Japan was already on a trajectory to better harness
Silicon Valley model innovation. Its financial system, labor market, industry-universitygovernment ties, industrial organization, social system encouraging entrepreneurship, andprofessional services ecosystem have evolved significantly since the late 1990s. Many of thefactors seen as impediments in the previous Japanese model have shifted to better embrace thegrowing startup ecosystem and its necessary ties to large firms and venture capital finance. Thesechanges grew out of piecemeal regulatory shifts and normative changes since the mid- to- late
1990s. The Abenomics third arrow reforms spell out the need for further developments along this15

Lerner, J. (2009). Boulevard of broken dreams: why public efforts to boost entrepreneurship and venture capital
have failed--and what to do about it, Princeton University Press.

5new trajectory, but many of the specific measures seem to be targets that would already havebeen achieved regardless of whether they were stipulated. While some traditional-style industrial
policy initiatives remain, particularly in energy, other broader targets, including implementing
robotics and sensor technologies in areas such as healthcare, have the potential to turn Japan’s
domestic conditions into opportunities for firms to achieve international competitiveness.
Arguably the most important contribution of the Abenomics third arrow reforms is an
unambiguous commitment to support and promote a startup ecosystem in Japan, along with thepartnerships between large firms, government-university-industry ties, and R&D efforts intechnology to legitimize startups as necessary drivers of innovation.

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1. The Third Arrow of Abenomics
The third arrow of Abenomics was articulated in its entirely in a June 2013 document
called the “Japan Revitalization Strategy,” with the alluring subtitle, “Japan is BACK.” It beganwith the recognition that Japan had experienced two decades of slow growth and set out aroadmap to regain GDP growth and increase productivity growth. The roadmap entailed generalprinciples, followed by “three action plans.”
Roadmap
1. Unleashing the power of the private sector to the fullest extent
2. Participation by all & fostering human resources who can succeed in global competition
3. Creating new frontiers
4. Redistributing the fruits of growth to peoples’ lives
The roadmap’s first point, “unleashing the power of the private sector to the fullest
extent,” including restructuring industries and accelerating venture businesses, with language
such as “the government will boldly promote capital investment and creation of new businesses
at unprecedented speed.” It also explicitly aimed at international competition, specifying that“…to ensure that shareholders and other stakeholders proactively support the forward-looking
initiatives by company managers, corporate governance will be reviewed so that Japanesecompanies will excel in international competition.” (p.4) Regulatory and institutional reform arealso targets, recognizing that in many areas such as medical care, nursing care, childcare, andagriculture, energy, and public services, regulations hindered dynamism in the private sector.
The second point, fostering greater human resources who can succeed in global
competition, includes bringing the hitherto underutilized power of women into the workforce,
activating the healthy elderly and youth, and developing Japanese youth into globallycompetitive human resources.
The third point, creating new frontiers, articulates the idea that the only way to sustain
growth is to either create entirely new markets by developing pioneering products, services, andsystems, or by growing and expanding into international markets. It articulates the need for a“Made by Japan” approach, which includes revising Japan as a “technology-driven” and“intellectual property based nation” through an “all-Japan” effort by mobilizing R&D efforts ofthe government, universities, and private sector into strategic areas. It points to drastically7

increasing the functions of the Council for Science and Technology Policy, and pledges
government support for innovative research. The other areas of the new frontiers are identified as“leaping into the world” and “attracting the world” with efforts to facilitate the expansion of bothlarge companies and small-medium enterprises (SMEs) abroad, as well as attracting foreigncompanies and skilled human resources.
The final point is focused on redistribution, to ensure the equitable distribution in societyof whatever gains are made. This includes improving corporate productivity while increasing
flexibility of labor mobility, diversity and workstyles, and new approaches to human resource
development.
In the strategy, the methodology is noted as “implementing policies at an unprecedented
speed” and “accelerating reforms with national strategic special zones services as the gateway.”
Critically, and in a new effort for Japanese policymaking, the third arrow strategy calls
for specific key performance indicators (KPIs), with numerical targets, target end-dates, andperiodic review of attainment levels.
The second part of the document outlines extremely detailed goals in “Three Action
Plans,” which include 1) “Industry Revitalization Plan,” 2) Strategic Market Creation Plan, and
3) Strategy of Global Outreach. The Industry Revitalization plan includes categories such as
accelerating the structural reform plan by stimulating private investment, promoting investment
in startups, facilitating restructuring and reorganization. Another plan to reform the employment
system addresses shifting from “excessive employment stability to labor fluidity (realizing labor
movement without unemployment),” and promoting diversity in the workforce and workstyle.
The Strategic Market Creation Plan includes specific areas such as expending the nation’s“healthy life expectancy,” promoting clean and economical energy and efficiency, building next
generation infrastructure, and “building regional communities that use their unique local
resources to appeal to the world.”
The Strategy of Global Outreach focuses on building strategic trade relations, such as the
TPP, and strategic initiatives such as exporting infrastructure, supporting SMEs to go abroad,and promoting culture-related content industries through “Cool Japan” initiatives.

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Table 2: Abenomics Third Arrow 2013: Three Action Plans (selected reforms)
I. Industry Revitalization Plan: revitalizing human talent, goods and funds
1. Accelerating structural reform program (vitalizing industries)
1.1 Stimulating private investment
1.2 Promoting investment in business ventures and investment to challenge businesses tofully utilize resources in and outside of Japan
1.3 Promoting business restructuring and reorganization
Etc.
2. Reforming the employment system and reinforcing human resources capabilities
2.1 Policy change that promotes labor fluidity (realizing labor movement without
unemployment)
2.2 Realizing flexible and diversified ways of working
2.3 Promoting increased labor force participation by women
2.4 Promoting increased labor force participation by the young/the elderly
2.5 University reforms
Etc.
3. Promoting Science, Technology and Innovation
3.1 Enhancing the functions of national research institutes
3.2 Securing funds for research support personnel
3.3 Increasing R&D investment by the public and private sectors
3.4 Strengthening intellectual property strategies/standardization strategies
Etc.
4. Becoming the world’s leading IT society
4.1 Promoting private sector access to public data and developing innovative electronic
administrative services
4.2 Developing the world’s top-level telecommunication infrastructure
4.3 Promoting cyber security measures
Etc.
5. Further strengthening Japan’s international competitiveness as a business hub
5.1 Realizing “National Strategic Special Zones”
5.2 Improving infrastructure such as airports, ports and harbors
5.3 Considering ways to manage public and quasi-public funds
Etc.
6. Innovation of small and medium-sized enterprises (SMEs)
6.1 Using, mobilizing, and commercializing regional resources as brands
6.2 Accelerating the restructuring of small and medium-sized enterprise (SMEs)
6.3 Supporting small and medium-sized enterprises (SMEs) which expand internationallyEtc.

9II. Strategic Market Creation Plan
1. Extending the nation’s “healthy life expectancy”
1.1 Realizing a society with the world’s most advanced medical care by activating medicinerelated industries
1.2 Realizing a society where people who are out of work due to illness or injury can return
to work as quickly as possible by access to better medical care and nursing care
Etc.
2. Realizing clean and economical energy demand and supply
2.1 Efficient distribution of energy through competition
2.2 Wise consumption of energy
Etc.
3. Building safe, convenient and economical next-generation infrastructures
3.1 Provide safe and resilient infrastructures at low cost
3.2 Provide safe and convenient transportation for people and goods
Etc.
4. Building regional communities that use their unique local resources to appeal to theworld
4.1 Strive to produce the world’s best quality agricultural, forestry, and fishery products andfood produce
4.2 Increase tourism to regional communities
Etc.
III. Strategy of Global Outreach
1. Building strategic trading relations and promoting economic partnership
2. Strategic initiatives for obtaining overseas markets
2.1 Exporting infrastructure and securing natural resources
2.2 Intensive support to potential small and medium-sized enterprises (SMEs)
2.3 Promoting Cool Japan
3. Improving infrastructure concerning funds and human resources to support economic
growth3.1 Activating inward direct investment
3.2 Strengthening human resources capabilities for global operation activities
Compiled from: https://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/en_saikou_jpn_hon.pdf

The strategies as initially laid out evolved over time. By the fourth year, 2017, the focus
had compressed, but the number of specific KPIs had grown. The 2017 document was titled the“Future Investment Strategy 2017: Reforms Towards Realizing Society 5.0.” Table 1 shows a10

large sample, which can be skimmed to get a flavor for the specifics, along with status reports on
progress.

