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15.RPA 6102

2017 JUL.

Digital Economy
and,Japan s Leadership

The magazine was originally written and published in Japanese. This is an English-translated version.

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［Google Blog］

02 Google Blog

Google is involved in a wide range of activities and we share their results on ourblog. Below are some of the blog posts we made for past several months.

Special Reporthttps://blog.google/topics/google-asia/

The digital economy
03
andJapan’s leadership
Interviewhttps://blog.google/topics/google-asia/local-business-global-ambition-new-export-opportunity-smes/
The invention of shipping containers in the 1950s helped kick-start a new wave of exports amonglarge companies by pushing down their export costs. Today in the 21st century, the Internet has theJapan’s leadership is essential for
applying fair and transparent rules
06 in the global economy
Member of the House of Representatives

Akira Amarisame impact among SMEs, helping them grow their businesses overseas. It has been estimatedthat if the number of SMEs online doubled, the Asia-Pacific region would benefit from an additional
35 million new jobs and $1.5 trillion in export sales. Google has teamed up with APEC, theVietnamese Government, and the Asia Foundation to sponsor the APEC App Challenge, a contest
to build the best app or mobile site to help small businesses export. More than 22 app developers

Showing the world the way towarda data-driven society in which data
08 are used to resolve social issues
Ministry of Internal Affairs and Communications

Yasuhiko Taniwaki

Japan-U.S. economic dialogue toaccelerate prosperity in the digital
10 economy
Ministry of Foreign Affairs

from countries including Indonesia, Malaysia, Thailand, Vietnam, China, and Australia took part. See
the APEC App Challenge 2017 YouTube video for more on this project.

https://webmaster-ja.googleblog.com/
Our latest quality improvements for Searchhttps://webmaster-ja.googleblog.com/2017/04/our-latest-quality-improvements-search.html
In April 2017, Google made a number of changes in order to continue surfacing more high-quality

Yo Takaba

A free Internet space supports
12 global economic growth
Ministry of Economy, Trade and Industry

Kazumi Nishikawa

content from the web. This includes improvements in Search ranking, easier ways for people toprovide direct feedback, and greater transparency around how Search works.
There are trillions of searches on Google every year. In fact, 15 percent of searches we see every
day are new which means there’s always more work for us to do to present people with the bestanswers to their queries from a wide variety of legitimate sources. While our search results will neverbe perfect, we’re as committed as always to preserving your trust and to ensuring our productsCase Study

Companies around the world engaged
in data-driven businesses and
14 reflecting trends in the digital
economy>Sendo Joint Stock Company>Caterpillar >NZTech
Special Dialogue

Japanese and American leadershipneeded to promote the digital economy

8

Local business, global ambition: The new export opportunity for SMEs

Japan Business Federation（Keidanren）

American Chamber ofCommerce in Japan

Toshinori Kajiura

Yoshitaka Sugihara

continue to be useful for everyone.

https://blog.google/topics/public-policy/
An international framework for digital evidence
https://blog.google/topics/public-policy/international-framework-digital-evidence/In the second half of 2016, Google received over 45,000 government requests for user dataworldwide. This is the most government requests we’ve received for user data in a six-month period
since we released our first transparency report in 2010. Cross-border requests for data continue toaccount for a substantial portion of overall requests, with over 31,000 in the second half of 2016

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process facilitates the production of digital evidence in cross-border investigations, it often is slow

Issue：Google Japan G.K.
The issuer：Head of Public Policy Team
Yoshitaka Sugihara

be tempted to take unilateral actions to deal with a fundamentally multilateral problem. We believe-1.2that governments can develop solutions that appropriately balance the various interests at stake.

-1.4

Roppongi Hills Mori Tower
PO Box 22, 6-10-1 Roppongi
Minato-ku, Tokyo 106-6126
Contact：gsphere.info@gmail.com

The conversation should include a broad group of stakeholders, including not just law enforcement
and national security perspectives, but also the voices of citizens, civil society groups, and others.

-1.6

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Global cloud platforms and software
as a service (SaaS) are being used asimportant tools for business and society in each country, and conditions
are changing considerably around theworld as the value of data increases
with technologies such as Big Data,
the Internet of things (IoT), and artificial
intelligence (AI) and people are using
mobile devices more and more.
Rather than being the exclusive provenance of IT firms, today’s digital technologies are in use across a wide rangeof fields from manufacturing and othertraditional industries through finance,
distribution, agriculture, healthcare,education, and government administration, and data are being accumulated
on subjects such as consumer andbusiness behavior and commercial
transactions. With the addition to thesedevelopments of the IoT, in which awide range of devices and equipment
collect data automatically, it has become more widely recognized that
putting data to use is the lifeline ofbusiness. Global economic activities inwhich data are utilized in an Internet environment that spans the whole world

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these fundamental issues.