[See Table 1 in Appendix 1]

The Abe administration made much of its third arrow of Abenomics, but there is a surprisinglack of comprehensive listing or discussion, both in the Japanese press and English language
analyses. One reason for the lack of English language analyses may be that, while an almost 400page Japanese document is published every year by the Prime Minister’s office, there is no
official English translation. (The unofficial translation on the Prime Minister’s office website isremarkably poor, offering translations of key issues that are not only somewhat unintelligible,
but sometimes wrong.)
The newest release was in June 2017. In the Lower House election later that year, theadministration could point to this new document, which begins by showing that the government
has maintained awareness of the challenges of competition in the current global, digital era inwhich software can provide value over manufacturing, and massive commoditization poses a
serious threat to a broad array of Japan’s industrial base.

112. The Silicon Valley Model and Japan’s Transformation
For Japan’s continued economic growth, it is critical that Japanese companies becompetitive in global markets. A wide range of Japanese companies were highly successful inglobal markets from the 1970s onward, contributing to a surge of Japanese products into global
markets. Yet beginning in the 1990s, at the same time that Japanese companies were reelingfrom the aftereffects of the asset bubble burst, the nature of global competition shifted
dramatically. Japanese companies were disadvantaged in many areas they had once dominated,
and the global center of gravity for competitiveness and the creation of value shifted to Silicon
Valley.
Domestic industry dynamics are shaped by national-level rules and regulations inimportant ways, which can affect the nature of global competition—who wins and loses in global
markets. This becomes a critical issue for politics; what is the economic backdrop for any
electoral competition? Is it rapid economic growth, driven and buoyed by competitive firms, forwhich the incumbent party can take credit, whether deserved or not? (This was the LDP from the
1960s through the 1980s.) Is it economic stagnation with struggling firms and a wave of
disruptions, in which the incumbent can be blamed for lack of decisive or effective policy? (Thisresembles the LDP of the 1990s, the brief opposition coalition in power during 1994, and the
DPJ during its tenure in power from 2008 to 2012.) Or is it a profound crisis that can sweep
away the incumbent? (The LDP lost power for the first time in an electoral competition in 2008
during the global financial crisis.) Many other scenarios are possible, including one witnessed by
the US presidential election in 2016, with a swath of competitive firms that were not seen to bebenefiting much of the old industrial heartland.
The question that ties Abenomics to Japan’s future economic performance, and therefore
a set of likely possibilities for future electoral competitions, is whether the third arrow reforms
help to put Japanese firms on a trajectory of competitiveness in global competition.
It is from this vantage that we focus on Silicon Valley, which has become critical to
global competition as it has moved to the forefront of economic leadership in the past few
decades, by (1) shaping the technological trajectories of industries; (2) re-organizing global
competition by transforming industries and creating firms that become global leaders; and (3)introducing new paradigms of industrial production.
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In the 1970s and 1980s, Japan was a leader on all three fronts: setting new technologicaltrajectories with the successful commercialization of various semiconductor technologies, quartz,
and liquid crystal displays; rising to top tier firms in a wide array of industries ranging fromsemiconductors to precision equipment, consumer electronics, automobiles, materials, and heavyequipment; and creating a new production paradigm of “lean production” that fundamentallyshifted inventory practices and transformed information flows within factories. 16
The leadership in these areas, however, decisively shifted to the US in the 1990s andbeyond, driven by venture capital backed startups that grew into large firms. In setting
technological trajectories, Microsoft and Intel dominated the value created in computers with theoperating system and core processors in the 1990s (Borrus and Zysman 1997), and firms such as
Google, Amazon, and Tesla redefined technological trajectories.
Silicon Valley model companies led by Apple, Google, and Facebook have risen to the
top of US corporations as measured by not only market capitalization, which could be an artifact
of a bubble, but also cash accumulations – real wealth that will withstand cyclical or bubble
valuations of stock prices.17 Amazon and Microsoft, headquartered in Seattle, but sharing muchof the Silicon Valley model based on venture capital investments, and drawing from the samepool of computer science talent in Silicon Valley, round out the top 10 list of market
capitalization and cash holdings.
Production paradigms of outsourced and offshored manufacturing, in which high valueadded design takes place in Silicon Valley, with cross-national production networks enabling
low cost manufacturing, as well as a model of rapid M&A and obtaining ideas from abroad tocreate “open innovation”, with advantages of competition based on platforms, also hailed from
Silicon Valley and software startups in the 1990s and 2000s (Sturgeon 2002, Breznitz andZysman 2013).
Areas of Japanese strength, ranging from semiconductors to consumer electronics, were
disrupted by Silicon Valley firms. More recently, with the advent of automated driving pioneeredby Google, Tesla, and Uber coupled with sharing economy solutions such as Uber and Lyft, are16

For a detailed account of some historical Japanese technological trajectory-setting successes, see Johnstone, B.
(1999). We were burning : Japanese entrepreneurs and the forging of the electronic age. Boulder, Colo., Basic
Books. For the production paradigm shift that Japan delivered, see Womack, J. P., D. T. Jones and D. Roos (1991).
The machine that changed the world : the story of lean production. New York, N.Y., HarperPerennial.
17
Data from SMBC, publically available at http://www.canonigs.org/event/report/20171219_Kushida_presentation.pdf

13threatening the incumbent automobile industry and entire supply industries as a correlated shift
to electric vehicles accelerates. Thus, the Silicon Valley model as a benchmark for innovationand entrepreneurship is worth considering in evaluating Japan’s future economic pathways.
Attempting to simply duplicate Silicon Valley, of course, is not the answer. Many regions
have tried, but the historical specificity of how the region developed is not easily duplicated.
(Lerner 2009).
A more realistic view is consideration of how portions of the Japanese economy candevelop sets of institutions similar to those of Silicon Valley, without necessarily entailing atransformation of the entire economy (Dasher, Harada et al. 2015). Japan’s political economy has
been evolving in a pattern of “syncretism,” in which traditional, new, and hybrid forms oforganization and strategy coexist (Kushida and Shimizu 2014). Not everything is hybridized,
since traditional areas remain, but with new areas such as foreign firms and a startup ecosystemdeveloping rapidly.
Dasher et al (2015) have identified the key characteristics underpinning Silicon Valley asan economic ecosystem, sorted into underlying institutions.
Table 15.2: Characteristics of the Silicon Valley Ecosystem, Sorted into Core InstitutionsA) Finance• Finance and governance of startups by venture capital• High financial returns for successful entrepreneurs and startups’ early employeesB) Human Capital• High level and diverse human resources for all stages of startups• High labor mobilityC) Industry-University-Government Interactions• Top class universities• Diverse and multifaceted industry-university ties
• Supportive role of government in setting basic research trajectories
D) Industrial Organization• Dual ecosystem of large firms and small, fast-growth startups• Highly competitive industries, balancing between “open innovation” and secretprotection• Extensive government role in shaping technological trajectories and basic scienceE) Entrepreneurship Culture• Acceptance of failuresF) Business Infrastructure• Business infrastructure (law firms, accounting firms, mentors, etc.)
Legal platform
Source: Adapted from Dasher, Harada et al. 2015

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The six institutions include: (A) finance, (B) human capital, (C) industry-universitygovernment interactions, (D) industrial organization, (E) entrepreneurship culture, and (F)business infrastructure (Dasher, Harada et al. 2015).
How much has Japan been evolving to embrace a Silicon Valley model along these
institutions? How much do the Abenomics reforms contribute to this evolution?
Japan’s political economy has been evolving significantly to embrace Silicon Valley
model institutional characteristics. Observers of Japan’s nascent startup ecosystem in the late
1990s noted the numerous hindrances, but by the mid 2010s, the changes were significant(Kushida 2017). Below is a simple table summarizing the changes, before discussing each indetail, with a section on Abenomics reforms.