R

0of due process, privacy and human rights. Although the Mutual Legal Assistance Treaty (MLAT)

age. We look forward to working with relevant stakeholders to craft viable and lasting solutions tolFig. 1. Simulated economic losses on individual countries’ gross domestic product (GDP)resulting from data localizationinternational framework that meets legitimate law enforcement needs and ensures high standards

extent of digital jurisdiction, the importance of rapid investigations, and privacy rights in the InternetaT

Vol.15
Issued July 2017

Although the contents of this journal are stated based on
the information at the time of publication, the information
may be changed after publication.

ihe digital economy, in which
technologies like cloud andthe Internet as well as data areused to create economic value,
has been spreading across theworld not only in developed countries but also in emerging markets and developing countries.
This also means that not only socalled IT firms but various industries are undergoing a digitalization process. However, the digital
economy still is in the process of
growing, and it faces a wide rangeof challenges, such as regulations
on exchange of data in specificcountries, for which solutions will
require close international cooperation. In the Asia-Pacific (APAC)
region in particular, Japan, which
has its own strengths in the digital field, will need to demonstrateleadership. This issue looks at thecurrent state of the digital economy and related issues, as well as
the leadership that Japan should
demonstrate.

-0.4This discussion will raise difficult questions about the scope of government surveillance powers, thecThe digital economy
and Japan’s leadershipcoming from outside of the United States. This volume underscores the need for an improvedand cumbersome. Without better and faster ways to collect cross-border evidence, countries will

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Digital technologies are the engine
behind global economic growth

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-1.1

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-1.7

-2.0
Brazil

China

EU

India

Indonesia

are referred to as the Internet economy
or the digital economy. (In this journal,
we use the term digital economy.)
One distinguishing feature of the digital
economy is the way it benefits nearly
everybody who has Internet access,regardless of location, scale of business, or industry. The digital economy,in which it is possible for anybody who
has a good idea to promptly engage inbusiness on a global scale using cloudbased infrastructure and services paidfor on a per-use basis, is filled withbusiness opportunities.
The latter part of this special feature will
look at the efforts of companies andorganizations around the world that
actually are taking on the challenges ofcreating innovation in the digital economy. These include New Zealand, whichaims to enrich its economy and society
by putting digital technologies to theirmaximum use as a digital nation, Sendo, which operates an e-commercesite that has an overwhelming share of
the market in Vietnam, a leading mobile
market, and Caterpillar, a traditional
construction-machinery manufacturer
founded more than 90 years ago thatis transforming itself into a digital enterprise using IoT, Big Data, and AI. These
case studies should prove useful asreference information for administratorsand private enterprises in Japan, a key
player in the digital economy.

South Korea

Vietnam

Source : “The Cost of Data Localization” (ECIP)

It no longer is possible for the world toreturn from the digital economy to ananalog economy. There is no doubt thatin the future the digital economy willcontinue to advance and serve as theengine driving global economic growth.
Under such conditions, it is expectedthat the APAC area will enjoy the greatest benefits of the digital economy. In

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terms of both population and economic
growth, this region is expected to drive
growth over the coming century. The
Analysis Mason report “Data-driven
innovation for emerging Asia-Pacific”
estimates that digital’s contribution todeveloping economies in India, Indonesia, the Philippines, Thailand, andVietnam could reach 33.5-55.85 trillion
yen or more in 2020. Such growth will
be supported by digital-native startups
in emerging markets.
Of course, the digital economy also
will have massive economic effects inJapan. The Oxford Economics report“Local Business Global Ambition” predicts that digitalization of SMEs withfive or more employees in Japan would
increase export sales by 1.2 trillion
yen, create 52,000 new jobs, and raise
workers’ wages by an annual averageof 550,000 yen.