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Table 2: Silicon Valley Ecosystem Characteristics Compared to Japan’s Impediments in
the 1990s, Changes by 2016
Silicon Valley Startup
Ecosystem
Characteristic

Japan in the mid-1990s:
impediments

Japan in 2016: changes thatfacilitate startup ecosystem

Financial System:
Venture capital

Bank-centered, traditional
financial markets

New small cap financial markets,growing VC industry, rise of
independent VCs

Labor Market: fluid,
diverse, highly skilled

Long term employment withseniority ties creating illiquid
labor markets. Best andbrightest locked into large firms
for entire career

Increasing labor mobility, especiallyin IT sector and with foreign firms.
Lower prestige and opportunity withlarge firms

Industry-UniversityGovernment Ties

Numerous formal regulatory
constraints on universities, lackof brain circulation

Active efforts by universities, private
venture capital, and government tospin out successful startups with
university technology“Open” innovation withlarge firms and small
firm symbiosis

Closed innovation with large
firms in-house R&D anduninterested in business withstartups

Firms more interested in open
innovation, participation in VC funds,
business with startups

Social system
encouraging
entrepreneurship

Entrepreneurship seen as low
prestige vis-à-vis large firms
and government, financiallyrisky

Rising attractiveness ofentrepreneurship as large firms enter
competitive crises, increases cases ofsuccessful startups

Professional services
ecosystem

Small size of professional
ecosystem

Law firms and accounting firms
setting up startup-focused practiceareas to foster and benefit fromgrowing startup ecosystemA) Finance:

Silicon Valley
Venture capital (VC) is at the core of the Silicon Valley model, one of the core
innovations of Silicon Valley that enabled it to grow into a distinct economic ecosystem. As
financial intermediaries that invest in private companies, VCs take equity stakes, and commonly
take active roles in monitoring and helping portfolio companies. The goals of VCs are to16

maximize financial return by exiting investments, which are accomplished through either Initial
Public Offerings (IPOs) or M&A (Metrick and Yasuda 2010).
Venture capital in Silicon Valley evolved as a distinct, prominent investment mechanismin the 1970s and grew rapidly after American regulatory shifts. The relaxation of US Labor
Department restrictions enabled pension funds to invest in venture capital funds.
The venture capital industry grew symbiotically with the US postwar electronics industry.
As each wave of technologies stabilized into a dominant design and stable set of firms, newfirms appeared, shifting to a new technology or business model, and disrupting the incumbents.
This pattern repeated numerous times (Kenney and Florida 2000).

JapanThe Japanese postwar financial model was centered around banks. Banks were theprimary financial intermediary that took household savings and provided industrial andhousehold loans. The “main bank” system entailed large banks who continuously monitored thefirms to which they extended loans—a mechanism of governance in which bankers would step
into firms that were performing badly and take over management (Aoki and Patrick 1994). Until
financial markets and international currency exchanges were liberalized in the 1980s, Japan’s
financial system was largely closed off from international markets, and household savings werelimited to the banking system rather than bonds or equities.
Japan’s VC industry began to grow in earnest in the 1990s, especially as the Silicon
Valley “tech boom” gained attention in the latter part of the decade. Until then, a common
critique of Japan’s startup ecosystem was that entrepreneurs had to take bank loans, often withpersonal assets as a guarantee; firm failure led to personal bankruptcy, making it extremely risky
to embark on entrepreneurial efforts (Imai 1998).
Through much of the 2000s, although an increasing number of venture capital firms werebeing set up in Japan, many were branches of traditional financial firms. Their employees were
financial institution employees rather than independent individuals who shared in investment
return upsides. Since personnel evaluations within banks were on a “point subtraction” system,
errors were seen as negative to the career prospects of employees. This led to risk-averse
investment behavior of Japanese venture capitalists, who were unwilling to invest in riskier, but
potentially higher growth startups.

17

Japan’s venture capital industry remains tiny compared to that of Silicon Valley—lessthan 1/28th since 2015. However, anywhere else compared to Silicon Valley looks small, so
another useful comparison is with other major G-7 economies and its neighbor, South Korea.
Here Japan looks larger than most of the others, except South Korea, which experienced asudden boom.
The most important recent qualitative shift in Japan’s venture capital industry has been
the rise of independent VCs. The historical dominance of financial institution funds was
criticized for not incentivizing investors to pursue high returns. By 2015 and 2014, however, thelargest amounts of capital invested in new funds were for independent funds. In 2015, it was
35%, followed by corporate venture capital (CVC) at 28% and financial institution VCs at 18%.
For the previous year, independent VCs received 42%, with CVCs receiving 43%. Some
examples of independent VCs include World Innovation Lab, Globis Capital Partners, B Dash
Ventures, and others.
An important driver of Japan’s VC growth was the creation of small capitalization
markets in the late 1990s. Two competing small cap markets were created in 1999, providing astable source of exits in which VCs could realize returns from their investments. The relative
cost of listing in Japan’s small cap markets, Mothers and JASDAQ, is far lower than in other
Asian markets, and the scale is far smaller than the US NASDAQ. 18 On the one hand, thishinders truly large high-growth firms from emerging, since once firms are listed at a smallerscale, they tend to become more risk averse and pursue stable rather than exponential growth. On
the other hand, since it is easier to IPO in Japan than in the US, Japanese VCs may actually facea more predictable exit strategy environment. 19

Abenomics
A specific goal of Abenomics is to double the proportion of VC investments as apercentage of nominal GDP. While this does not address the quality of VC, it does provide
explicit normative support.

18

Riney, J. (2016). "7 Things Investors & Founders Need to Know about the Japan Startup Ecosystem." Retrieved
2016, June 1, from http://500.co/japan-startup-ecosystem-founders-investors/.
19
Ibid.

18

B) Human capital:

Silicon Valley
Silicon Valley draws upon the best and brightest from around the world, and ischaracterized by high labor mobility and employment fluidity. Top firms attract employees fromaround the world who settle locally, and top universities such as Stanford, University ofCalifornia Berkeley, and UC San Francisco Medical School are fed by global talent pools ofstudents and professionals.
The Silicon Valley labor force includes people who have deep expertise in every stage ofa startup, from initial startup to rapid growth, to increasing maturity. Silicon Valley is also a
focus point for people with cutting edge skills in high demand areas, and this has been the casefor various waves of technologies, from semiconductors to various types of software. 20
The positive role of immigrants, particularly those with high-end skills, has been adramatic feature of Silicon Valley. To take a recent snapshot, the percentage of foreign born
population in Silicon Valley was 36.4% in 2012, exceeding that of California overall (27%), andis almost three times that of the US average (13%). Silicon Valley has continually benefited fromflows of immigrants from various areas of the world that create bridges with the economies of
their home countries (Saxenian 1994, Saxenian 2006). Cross-national production networks withplaces like Taiwan and software outsourcing to India also evolved through human interpersonal
networks.

Japan: Foreign Labor
A discussion of human capital in Japan should be divided into immigration and labormobility.
In terms of immigration, Japan’s postwar economic model was largely closed to outside
immigration. When labor shortages led to a limited relaxing of immigration, particularly in themid 1980s, they were mostly limited to unskilled workers for assembly lines and construction.

20

An interesting study shows that software programmers versed in a general programing language, SQL, could befound all over the world, but that those versed in Hadoop, a big data framework, was concentrated dramatically in
Silicon Valley right as it started to become mainstream and highly valued by companies around the world. Tambe,
P. (2014). "Big data investment, skills, and firm value." Management Science 60(6): 1452-1469.

19

More recently, in the 2000s, labor shortages arose in areas such as healthcare andeldercare led to implementation of limited special visa programs to bring in temporary skilledworkers for a few years at a time, but the scale remained small.

Abenomics
In the Abenomics third arrow, only two KPIs involve immigration or bringing foreign
workers to Japan. One is a goal of having 1500 full time university faculty positions for young
and foreign applicants by 2016. This was achieved, as measured by the number of new, fully
funded faculty positions by mid-2016.21 Here, however, by combining young and foreign, and by
specifying applicants rather than positions filled, the third arrow avoids numerical targets offoreign university faculty.
There is also a numerical target for foreign students in Japan, with a KPI of doubling thenumber of foreign students studying in Japan from around 140,000 in 2013 to 300,000 in 2020.
This was on track, with approximately 267,000 in May 2017. 22 The question is the proportion ofthese students who are high end students who are likely to contribute in some way, or the widely
criticized hidden mechanism to increase foreign labor through “training programs” in which thestudents end up working almost full time in various service jobs.
In terms of skilled immigration, there is a numerical target of 10,000 highly skilled foreign
professionals to be recognized by 2020, doubling it to 20,000 by 2022. In the 2016 version, an
additional KPI of 5,000 such workers by the end of 2017 was added. Given that the potentiallabor shortage in a variety of sectors is projected to be orders of magnitude greater than thesenumbers, with the Ministry of Health, Labor and Welfare projecting a shortage of 377,000
people in caregiving alone by 2025,23 it is safe to say that Abenomics is not looking seriously atbringing in foreign human capital in a meaningful way.

Japan: Labor Mobility and Human Resource PoolLet us now turn to labor mobility. Japan’s human resources pool of entrepreneurs andstartup firm employees was traditionally severely constrained by norms of lifetime employment
offered by large firms, which took much of the top talent. Low labor mobility among mid-career21

http://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/dai4/siryou5_3.pdf
http://www.mext.go.jp/a_menu/koutou/ryugaku/1345878.htm
23
http://www.mhlw.go.jp/stf/houdou/0000088998.html
2220

hires choked off potential labor force for startups as they grew, and the lack of labor fluidity andexperienced people led to a lack of human capital depth in growing the startup ecosystem.
Regulatory shifts from the late 1990s, such as the ability for companies to offer stock
options as compensation, and shifts in labor laws that allowed greater flexibility for employers(Vogel 2006) did improve conditions facing the startup ecosystem. At the same time, significant
restructuring at large Japanese companies, as well as large manufacturers such as Sharp andToshiba entering into deep crises helped release some of the talent traditionally “locked up” inlarge firms. Increasingly many startups are finding mid-career employees from large companies
who could have advanced further within the company, but decided to pursue opportunities byleaving—a relatively rare pattern until the 2000s. The influx of foreign firms into Japan also
increased the choices available to elite college graduates, creating a pathway for many of them topursue entrepreneurship after some years of working at foreign firms (Kushida 2017).
The Japanese startup ecosystem has evolved to the point that the startups raising the mostfunding in 2015 had as their founders an overwhelming proportion of graduates of Japan’s elite
universities. Notably, however, they are almost all domestic universities and the founders are
Japanese—if not citizenship, then by name. Moreover, most of the previous employers of theentrepreneurs were foreign firms, notably consulting and financial firms. (See table in Appendix
2)

Abenomics
Abenomics does take on labor mobility as an issue, focusing on increasing the number ofpeople changing jobs without becoming unemployed. It also includes numerous measures aimed
at creating specific skills in people—cybersecurity certifications and other IT-related skills[14.1]. However, the focus here is more on general skills for the population rather than on thestartup ecosystem.

21C) Industry-University-Government interactions:

Silicon Valley
In the Silicon Valley model, industry-university-government relationships are anchoredin intellectual property development and transfers, but reach far beyond it to include licensing,academic spin-offs, collaborative research, contract research, consulting, ad-hoc advice andnetworking for practitioners, teaching, personnel exchanges, and student supervision (Grimaldi,
Kenney et al. 2011).

Japan
Until the late 1990s, Japan’s university system faced numerous challenges incollaborating with industry. For example, professors at national universities were consideredpublic servants, and were not allowed to take outside jobs, such as positions on startup company
boards. Since the 1990s, however, a surge of interest in creating stronger linkages between
universities to spin out intellectual property, as well as nurture entrepreneurs, led to the creationof various organizations and centers. While the level of industry-university collaboration anddegree of entrepreneurship encouraged from universities is far lower than top universities in theUS, the situation is markedly different from twenty years ago.
The Abenomics third arrow measures have specific KPIs focused on increasing
university-industry research, increasing industry investments into university research, increasing
the amount of commercializable intellectual property from universities, and increasing the levelof collaboration between universities and SMEs.
Specific measures read as the following: “doubling the number of large-scaleindustry/university or research institute joint research projects by 2020” (11.6); to “triple
investments from corporations into universities/national research institutes by 2025” (11.4); to“increase the number of patents granted to universities by the end of FY2020” (11.1); and a plan
to concretely support strategic reform initiatives at universities, offering operation cost subsidies(11.2). These are all relatively conventional measures, and may very well be following existing
trajectories, so that not much needs to be done to achieve them.
In the areas of university-SME collaboration, however, there is an interesting measure. In
the strategy section on “vitalization and productivity enhancements of SMEs,” a goal is to22

“create industry-academia-government collaboration to provide support to 200 pioneering
projects that utilize locally developed technology by 2021, with approximately 1000 projects
over the subsequent 5 years” (15.3). A generous interpretation of this is that it offers aninteresting focus to enhance the competitiveness of SMEs. A more cynical view is that it issimply a continuation of existing support to prop up less competitive SMEs as a social welfare
measure, especially for regions lacking large firms as major employers.

Silicon Valley
Historically, the US government – particularly the Department of Defense, played an
instrumental role in the development of Silicon Valley. By focusing research activities in areas
such as semiconductors and sourcing technology from startups, acting as a “lead buyer,” shaping
university research through organizations such as the National Institute of Health and National
Science Foundation, and developing the basis of the Internet as a communications network fornational defense, the US government has been critical in shaping US innovation trajectories(Kenney 2000). A large influx of research into universities during the Cold War era led toindustry spinouts from university-led research, which fed into the semiconductor industry andother related industries.
More recently, strategic DoD efforts in the form of contests have been a driver of certain
important areas of technology in Silicon Valley, as universities and companies competed against
one another, then joined forces as researchers moved across university-industry boundaries. The
most dramatic recent case has been self-driving vehicles, which were sparked by DoD
competitions (Markoff 2016).

Japan
Strategic industrial policy, including infant industry promotion, technological selection,and government orchestration of industrial consortia, along with the promotion of dense
information exchange among industrial actors has been one of the longstanding themes ofJapanese government policy in the modern era. Japan’s style of traditional industrial policy,
though its effectiveness is much debated, has been quite different from that of the US
government policies that shaped Silicon Valley. The Japanese policies were far more strategic
and specific. One upside was that specific technologies could be pursued, but a downside was23

that the selection of technologies could lead to domestic isolation if global markets shifted in adifferent direction (Kushida 2011).
The Abenomics third arrow measures contain numerous specific technological targets.
These range from developing new technologies surrounding electricity generation to deploying
robotics and advanced sensors in healthcare, infrastructure maintenance, and agriculture. On the
one hand, Japan’s rapidly aging demography can provide opportunities for technologicaldeployment in areas such as robotics for healthcare, agriculture, and infrastructure. Initiatives
such as “increasing the proportion of large hospitals utilizing electronic medical records to 90%
by 2020” (1.2), “increasing the market size for robotic devices in nursing care to 50 billion yen
by 2020” (1.6), and “increasing the number of robotic devices for nursing care to 8000 units by2030)” (1.7) have the potential for taking Japanese demographic challenges and making theminto internationally competitive value added products and services. However, some of thespecifics, such as aiming for 8000 units by 2030, seem modest for such a long time horizon.
In Japanese-style industrial policy, there is, of course, the inherent risk of government
policies choosing what turns out to be the wrong technology, and Japan’s industrial policy
history is littered with such examples. Moreover, Japanese-style industrial policy runs the risk ofmorphing into protection for industries or firms that are no longer globally competitive—a shift
from promotion to protection. Specific numerical targets for technologies such as fuel cellvehicles, fuel cell charging stations, commercializing “the world’s first floating wind turbine,”establishing the basic technologies for “integrated gasification fuel cell cycle power generation,and next generation gas turbines, seem ambitious, but risky.
For example, “establishing approximately 160 commercially operated hydrogen
automobile fueling stations by 2020, increasing to approximately 320 by 2025” (6.5.2) is a
specific technology selection that risks isolating Japan. A costly hydrogen fueling station
network is needed to enable a hydrogen vehicle market viable, and if solely Japan invests in sucha network, any hydrogen vehicle market will remain limited to Japan – the familiar “Galapagos
phenomenon.” (Kushida 2015)
Others, such as “commercialize the world’s first floating wind turbine by 2018” (6.8) isan extension of the current demonstration project off the coast of Fukushima, led by a tenmember consortium that includes Mitsubishi Heavy Industries and Hitachi. This may be seen as24

assistance to the manufacturers of Japan’s nuclear facilities, which have been mostly halted sincethe 2011 earthquake, tsunami, and Fukushima nuclear disaster.
There may be more industrial opportunity in broader goals, such as the promotion ofrobotics and sensors in maintaining and inspecting infrastructure (4), and targets for upgrading
commercial office buildings and housing to become more energy efficient (6).
Many of the specific targets, such as raising the productivity of supply chains (3.1) andthe use of digital data in factories (3.2) can possibly lead to increased international
competitiveness, but they are likely to be targets that firms are moving towards anyway.
Measures such as contests, as seen in the DoD cases that turned out to be beneficial to
Silicon Valley, are not a part of the Abenomics measures.

D) Industrial organization:

Silicon Valley
In Silicon Valley, the ecosystem supporting large companies, which engage in open
innovation by buying startups, funding them, and existing in the same labor force and technology
environment, coexists with the ecosystem to foster high growth startups (Kenney 2000).

Japan
One of the often-cited common challenges for the startup ecosystem in Japan has been
the lack of collaboration between large and smaller firms. The dominant historical model waslarge, elite firms with SMEs that were suppliers, with the latter squeezed during economic
downturns, and the large firms taking leadership in technological and strategic directions. As aresult, Japanese large firms lacked know-how on how to deal with startups that had highpotential technological or strategic value—either from a standpoint of not treating them as lowertier suppliers based on their side or considering various strategic collaboration possibilities
including M&A.
This situation has shifted markedly over the past decade, as waves of new startups arecollaborating with large firms in new ways. Even in the financial industry, startups offering
accounting services to SMEs, for example, are partnering with large and local banks, some of themost traditional and conservative actors. (See Kushida 2016 for examples).