Concerns about data localizationand commercial rules in demand
At the same time, there are concerns
about the trend seen in some emerging
markets toward restricting international
exchange of data. The growth of thedigital economy results from the freeexchange of data across national borders, and it is conceivable that suchdevelopments could have negative
impacts on economic progress not only
for the APAC area but for those individual countries as well.
According to “The Cost of Data Localization,” a report summarizing a study
by the European Centre For International Political Economy (ECIPE) of Brazil,
China, the European Union (EU), India,
Indonesia, South Korea, and Vietnam,
restriction of exchange of data acrossnational borders in all sectors of theeconomy would result in losses to GDP
of 0.8% in Brazil, 1.1% in the EU, 0.8%
in India, 0.7% in Indonesia, and 1.1%
in South Korea. This would lead to economic losses of up to 703.8 billion yen
in China and 2.1561 trillion yen in the
EU (Fig. 1).
To address this challenge, in its chapter
14 on e-commerce transactions theTrans-Pacific Partnership (TPP), a subject of repeated negotiations among 12
countries in the APAC area, includes
provisions on protecting the personal
information of users of e-commercetransactions and online consumer protection in addition to securing the free

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Fig. 2. The contributions to economic growth of fair and transparent trade rules

Eurasian Economic
Union

North American
Free Trade Agreement(EEU)(NAFTA)●TPP, chapter 14 (e-commerce)

Asia-Pacific
Economic Cooperation

Experts discuss the digital
economy and Japan’s leadership
Interview

・Securing the free transfer of information across national borders
・Prohibiting demands for localization of computer-related
equipment such as servers
・Prohibiting demands for transfer of and access to source code
・Protecting the personal information of usersof e-commerce transactions
・Online consumer protection(APEC)

Key person

P.06-07

P.08-09
Director-General for Information
Security (Then-Director-General,
Global ICT Strategy)

Trans-PacificPartnership(TPP)

Akira Amari says, “The TPP is an extremely important economic partnership agreement that will contribute to the growth of the global
economy as a whole by fair and transparent rules on commercial trade in an emerging economic area that continues to grow.” There
are strong demands for Japan to demonstrate its leadership in the growth of the digital economy in the Asia-Pacific (APAC) area.

transfer of information across national
borders, prohibiting demands for localization of computer-related equipment such as servers, and prohibiting
demands for transfer of or access tosource code (Fig. 2). In addition, theJapanese and American business communities and their governments haveformulated Cross-Border Privacy Rules(CBPR) as a framework for protecting
privacy in data across national borders
and are carrying out activities to broaden their use.
Today, after the withdrawal of the U.S.
from the TPP, Japan continues negotiating with the 11 other prospective TPP
member states toward TPP11. Thereis a strong need for Japan to demonstrate leadership in the growth of thedigital economy in the APAC area.
Member of Japan’s House of Representatives Akira Amari, a leader in TPP
negotiations, says of Japan’s role, “TheTPP is an extremely important economic partnership agreement that willcontribute to the growth of the global
economy as a whole by fair and transparent rules on commercial trade in
an emerging economic area that continues to grow. If Japan does not takethe lead in the TPP11 framework now
being negotiated, no other country will
go along with it. Now that the U.S. has
withdrawn from the negotiations, Japanneeds to demonstrate even stronger

leadership, as a nation with strengths
in digital technologies and one that istrusted by many states in the APAC
area.”
This issue presents the valuable opinions, from their own individual perspectives, of member of the House ofRepresentatives Akira Amari, who is
involved in formulating policy in Japan
based on a deep knowledge of the digital economy, then-Director-General of
the Global ICT Strategy Bureau of the
Ministry of Internal Affairs and Communications Yasuhiko Taniwaki, Directorof the Second North America Divisionin the North American Affairs Bureau of
the Ministry of Foreign Affairs Yo Takaba, and Director of the Trade Policy
Planning Office in the Ministry of Economy, Trade and Industry Kazumi Nishikawa. It also includes a dialogue between
Toshinori Kajiura of the Japan Business
Federation (Keidanren) and Yoshitaka
Sugihara of the American Chamberof Commerce in Japan (ACCJ) on the
background and objectives of a Joint
Statement submitted to the Japaneseand American governments on promotion of the digital economy.
This issue contains a wealth of passionate arguments by public- and private-sector experts from various fields
across national borders on the digital
economy and Japan’s leadership. We
hope readers will find it useful.