25For example, Preferred Networks, founded in 2014 by a Tokyo University computerscientist, provides machine learning algorithms and tools. Japan’s top manufacturers including
Toyota and factory robot producer Fanuc have partnered with Preferred Networks to jointly
develop systems for factory robotics that enable the robots to learn new movements and tasks bythemselves without operators programming them.
Part of the new ease of collaboration is that many of the new startups are created bypeople with the same elite backgrounds as large company leaders and employees, which is acontrast with the past.

Abenomics
There are no concrete provisions in Abenomics directly aimed at facilitating large-firmand startup collaborations. However, many of the IT adoption and technology oriented goals do
create opportunities for startups to partner with large corporations. For example, forinfrastructure, a goal is to “use sensors, robots, and other non-invasive technologies to examine
and analyze critical and aging domestic infrastructure, with a 20% utilization by 2020, and 100%by 2030” (4.3). This opens the opportunity for startups to provide technologies and services thatlarge firms may not have or be able to develop quickly enough. Startups on their own may not beable to scale their offerings fast enough, leading to potential partnership opportunities.
Another Abenomics measure is to aim for 80 banks to adopt open APIs (Application
Protocol Interfaces), which allows third parties to connect directly to banks’ IT systems, by 2020
(5.1). Some banks may enable direct tie-ups with startups that are already integrating theirofferings with such ventures as Money Forward and Freee, which provide accounting services
for SMEs and personal finance management tools for individuals. Other areas, such as the
adoption of robots in nursing care, may be fruitful for collaboration between startups and large
firms.

26

E) Entrepreneurship culture:

Silicon Valley
In Silicon Valley, entrepreneurs are celebrated, and there is knowhow for monitoring andevaluation so that failures, although unfortunate, are considered positive experiences if it was a“good failure” (Dasher, Harada et al. 2015).

Japan
Japan’s early postwar period saw a flourishing of entrepreneurs who built large, globallycompetitive companies; Honda Soichiro of Honda, Akio Morita and Ibuka Masaru of Sony, andInamori Kazuo of Kyocera, for example. However, by the 1980s, large firms dominated Japaneseindustry, not only in terms of technological and market leadership, but also in terms of prestige
and cultural position. Graduates of elite universities streamed to long-term employment positions
in large firms, while entrepreneurs tended to be those who could not get positions in large firms.
This has shifted significantly in the past ten years. As early as the early 2000s, many ofJapan’s entrepreneurs were still seen with suspicion, fed by such scandals as that caused by
Horie Takafumi, who founded a company Livedoor in the mid-1990s, which eventually went on
to attempt purchasing one of Japan’s traditional broadcasters—but Horie was later arrested,
sentenced, and jailed for accounting fraud. His lavish and public lifestyle, which was often seen
flaunted on television, his uniform of jeans and casual shirts, and his outspoken criticism of large
firms, led subsequent entrepreneurs to become more soft spoken and avoid the limelight(Asakura 2016).
However, after 2010, there was a decided shift towards celebrating entrepreneurship.
Major newspapers such as the Nikkei, which were criticized earlier for not carrying stories ofentrepreneurs or the startup ecosystem, favoring instead the traditional large firms, began
focusing more on the startup ecosystem.
Numerous startup pitch contests and major events celebrating high growth startups havebeen taking place in recent years. Audiences number in the thousands, some are focused on
having policy recommendation arms, and they often receive national news coverage. These
organizations and events help legitimize and popularize a culture of high growth startups. Some
include the annual New Economy Summit, launched in 2013, organized by the Japan27

Association of New Economy, and set up by Japan’s largest, listed online commerce company,
Rakuten. The New Economy Summit invited prominent Silicon Valley entrepreneurs such as
Larry Ellison, founder of Oracle, and the founders of startups such as Dropbox, Lyft, Box.com,
and Andy Rubin whose company was bought by Google and became the Android platform. The
Infinity Ventures summit, which began in 2009, brings hundreds of companies to Kyoto
annually, and is a hub for investors, entrepreneurs, and large firms to meet. Less businessfocused and intended to inspire community building, events such as Slush Asia, orchestrated by
the Finnish firm, Slush, took place in Tokyo in 2016. From the government, the New Energy andIndustrial Development Organization (NEDO), which subsidized the R&D of science andtechnology-based startups, pitch contest, the NEDO Technology Commercialization Program,featured startups that entered several rounds of pitch competitions around the country. The firstprogram took place in 2015.

Abenomics
The Abenomics goal of doubling Japan’s position on a survey of entrepreneurship
mentality, measured as the number of people who answered that they are “entrepreneurs orprospective entrepreneurs” is interesting. Although the target date is 2025, it is, at minimum, abaseline provision of government support of entrepreneurship.

F) Business infrastructure:

Silicon Valley
In Silicon Valley, the ecosystem is comprised of law firms, accounting firms,
headhunting firms, and interpersonal networks of angel investors and other mentors who
underpin the ecosystem (Kenney 2000).

Japan
In Japan, until recently, there was relatively little of a support ecosystem for startups,
with accountants and lawyers having little if any experience with high growth startups, and little
ability to the play the roles of deal-maker, advocate, advisor, and other functions that Silicon
Valley professional firms provide. Within the past decade, the business infrastructure began to28

develop significantly, with law firms and accounting firms, along with human resources
development and placement firms increasingly focused on startups.

Abenomics
In the Abenomics third arrow, cultivating “a positive feedback loop to foster innovative
startups” is the title of an entire category. The various measures inside the category are focusedon university patents, increasing investments into startups, and establishing business entry andexit rates comparable to those of the UK. There is no real focus on fostering the business
infrastructure for a startup ecosystem in Japan.

Conclusion
The sheer volume and specificity of Abenomics third arrow reforms has been impressive.
Many of the key performance indicators are set at 2020 and beyond, likely beyond the Abeadministration’s tenure and therefore insulating him from blame if they are not attained. Others
are achievable without extra measures, and are likely an easy mechanism of taking credit (Hoshi
2018). Yet, the contrast with previous administrations, which all suffered short tenure and werecriticized for the lack of policymaking continuity, let alone the ability to think longer term or
strategically, is stark.
Will the third arrow reforms propel Japan into competitive footing in the global economy
moving forward? In light of the Silicon Valley model, which has disrupted a range of previouslycompetitive Japanese industries ranging from semiconductors and computers to consumer
electronics, and which is poised to disrupt more, such as automobiles and industrial equipment,
the Abenomics third arrow reforms are not a cohesive strategy to combat the potential
disruptions, and many of the goals extend far beyond the current Abe administration’s likely
tenure. However, they do amplify trajectories already underway to facilitate a segment of Japan’s
economy to embrace Silicon Valley model-type institutional opportunities. Much of the specificindustrial technology targeting resembles previous historical industrial policy, with theadvantages of being able to move quickly, but the inherent risks of running in the wrong
direction, or creating a situation in which Japanese technologies become “leaders without
followers” in global markets.

29

Arguably the most important contribution to Japan’s transforming economic model infacilitating a Silicon Valley model of entrepreneurship and innovation is the explicit normative
support for many of the underlying institutions of the Silicon Valley model in finance, humancapital, university-industry-government ties, and social support of entrepreneurship. They
represent a clear recognition of the need for explicit change in various aspects of the Japanesemodel, providing legitimacy to an area that long suffered a lack of it. The good news is that there
seems little that will actively hinder Japan’s trajectory towards developing a Silicon Valley
model segment of the economy – something that observers would not have expected during theyears during the years when Prime Ministers rotated on an almost annual basis, with an
opposition party in power for a few years, each putting forth various piecemeal reforms that did
not encompass an underlying vision or strategy.
It is, of course, still far from obvious that Japanese firms will successfully cope with thelooming disruptions that new technological advances in areas such as artificial intelligence arelikely to deliver, redefining and challenging industrial structures and incumbent firms around theworld in a wide range of industries. However, while one can criticize the Abenomics third arrowfor not providing enough focus or extra momentum, it is difficult to find active hindrances—
something that is, unfortunately, not to be taken from granted given the past couple decades.