Member of the Houseof Representatives

Akira AmariJapan’s leadership is essential for applying
fair and transparent rules in the global
economyMinistry of Internal Affairs
and Communications

YasuhikoTaniwakiShowing the world the way towarda data-driven society in which data
are used to resolve social issues

P.10 -11

P.12 -13

Director, Second North America
Division,
North American Affairs Bureau,

Ministry of Foreign Affairs

Yo Takaba
Japan-U.S. economic dialogue toaccelerate prosperity in the digital
economyIndustry Voice

P.14 -17

Then-Director for Trade Strategy,

Ministry of Economy, Tradeand Industry

Kazumi
NishikawaA free Internet space supports
global economic growth

Special Dialogue

P.18 -19

Companies around the world engaged
in data-driven businesses and reflecting
trends in the digital economy

Japanese and American leadershipneeded to promote the digital economy

CEO,

Sendo Joint Stock
Company
Tran Hai Linh

Director, Government& Corporate Affairs,

Chief Executive,

Japan Business Federation (Keidanren)

American Chamber of Commerce in Japan

Caterpillar

NZTechGraeme Muller

Toshinori Kajiura

Yoshitaka Sugihara

Megumi Tsukamoto

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Interview

Japan’s leadership is essential for applying fair
and transparent rules in the global economy
As the minister of state responsible for the TPP, Memberof the House of Representatives Akira Amari led the way
through difficult negotiations
to an overall agreement. We
asked him about the future of
the TPP after the U.S. withdrawal and the rule-making needed
to demonstrate leadership in
the international community.

Member of the House of Representatives

Akira Amari

06— Please describe your viewson the background and the future
prospects for TPP negotiations.
Although it was the tariff negotiations
that attracted the most attention, themost important theme of the TPP was
to make fair and transparent rules oncommercial trade and investment a
global standard. Demand in Asia, theMiddle East, and Africa is expected toundergo rapid growth in the future, surpassing that of the current leading tradeand economic zones. It is no exaggeration to say that whether or not we areable to enact fair and transparent rulesin these massive economic zones will
determine the fate of the world.
While the topic may be those usually
led by the World Trade Organization(WTO), it is impossible to create ambitious rules under the current WTO’s
method, which requires unanimity.
That’s why for the TPP, we chose theprocess of creating rules multilaterally
and to deploy it globally.
The membership of the U.S. was essential to achieve that objective fortwo reasons. One is the fact that rules

created by the U.S. and Japan, thetwo countries that are very influential
in the global economy, would be more
likely to serve as the greatest common
denominator when used as global
standards. The other is the fact thatrules are meaningless if they cannot be
enforced. If the U.S. were a rule maker,
then it would be able to put pressure on
countries that did not follow the rules.
—Since Donald Trump took office, the U.S. has withdrawn fromthe TPP…at least for now.
For centuries, the U.S. has been an
Atlantic nation oriented toward Europe.
But when President Barack Obamadeclared that the U.S. was a Pacificnation, the view changed 180 degrees.
There was a recognition of a new frontier in the Pacific. However, a nation
cannot become an official member ofAsia simply by declaring that it is a Pacific nation. That’s why the U.S. took
part in the TPP. Participation would
make it an established member of Asia,
enabling it to press its own agenda.
Creating such a route to raise its voicein Asia was indeed the reason andmeaning for the U.S. to participate in
the TPP. One cannot discuss the TPP
without understanding it.
If the U.S. becomes an aboveboard
member of Asia, then eventually both
China and India would probably needto participate as well. In fact, just as the
TPP reached the summary agreement,
the deputy prime minister of Thailand
visited me and said, “We definitely
would like to participate in the TPP.”
South Korea, Taiwan, Indonesia, and
the Philippines also indicated their intentions to participate. However, suchtalk disappeared when the U.S. withdrew. The U.S. basically threw away its
ticket to be a part of Asia through thefront door.
Does Japan aim to conclude the
TPP11 and then have the U.S. ratify it?
Japan does not want to give up what
has been achieved so far. If Japan does
not take leadership on the TPP11,