30Appendix 1: Abenomics Third Arrow
Selected Abenomics Third Arrow KPIs and Progress So Far
1. Health, Medicine, and Caregiving
1.1*
By 2020, extend the ‘healthy life expectancy’ fromthe 2010 level (male=70.42, female=73.63) by one
year. (Revised in 2014 to “extend two years by
2025)
1.2+
By FY2020, increase the proportion of large
hospitals (with over 400 beds) utilizing electronic
medical records to 90%
1.3
By 2020, implement 20 cases of clinical trials andstudies based on registered data of patients anddiseases
1.4+

1.5

By 2020, establish around 20 Japanese medical
centers abroad (revised in 2017 from 10 by 2020.
There was 1 in 2013)
By 2030, increase the overseas market for Japanese
medical technology and services to 5 trillion yen(4.5 billion yen in 2010)1.6

 2013: Life expectancy formales=71.19, forfemales=74.21
 2014 (October): 77.5%24
 2015: 31 doctor-initiatedclinical trial notifications25
 2016: 1326

 2015: The export value ofpharmaceuticals was about
153.5 billion yen, and about
622.5 billion yen for medical
equipment. 27
 2015: 2.47 billion yen

By 2020, increase the market size for robotic
devices in nursing care to 50 billion yen
1.7
By 2030, increase the number of robotic devices for  Unclear
nursing case to 8000 units
2. Advancement of mobility services, eliminating “mobility disadvantaged” people, andtransforming logistics
2.1
By 2020, increase the share of new passenger cars
 2015: Share of new
equipped with automated braking system to overpassenger cars for equipped90%with automated braking
system=45.4% **New KPI
2.2*(partial)

2.3

Increase the share of vehicles (stock) with driving
safety support devices/systems to 20% by 2020, andobtain 30% of the world market

Increase the share of vehicles with driving safety
support features/systems to approximately 100% ofJapan’s entire domestic stock of vehicles

 2015: Share of vehicles
equipped with safety support
devices/systems= 6.5%
 2014: 40.5% of the world
market 2015: New cars equippedwith driving safety support
features/systems=42.4%

24

https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/health/dai1/siryou2.pdf
http://www.jmacct.med.or.jp/about/h28/files/act20170204_3.pdf
26
http://www.kantei.go.jp/jp/singi/kenkouiryou/suisin/suisin_dai19/siryou1_2.pdf
27
ibid.
25

31

 Domestic stock of vehicles
equipped with driving safety
support features/systems=
6.5%
3. Realize Smart Supply Chains
Improve the labor productivity in manufacturing
 2013-2015: Average growthindustries by more than 2% per annum
rate=1.4%
3.2+
By 2020, increase the proportion of companies that  2016: 67%, 40%
collect data in their factories and facilities to 80%,**New KPI
with 40% of firms using the collected data to solve
concrete management issues.
4. Increasing the Productivity of Infrastructure and Increase the Competitiveness ofMetropolitan Areas
4.1
By 2025, improve the productivity of construction**New KPI
sites by 20%
4.2*
By 2020, enable Tokyo to achieve a top 3 ranking
 2016: 3rdin the Global Power City Index
4.3
For critical/aging domestic infrastructure, use Underwater field experiments
sensors, robots, and non-invasive inspection
were launched in 2016. Sitetechnologies, with 20% utilization by 2020, andverification is underway for
100% utilization by 2030
the implementation ofmonitoring technologies
using sensors etc.
5. Promoting Fintech (added 2017)5.1
By 2020, aim for over 80 banks adopting open APIs**New KPI
(Application Protocol Interfaces)
5.2
By 2027, double the ratio of electronic (cashless)**New KPI
payments to 40%
5.3
By 2022, quadruple the proportion of Small**New KPI
Medium Enterprises utilizing information
technology such as cloud services to increase theefficiency of their back office operations (finances,accounting, etc), to 40%
5.4
By 2020, increase by 5% the efficiency of the**New KPI
circulation of funds in Japan’s supply chains(Supply Chain Cash Conversion Cycle)
6. Overcoming Resource Limitations in Energy and Environmental and Promoting
Investments
6.1
On 4/1/2020, implement the legal unbundling of
 “Organization for Crosselectricity transmission and distribution as the final
regional Coordination ofstage of Japan’s electricity system reform
Transmission Operators”
established on April 1, 2015.
 Passed revision of theElectric Utility Operator Law
on June 17, 2015 that
included unbundling of
3.1

32

transmission capabilities.
 In Sept 1, 2015, establishedthe Electric Power Trading
Surveillance Committee Liberalized retail electricity
sales on April 1, 2014.
6.2
6.3
6.3.1

6.3.2

By 2030, new houses and buildings will comply
with energy saving standards ZEH and ZEB
By 2020, double the number of housing renovations
for energy-savings(supplement to above) By 2020, attain 100%
compliance of new buildings with energy saving
standards, and for new public buildings, attain “netzero energy buildings”(supplement to above) By 2020, attain 100%
compliance of new houses with energy saving
standards, and attain a majority of orders of newhouses through house makers to be “net zero energy
houses”

6.4

By 2020, attain a 100% diffusion of newly soldlighting to be energy efficient, such as LEDs

6.5

By 2030, attain a 50-70% ratio of next-generation
automobiles for new automobiles sales

6.5.1(supplement to above) By 2020, increase thenumber of electric or plug-in hybrid vehicles in use
by one million

6.5.2(supplement to above) By 2020, increase thenumber of fuel cell vehicles in use to 40,000
vehicles, and 800,000 by 2030.
By 2020, establish approximately 160
commercially operated hydrogen automobile
fueling stations, increasing to approximately 320 by

6.6

 2017 (October): 6179
companies nationwide, (5507
housemakers and 639 general
construction shops)
nationwide are registered
ZEH builders28
 2015: Domestic shipment
amounts for general lighting
sources: LED lamps, 40% of
the total29
 2016: Proportion of nextgeneration automobiles for
new automobiles
sales=35.8%
 Electric car stock (BEV and
PHEV): 40,580 (2012),
151,250 (2016); Battery
electric car stock: 29,600(2012), 86,390 (2016) Plugin hybrid electric car stock:
10,980 (2012), 64,860(2016)30
 2016: 194,710 fuel cellvehicles in use (SOFC andPEFC) in Japan31
 2017 (March): 90 hydrogen
automobile fueling stations
established28

http://www.meti.go.jp/committee/sougouenergy/shoene_shinene/sho_ene/pdf/016_01_02.pdf
http://jlma.or.jp/tokei/jishu_old.htm
30
https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
31“Dissemination of Ene-Farm” http://www.meti.go.jp/english/report/downloadfiles/2017_outline.pdf
29

33

6.7

2025
By 2020, gain 70% of the world market share forgeothermal electricity generating turbines

6.8

By 2018, commercialize the world’s first floating
wind turbine

6.9

By approximately 2025, aim to established next
generation thermal power generation technologies
step by step, according to the “next generation
thermal electricity generation technology roadmap”(numerous highly technical temperature andefficiency gain targets)(Supplement to above) By 2025, establish the basic
technologies for IGFC (integrated gasification fuelcell cycle) power generation, and realize its
practical use by 2030
By around 2020, aim for the practical use of 1700
degree level gas turbines for LNG (liquid naturalgas) electricity generation (increasing the current
efficiency of around 52% to around 57%)
By 2020, aim for a complete penetration of smart
electricity meters to homes and business according
to the smart meter diffusion plans of each powerelectric company
By 2017, establish a “negawatt power transaction
market” in which saved energy is transacted(disappeared in 2017 as a KPI)
By 2020, aim for Japanese firms to attain about
50% of the world market (or 500 billion yen) ofadvanced electricity storage batteries
By 2020, halve the cost of electricity storage
batteries (less than 23000 yen/kWh)

6.10
6.10.1

6.11+

6.12

6.13*

6.14

6.15

 2015: Japan ranked 10 th outof the top 10 countries per
geothermal generating
capacity32
 Japan is currently conducting
a demonstration project off
the coast of Fukushima
Coast, led by a 10-member
consortium including
Mitsubishi Heavy Industries
and Hitachi. The project
consists of a 2MW turbine, a
7MW turbine, a substation,
and a 5-MW model.

 Current power generation
efficiency: 39%
 2013 (August): 1600 degreelevel gas turbines for LNG
electricity generation started
operation domestically 2016 (February): 39,000
smart meters installed 33
 Established in April 2017

 2015: Storage battery for
mainly domestic use:
22,000yen/kWh; Storage
battery for industry use:
36,000yen/kW34

32

https://www.worldenergy.org/wp-content/uploads/2017/03/WEResources_Geothermal_2016.pdf
http://www.meti.go.jp/committee/sougouenergy/denryoku_gas/kihonseisaku/pdf/005_03_02.pdf
34
http://www.meti.go.jp/committee/kenkyukai/energy_environment/energy_resource/pdf/005_08_00.pdf
33

34

7. Robotics Revolution/Bio and Materials Revolutions
7.1
By 2020, increase domestic robot production
market size to 1.2 trillion yen in manufacturingindustries and 1.2 trillion yen in non-manufacturingindustries. (revised in 2016. The 2014 version read
double in manufacturing, 20x in nonmanufacturing) 2015: Approximately 689
billion yen in manufacturingindustries and 123.9 billion
yen in non-manufacturingindustries (In 2014: 590.1
billion yen in manufacturingindustries and 61 billion yen
in non-manufacturingindustries)

8. Creating the Foundations for Data Utilization
8.1

8.2
8.3

8.4
8.5*

8.6

8.7

By 2020, offer 100% of data in machine readable
file formats according to the needs of private sector
firms, based on deliberations of the private-publicroundtable
By 2020, ensure that 100% of municipalities aretaking action to make data open and available
By the end of 2018, utilize Cloud technologies forgovernment information systems to reduce thenumber of government information systems by 725(halving the number), and by the end of 2021,
reduce the operational cost by 30%
Retain Japan’s number 1 ranking in the OECD in
offering the lower broadband fees per unit speed
During 2016, attain 15 million MVNO (mobile
virtual network operator) subscribers. (Deleted in2017)
By 2019, aim for WiFi availability in around
30,000 sites of tourism and disaster prevention or
recovery sites.
By 2020, attain over 800 success cases bymunicipalities and regional organizations**New KPI** New KPI
 1235 IT systems in 201535

 2016: 16.36 million
subscribers36
 2016 (October): WiFi
installed in 14,000 areas(47% completion)37
 The “Regional IoT
implementation statussurvey” conducted by the
Ministry of Internal Affairs
and Communications inMarch 2017 showed that outof the 773 public entities
surveyed, 16.6% responded
that they were actively taking
measures to implement IoT
solutions in their regions (in2014, only 5.9% of entities(N=733) responded that they35

http://www.itdashboard.go.jp/Statistics/system
http://www.soumu.go.jp/main_content/000508722.pdf
37
http://www.soumu.go.jp/main_content/000456095.pdf
3635

were actively taking
measures to implement IoT
solutions in their regions). 38
9. Fostering Intellectual property/standardization strategies, ensuring an environment offair competition
9.1+
By end of 2020, increase Japan’s presence as a
 2016: 9739
secretariat in international standardizationsorganizations by 100
9.2
By 2020, standardize 100 excellent technologies
 5 cases as of mid-2016
and products from SMEs and medium-sizedcompanies
9.3+

By 2023, reduce the time to acquire patent rights byhalf, attaining an average of 14 months

 2015: Average of 15 months

9.4+

By 2019, aim for 15% of patent applications to befrom SMEs

 2015: 14%

10. Strengthening Human Capital growth and Effective Utilization
10.1
By 2022, aim for 1 million enrolled in adult school 2015: Approximately(professional school) programs at universities or
490,000 enrolled
vocational skill schools.
**New KPI
10.2
By 2022, aim for 5000 courses aimed for 2017: 2417 courses
professional or specialized skills**New KPI
10.3
By 2020, raise the proportion of teachers who can 2015: 73.5% (71.4% in 2014)
utilizing IT tools in the classroom to 100% (Fiscal
2014 was 61.4%)
10.4
By 2020, aim for 100% of prefectures and 2014: 31.9%40
municipalities have an IT environment
improvement plan
10.5
By 2020, aim for 100% of regular classrooms with
 2015: 29.8% (27.2% in 2014)
Wireless LAN access
10.6
By 2020, increase the number of full time teachers 2016: 43,600 teachers (afor domestic schools below the age of 40 by 10%
decrease from 43,800 in2013)41
10.7
By 2020, increase the number of researchers who
 In 2015 the number ofmove jobs within the domestic sector by 20%
researchers who moved jobs
within the domestic sector
was 11,192, up from 9,856 in
201342*
10.8
By 2020, increase the employment of the young 2016: 78%(20-34 years old) to 78% (74% in 2012)38https://www.kantei.go.jp/jp/singi/it2/detakatsuyokihon/dai7/siryou2.pdf
http://www.meti.go.jp/information_2/publicoffer/review2016/saishupdf/27002700METI.pdf
40
http://www.mext.go.jp/b_menu/shingi/chousa/shotou/110/shiryo/__icsFiles/afieldfile/2016/11/07/1378984_8.pdf
41
https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai1/siryou2.pdf
42
https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai2/siryou3-1.pdf
39

36

10.9
10.10+
10.11*

10.12

10.13
10.14+
10.15
10.16
10.17+
10.18

10.19
10.20

10.21*
10.22

By 2018, reduce the number of long-term
unemployed (more than 6 months) by 20%
By 2018, increase new employment transfers (midcareer hires of general employees, excluding parttime work) by 9%
By 2017, increase the number of job changes
without unemployment to 2 million workers. (In2013, was 1 million workers)
By 2017, have 100% of private job training
operators that are subcontracted by public sector job
training operators take job training service
guideline courses
By 2019, establish schemes to evaluate andimprove job training in all 47 prefectures
By 2020, increase the employment rate of ages 2064 to 81%
By the end of FY2020, reduce the proportion of
involuntary non-regular workers to below 10%

 2013: 142,000 2015: 109,000 2016: 2,936,700 transfers(8%)43By FY2020, double the number of Japanese college
students studying abroad (60,000 to 120,000)
By FY2020, double the number of foreign students
studying in Japan (140,000 to 300,000)
By 2017, increase the proportion of English
language teachers who score higher thanapproximately 80 on TOEFL from 28% to 50% forjunior high schools and from 52% to 75% for highschools
By FY2018, increase the number of school
accredited as International Baccalaureate to 200
By 2023, aim to have more than Japanese 10
colleges/universities ranked in the top 100 of
university rankings

 2016: 96,641

By FY2020, increase the employment rate forwomen aged 25-44 to 73% (68% in FY2010)
By 2020, increase the proportion of male workers
taking childcare leave to 13% (2.6% in 2011) 2016: 3.3 million44

 2016: 79%
 2016: 15.6%45

 2017 (May): 267,042 foreign
students46
 2015: 30.2% for Junior high,
57.3% for high school47

 2017: 51
 2 Japanese Universities(Tokyo University, Kyoto
University) in top 10
according to the Times
Higher Education ranking in
201748
 2016: 73%
 2015: 2.65%43

http://www.mhlw.go.jp/toukei/itiran/roudou/koyou/doukou/17-2/dl/gaikyou.pdf
http://www.mhlw.go.jp/file/05-Shingikai-12602000-SeisakutoukatsukanSanjikanshitsu_Roudouseisakutantou/0000190839.pdf
45
http://www.mhlw.go.jp/file/05-Shingikai-12602000-SeisakutoukatsukanSanjikanshitsu_Roudouseisakutantou/0000190839.pdf
46
http://www.mext.go.jp/a_menu/koutou/ryugaku/1345878.htm
4447

http://www.mext.go.jp/component/a_menu/education/micro_detail/__icsFiles/afieldfile/2016/06/15/1372389_3.pdf
48
https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai1/siryou2.pdf

37

10.23

By 2020, increase the male workers taking paternity
leave immediately after wives’ deliveries

10.24

By 2020, increase the proportion of women in
leadership positions to 30%…more related to childcare
By 2020, aim to recognize 10,000 highly skilled
foreign professionals, and by 2022 a further 20,000

10.25
10.26

 A research project carried out
by the Cabinet Office showedthat in 2015, 55.9% of new
fathers had taken time off
after their wives’ deliveries49
 2015: 9.8%
 Between May 2012 andDecember 2016, 6669 highly
skilled foreign professionals
were recognized