other countries are unlikely to follow.
Each country has different attitudes towards the TPP. While some participating countries conceded on conditions
with the opening of the U.S. market
as a precondition, some do not want
to incur the wrath of President Trump
and would participate if Japan took thelead and gave them a bulletproof protection. Fortunately, Prime Minister Abe
and President Trump get along very
well, and I believe that such chemistry
between the two will have a positive
impact in the future. We will probably
need to finish up the TPP11 while Prime
Minister Abe works on persuading
President Trump that the TPP would be
beneficial to the United States as well.
—Commercial trade is expanding
to include not only physical goods
but the digital world as well. What
are your thoughts on cross borderdata flows?
The free flow of data across national
borders is a fundamental rule in thedigital economy. In order to protect
this and to prevent the countries fromrestricting the digital economy, the TPP
includes rules such as on those prohibiting countries from demanding theservers be located domestically andfrom making the transfer of technology
or disclosure of source code prerequisites for market entry. Today the Internet is the infrastructure of the global
economy, and for this reason there isa need to create fair and transparent
rules to avoid making market participants worried through regulations andrestrictions, based on a recognition of
the public nature of infrastructure.
—Japan is expected to be a leader for rule-making in the Asia-Pacific (APAC) area, thanks to its
strengths in digital fields.
There are two patterns in rule making:the de jure pattern, in which international organizations like the ISO establish
rules for deployment worldwide, andthe de facto pattern, in which thosewith a high share in the market tend to
become standard. While it is said that
the EU tends toward the de jure approach while the U.S. tends toward thede facto approach, I believe that there
is one more pattern. It’s a standard
where you restrict and keep superior
products from overseas out of the domestic market.

The TPP cabinet-level conference held in Atlanta, Georgia in October 2015

This is a model that can be employed
by a country like China, thanks to its
one-party government and its population of 1.4 billion. But we cannot accept
and allow this third way of rule-making.
That’s because truly superior technologies should become the global
standard. To make such outstanding
technologies become global standards,
it is essential to have sensible countries
cooperate on rulemakings.
—A rule-making strategy is essential for Japanese private-sector
companies as well, not just at the
government level to be competitivein the global market.
The Executive Council of the Liberal
Democratic Party of Japan recently discussed a strategy on appointing Chief
Standards Officers (CSOs) in government and businesses. I argued, “Fromnow on, rule-making will be more
important than standardization. Whatis needed is not a CSO but a Chief
Rulemaking Officer (CRO).” The standardization strategy was proposed 10
years ago when I was the Minister of
Economy, Trade and Industry. Bringing
that up now is so outdated. Japanesepeople are generally very serious andtend to think that they need to comply
with global standards immediately. But
even a decade ago, I said, “Standards
are not created by God. Some people
simply transformed their local standards
into global standard in their own interest. Keeping this in your mind, we needto shift towards creating standards
rather than thinking of just adapting
ourselves to standards.” I believe Japanis a country capable of conducting out-

standing rule-making, and the country
must play a role as a world leader.
—To demonstrate leadership, it
will be important strategically tobring allies together as well.
In sum, this refers to creating a “TeamJapan.” In the world of rulemaking, nomatter how good your proposals are,other countries will not often want to let
you take the leadership. That’s why it isimportant to have friends and allies whoshare the same rules instead of creating rules alone. Open innovation is an
essential strategy for doing so. Rather
than dominating intellectual properties
by keeping them closed, they should be
opened proactively to public. In doingso, you can bring aboard more friends
and allies and stimulate further innovation through collective knowledge. By
protecting the uniqueness only in coreelements, it is possible to maintain advantages in a world of openness and todemonstrate leadership.

ProfileAkira Amari
Joined Sony Corporation after graduating in 1972 from the
Department of Political Science, Faculty of Law, Keio University.
Was first elected a member of the House of Representatives
in 1983, and has since served 11 consecutive terms. Was
appointed Minister of Labor in 1998, Chair of the Budget
Committee in the House of Representatives in 2004, Ministerof Economy, Trade and Industry in 2006-2007, Minister ofState in 2008-2011, Chair of the Liberal Democratic Partyof Japan’s Political Affairs Research Committee in 2012, andMinister of State for Economic Revitalization in December
2012-2016 (four consecutive terms).

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InterviewShowing the world the way toward a data-driven
society in which data are used to resolve social issues
We spoke with Yasuhiko Taniwaki of the Ministry of Internal Affairs and Communications about how realizing adata-driven society in whichdata are used to resolve social
issues will help demonstrate
Japanese leadership in the international community.

Director-General for Information Security(Then-Director-General, Global ICT Strategy)
Ministry of Internal Affairs andCommunications

YasuhikoTaniwaki

08—Please tell us about the positioning of data utilization in Japan’s
growth strategy.
The Future Investment Strategy 2017—
known as the “growth strategy”—
approved by the cabinet in June 2017is built based on the realization of socalled Society 5.0. The vision of Society
5.0 aims to realize a data-driven society
by implementing advanced technologies such as information and communication technologies (ICT) in social andeconomic systems to resolve the issues
we face as a society, and by promoting
the creation, collection, analysis, andusage of data through utilization of IoT,
AI and Big Data to solve social issues.
Big Data mentioned here includes awide range of data types including
open data provided by national and local public agencies, data that presents
used-to-be tacit knowledge on agriculture and infrastructure management,machine-to-machine (M2M) streaming
data, and personal data that shows
individuals’ attributions. I believe thatcombining these various types of staticand dynamic data to find new solutions

that could not have been envisioned
before will lead to the growth of Japan’s
economy.
—The cross-border free flow ofdata is essential to the growth ofthe digital economy.
Ensuring the free flow of data in borderless cyberspace will lead to increased
benefits to all stakeholders. In order
to secure the free flow of data, it is essential to foster a shared international
understanding and to avoid creating
the consensus which may lean toward
protectionism such as data localization.
—What are your views on policies
aimed at growing a nation’s domestic industry through restricting thecross-border data flow and those
aimed at growing the industry
through promoting the free flow ofdata?
I believe that stimulating open innovation through free flow of data with players from a wide range of domains—
not just domestically but internationallyas well—will be essential to economic
growth in individual countries in the
future. Also, in solving social issues it isimportant to establish multi-stakeholder
processes that incorporate the views ofa wide range of parties including users
or civil society, not just suppliers. While
it is not a simple task to create international rules, I believe that the Japanese
government should play a leading rolein building ideas and consensus for realizing the free flow of data.
—What kind of leadership do you
believe Japan should demonstratein the Asia-Pacific (APAC) area?
First of all, Japan should take the leadin building mechanism to protect thesafety and security of free flow of data.
Cross-Border Privacy Rules (CBPR)
have been formulated under Japaneseand American leadership in the APEC
region. It is important to broaden themembership of this framework to all
APEC member countries to promote
free flow of data, including personal
data within the region.

Second, we need to contribute to solving social issues through use of digitaltechnologies. Japan is considered aforerunner in facing issues that the restof the world will face sooner or later. In
particular, the aging population is oneof the most important challenges weare facing. Japan is aiming to resolve
this challenge through solutions involving use of fine data, and I believe thatthe expertise accumulated throughdoing so will help other countries solve
issues as well.
—What do you expect from theprivate sector in promoting the digital economy?
Basically, it is the private sector that
leads the digital economy, and the
public sector supports their activities.
I believe it is important for the government to review rules and regulations
so that the government’s reach (or its
involvement) can be kept minimum inorder not to impede the private sector’s
growth when a new solution or business appears on the scene. For example, one type of supports that the public sector should provide is to create anenvironment in which new initiatives canbe carried out, such as the regulatory
sandbox (deregulation through a temporary suspension of existing regulations) incorporated in the government’s
growth strategy published this year.
In the area of cooperation with othercountries, while we have been conducting policy dialogues with othercountries to recognize policy differences and to deploy harmonized ones, I
think that in the future the “1.5 Track”
will become more important than everwhere public and private sectors work
together to develop new courses ofpolicy actions as well as the practicalcollaborative projects.
—The Ministry of Internal Affairs
and Communications has played acentral role in preparing principles
on AI development
While AI is an important factor in thedigital economy, some have voiced
concern about its negative aspects. In
response, the Ministry of Internal Affairs
and Communications has advanced
discussion among experts intended tocalmly consider the use of AI in a human-centric society. The draft AI development guidelines formulated throughsuch discussion are intended to be pro-

A data distribution system for solving social issues
Cyberspace

AI

Generating, collecting,exchanging dynamic
and static data

Data-based analysis

Big Data◎Open data
◎Structuring explicit knowledge transformed fromtacit expertise in agriculture andinfrastructure management◎M2M (streaming data)◎Personal data

Real world

IoT

Realizing solutions for solving issues
through use of data
(Open innovation based on design thinking)Data-driven society

Various things, machines, people
Feedback to the real world(solving social issues)