11. A Positive Feedback Loop to Foster Innovative Startups
11.1
By the end of FY2020, aim to increase the number 2012: 4831 University TLO
of patents granted to universities by 50%
patents granted50
 2016: 3685 University TLO
patents granted51
11.2
Between FY2016 and FY2021, aim to allocate**New KPI
resources to strategic reform initiatives forstrengthening each university and maintain theoperation cost subsidies at around 40%
11.3
By the end of FY2017, attain a number one ranking  2017-2018: 8th
in the innovation ranking (technology section,
published by the World Economic Forum)
11.4
By 2025, aim to triple the investments from 2015: 120.9 billion yen
corporations into universities and national research
institutes
11.5+
By FY2020, increase the ratio of R&D investment,  2015: 3.56%
including both public and private sectors, to 4% of
GDP
11.6+
By the end of FY2020, double the number of large-  2015: 1004 joint researchscale joint research project between corporations
projects reported(x1.5 gain)52
and universities/research institutes
11.7
By FY2016, increase both the new business 2015: business establishment
establishment rate and exit rate to an equivalent
rate for Japan was 5.2%, exit
level of the US and UK (in the 10% range), with net
rate was 3.8%53
positive levels of entry (the 2004-2009 average was
4.9%)
11.7.1 (supplement to above) By 2025, double Japan’s 2018: Japan ranks 28th on theposition on the entrepreneurial activity index (theGlobal Entrepreneurship
percentage of respondents in a survey ofIndex, with a score of 51.5
49

http://www.gender.go.jp/kaigi/senmon/jyuuten_houshin/sidai/pdf/jyu11-08.pdf
https://www.jpo.go.jp/cgi/link.cgi?url=/shiryou/toushin/nenji/nenpou2013_index.htm
51
https://www.jpo.go.jp/shiryou/toushin/nenji/nenpou2017/toukei/all.pdf
52
https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai2/siryou3-1.pdf
53
http://www.chusho.meti.go.jp/pamflet/hakusyo/H29/h29/html/b2_1_1_2.html
50

38

entrepreneurial mentality who answered that they(the US, ranked number 1,
are “entrepreneurs or prospective entrepreneurs”
scored 83.6)
11.8
By 2022, aim to double the proportion of venture 2013-2015: Average ofcapital investments into startups as a proportion of
0.029%
nominal GDP
12. Regulatory reform, Simplification of Administrative Procedures, Integrated facilitationof IT Adoption
12.1
By March 2020, aim to reduce administrative**New KPI
procedure costs in priority fields by more than 20%(field include national tax, local tax, enabling ofelectronic tax submission, etc.)
12.2
By 2020, make Japan as a top three country in the 2016 (October): 26th (2 ranks
World Bank’s “Business Environment Report”
down from previous year)
13. Drastic Regulatory Reforms in National Strategic Special Economic Zones
14. Cyber Security
14.1

By 2020, aim for over 30,000 registered IT security
support providers

 2017 (April): 4172 registeredproviders

15. “Sharing Economy”
15.1
During 2017, establish a minimum of 30 local**New KPI
public or municipal examples of sharing economy
utilization
15.2
For Vitalization and Productivity Enhancements ofSMEs, middle sized enterprises, and small
enterprises
15.3
By 2021, create consortia of industry-academiagovernment-financial sector collaboration toprovide support to 200 pioneering technologicaldevelopment projects utilizing locally developed
technologies every year, with approximately 1000
projects over 5 years
15.4
By 2020, increase the number of profitable SMEs
 2015: 923,037 businesses
and small businesses from 700,000 (in 2013) to 1.4(859,753 businesses in 2014)
million15.5+
By 2020, aim to raise labor productivity growth rate  2015: 1.3% growth rate
in services industries to 2% (from 0.8% in 2013)(1.0% in 2014)
15.6
By FY2017, realize initial overseas expansion of 2013-2015 (July): Overseas
10,000 companies
expansion of 6500 realized 54
16. Aggressive Agriculture and Fisheries Industries Development
16.1*
By 2023, reduce the cost of rice production by 40%  2015: Production cost for(16,001 yen/60kg in 2011)individual enterprise- 11,397
yen/60kg (29% reduction);
corporate enterprise-11,996
yen/60kg (25% reduction)54

http://www.meti.go.jp/committee/kenkyukai/external_economy/shin_yushutsutaikoku/pdf/003_02_00.pdf

39

16.2
16.3
16.4
16.5+

By 2025, double the cost efficiency of animal feedrice
By 2025, quadruple the number of corporate
farmers to 50,000
By 2025, almost all farmers will utilize data in theiragricultural operations
By 2019, increase the export of agricultural,
forestry, and fishery products and food produce to 1
trillion yen

 Will be evaluated going
forth55
 2016: 20,800 corporate
farmers
 2016: 54%
 2016: 750.2 billion yen* achieved+ on track if extrapolated linearly
Source: http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/miraitousi2017_t.pdf , some translations by author.
Originally compiled by Takeo Hoshi and research assistants.

55

http://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo_dai6/siryou8.pdf

40

Appendix 2: Japan’s Venture Capital Industry
Japan’s venture capital industry has developed significantly. While the size remains far
smaller than that of the US or Silicon Valley, the amounts are actually greater than other notableadvanced industrialized countries such as France, Germany, and the UK.
Figure 1. Venture Capital Investment Amounts (billions USD)
FY
Japan
EU
Germany
FranceUK
IsraelSouth Korea
US Total
Silicon Valley

2010
1.29
4.26
0.97
0.80
0.79
0.41
0.96
23.52
9.39

2015
1.11
5.91
0.87
0.84
0.62
0.65
1.78
59.70
27.76

Source: Venture Enterprise Center, GVCA, BVCA, AFIC, IVC Research Center, KVCA
*Note that UK's data is as of 2014.

Figure 2. Amounts Raised in IPO, Small-cap Markets in Japan, US

2015
2014

Average (million $)Japan (Mothers/JQ)
US NASDAQ
7.6
116.0
8.7
121.6

Median (million $)Japan (Mothers/JQ)
US NASDAQ
3.5
75.0
5.7
65.0

Source: Tokyo Stock Exchange, NASDAQ

41

Appendix 3: Top Japanese Startups by Fundraising, 2015
Major Venture Capital Fundraising by Japanese Startups, their founders and education 2015
Company

SpiberAmountRaised(billion
yen)
10.54

Metaps

4.89

Freee

4.49

Raksul3.99

Megakaryon

2.54

Producing platelet products
from iPS cells

Quantum
Biosystems

2.4

Commercial DNA sequencer

ToshihikoHonkuraPlus One
MarketingPreferred
Networks

2.13

Mobility hardware products
made by Japan
Industrial IoT applications withAI

Kaoru Masuda

AXELSPACE

1.89

Treasure Data,
Inc.
GLM

1.77

Origami1.59

iPS PORTAL

1.53

1.9

1.69

seven dreamers 1.52
Money Design

1.5

Description

Founder

Education

New-generation biomaterial
development
Marketing tools and consulting
service in mobile business
Cloud-based accounting
softwareCommercial printing service

Kazuhide
Sekiyama
Katsuaki Sato

Keio
University
WasedaUniversity
Hitotshbashi
University
Keio
University
University ofTokyo,
Harvard
University
University ofTokyo,
Columbia
University
WasedaUniversity
University ofTokyo,
University ofTokyo
University ofTokyo
WasedaUniversity
Kyoto
University
WasedaUniversity,
University ofSydneyDoshisyaUniversity
University of
Delaware
University ofTokyo,

Commercial microsatellite
imaging and data service
Cloud data management
platform
EV Development / providing
EV platform
Mobile payment service

Instruments to analyze andmeasure iPS cells
R&D of carbon tool andmedical equipment
Financial portfolio design withAI

Daisuke Sasaki
YasukaneMatsumoto
Genjiro Miwa

Toru
Nishikawa,
DaisukeOkanohara
Yuya
Nakamura
Hiro
Yoshikawa
Hiroyasu
Koma
Yoshiki Yasui

Syosaku
Murayama
Shin Sakane
MamoruTaniya,42

Tomoyoshi
HiroseCYFUSE

1.41

Koji Kuchiishi

1.19

3D tissue-engineering
technology
Next-generation marketing
platform
News discovery app

from scratch

1.29

SmartNews

Ptmind1.1

Data analysis and monitoring

Zheng Yuan,
Takashi Ando

Money
Forward

1.03

Online application for personalaccounting

Yosuke Tsuji

AnyPerk

1.02

FOODiSON

1.01

Integrated perks and rewards
platform
Fresh fish distribution platform

JOMDD

1.01

Medical device incubator

Taro
Fukuyama
Tohru
Yamamoto
Takahiro
UchidaRetty

1.0

Social gourmet site

KazuyaTakedaLOCONDO

1.0

Shoes and fashion e-commerce
service, buy first and thenchooseYusukeTanakaYasuhiro Abe
Ken Suzuki

Yokohama
National
University
Keio
University
Nihon
University
Keio
University,
University of
Tokyo
Nihon
University,
RikkyoUniversity
Kyoto
University,
University ofPennsylvania
Keio
University
Hokkaido
University
Fukushima
Medical
University,
Harvard
University
AoyamaGakuinUniveristy
Hitotsubashi
University, UC
Berkeley

Source: Japan Venture Research Co., LTD

43

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