vided as a nonbinding soft law insteadof a regulatory model, aiming to contribute to share potential concerns andbest practices in AI development. In the
G7 meeting of information and communications ministers held in Takamatsu,
Kagawa Prefecture in April 2016, Japanproposed principles on AI developmentthat earned the support from othercountries in attendance, and ministers
decided to continue the discussion in
the G7. The OECD is also carrying out
a joint project based on the proposed
AI development guidelines.
—In the era of digital economy,
while government and private businesses in each country need towork together, innovation will not
accelerate without competition.
Doesn’t this lead to policy contradictions?
As you note, there are two domains:that of cooperation and that of competition. I think that these should be
decided on through the mechanismsof private-sector competition insteadof being cultivated by the government.
However, this needs to be user-centric.
There is a need to make progress atthe same time on building systems thatreflect the perspectives of users andcivil society through a multi-stakeholder
approach, rather than merely reflecting
supply-side principles alone.
—What are your thoughts on Japan’s
future in the digital economy?
For some people, the term “digital
economy” might indicate a cold, in-human society. But as I noted at the
beginning, the objective of a data-driven society is to use data to solve theissues that our society faces and maintaining a human-centric society remains
unchanged as our goal. Moreover,putting data to use makes it possible
to visualize areas that people have notyet recognized, enabling even morethorough responses than before. In thissense, the digital economy can be described as a society that is human-centric, or kind and mindful to people. I
believe if we make the most out of anature of Japanese people—such as
its thoughtfulness and consideration—then we should be able to become andshow a model for human-centric data-driven society to the world.

ProfileYasuhiko Taniwaki
Joined the former Ministry of Posts and Telecommunications
after graduating from the Hitotsubashi University Faculty of
Economics in 1984. Served as Deputy Director-General of
Information and Communication Bureau and Councilor for
the Cabinet Secretary. He has been in his current positionin Global ICT Strategy Bureau since 2016. Born in Ehime
Prefecture. Author of Missing Link: Revitalizing Japan as a
Digital Power (Toyo Keizai Inc.), The Mobile Phone in Japan:
The Most Mysterious in the World (Impress R&D), Whose is
the Internet? Order in the Net World has Started to Break
Down (Nikkei BP Inc.), and Integrating Networks: Can the
United States Recover as an Internet Powerhouse? (Kanki
Publishing Inc.).

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Interview

Japan-U.S. economic dialogue to accelerate
prosperity in the digital economy
We asked Yo Takaba of the Ministry of Foreign Affairs’ North
American Affairs Bureau, whoworks on building frameworks
for Japan-U.S. economic dialogue, about the stances ofboth countries on the digital
economy and Japan’s leadership.

Director, Second North America Division,
North American Affairs Bureau,
Ministry of Foreign Affairs

Yo Takaba

10—Please tell us about the positioning of the digital economy inJapan-U.S. economic dialogue.
Since the new U.S. presidential administration took office, high-level economic dialogue covering a wide range of
topics has begun, with Vice-President
Pence representing the U.S. and Deputy
Prime Minister Aso representing Japan.
The agenda of this dialogue is basedon three pillars. The first is cooperationin economic and structural policies,
the second is a common Japan-U.
S. strategy on trade and investment
rules to drive economic growth in the
Asia-Pacific (APAC) area, and the thirdis promotion and identification of areasin which Japan and the U.S. can cooperate looking at the same direction.
The digital economy is covered under
the second and third of these pillars.
Typically it would be discussed under
the third pillar. It is highlighted here because it is an area in which Japan andthe U.S. can build a win-win relationship. With regard to the second pillar,
rules on trade and investment, the TPP
should have been the answer, but since

the Trump administration withdrew its
signing, there no longer are any common rules that two can share in thisarea.
Advanced rules such as prohibitionof requirements to disclose source
code, prohibition of requirements onserver localization, and promoting thefree flow of data, which will energize
e-commerce transactions, were builtin to chapter 14 of the TPP. These rules
would be highly beneficial for promoting global trade and investment. In
fact, U.S. Commerce Secretary Ross,
who argues for a bilateral framework,
has stated the portions of the TPP
on e-commerce transactions should
be used in the renegotiation of theNorth American Free Trade Agreement(NAFTA). Since as this statement indicates the U.S. continues to recognize
the necessity of high standard rules inthe digital economy, Japan-U.S. dialogue needs to continue in the future.
—What are some concerns that
could be a factor for impeding theworld’s digital economy?
I think that rather than being inherent
to Japan or the U.S., the greatest impediments come from outside of two
countries. This is because securing thefree flow of data between Japan and
U.S. is not sufficient for a true economic prosperity. Substantial results cannot
be expected unless other countries inthe same economic ecosystem sharethe same awareness and the samelevel of rules. In the APAC region, somecountries do not yet have rules fully
equipped, while others are thinking
about enclosing data or blocking its
free flow. Japan and the U.S. needto provide solid models of rules andcodes of conduct for such countries inorder to increase the numbers of allies
and build standards. In the process of
doing so, it is not enough to discussmatters simply within the government.
I think we need to listen to the voices
and views of private-sector businesses
when developing rules.

—What kind of leadership should
Japan demonstrate in the APAC?
While engaging in such Japan-U.S.
dialogue, we also are stressing what
is being called TPP11 framework in
the absence of the United States. As I
mentioned earlier, since this includes ahigh level rules that should contributeto digital industries, one pillar of oureconomic diplomacy relies on how werealizing such rules and make progress
on it seriously and with a sense of urgency.
—Can the TPP11 framework be
advanced even after the U.S. official withdrawal from the TPP?
We are not naive enough to expect the
U.S. to return to the TPP anytime soon.
However, since there are some in the
U.S. who understand the strategic andeconomic value of the TPP, I believethat advancing with the TPP11 will
send a positive message to such supporters of the TPP in the United States.
Also, I believe that Japanese leadershipis essential in maintaining conditions
under which the U.S. can return to the
TPP at any time in the future once itreassesses its importance and changes
its decision.
—International rule-making andpromotion of investments are important roles of the Ministry of Foreign Affairs. What are your thoughts
on leadership in that domain?
With the development of the digital
economy today, the qualities of humanresources in need around the world arechanging, as seen in the example of cybersecurity experts. I think an importantrole of the Ministry of Foreign Affairs is
to identify adequate needs in individual
countries and to contribute to humancapacity building by using tools like official development assistance (ODA). In
the area of investment, it is important towork on the rulemaking that creates anenvironment that makes easy for businesses to enter markets. I believe thatworking together to create high-level
rules in countries and markets thatcompanies are interested in will havethe result of encouraging investment.
In fact, I have heard that it is easier toenter Malaysia and Vietnam, the participating countries in the TPP, than it is toenter countries that are not participating the TPP. In that sence, I believe thatthe establishment of TPP-level rules

At the first Japan-U.S.
Economic Dialogue heldon April 18, an agenda
consisting of three pillars(rules on trade andinvestment/joint strategy
on issues, cooperation ineconomic and structural
policies, cooperation in
individual fields) was
adopted (http://www.
mofa.go.jp/mofaj/na/na2/
us/page3_002073.html).

would be the best contribution we canmake.
—Do you have a message for private-sector companies?
Digital industries are the engine driving
regional economic prosperity, and I
think they can be now called as a key
basic industry rather than a stand-alone
industry. What government can do forsuch an industry is to build systems toenable their stable development. However, since it is also an extremely sensitive area, I think that in some cases
it would be more helpful not to create
rules or framework, while at the sametime government should contribute
thoroughly in building standards that
secures safety and stability as well asprivacy protection. I think it is importantfor government to contribute to industry
growth by evaluating and identifying theareas in which it should play a role andthose in which it should not, throughdialogues among private-sector firms
and between the public and private
sectors. We will use the framework ofJapan-U.S. economic dialogue for that
purpose as well.
— China, which has adopted adifferent approach than Japan andthe U.S., is a growing presence in
the APAC area.
I believe that we need to recognize thesituation thoroughly and discuss it inJapan-U.S. economic dialogue as well.
In the region, China has adopted the“One-Belt, One-Road” strategy, and is
deploying economic diplomacy using
methods that contributes to its own
growth and to the establishment andexpansion of its influence. Since the approach to cyberspace taken under theirstrategy includes some areas that are
not in alignment with open environment

promoted by Japan and the U.S. where
many countries can develop freely, I
believe we need to come up with an initiative to override this kind of approach
constructively. I think that is what’s truly
needed the most from Japanese andU.S. leadership right now.
—So is it important to promote
the TPP11 for that reason too?
The TPP is an effective framework notonly from an economic perspective but
also from the strategic one, considering
how we can apply the necessary rulesin the region facing the China’s growing
presence. In some cases, only having
bilateral agreements and arrangements
between Japan and the U.S. would
weaken its impact, and that is why
Japan is strongly promoting the TPP. It
may sound somewhat paradoxical, but
at the same time in order to strengthen
the bilateral Japan-U.S. alliance, Japanconsiders the multilateral TPP framework as a strategic and rational choice.
We plan to continue working hard toensure that the U.S. will understandthe importance of the framework forregional trade and investment that the
TPP aims to be.

ProfileYo Takaba
Born in Fukuoka Prefecture in 1972. Joined the Ministry ofForeign Affairs in 1995 after graduating from the Faculty of
Law of the University of Tokyo. Took current position in June
2016 after serving as principal deputy-director of the China
and Mongolia Division of the Asian and Oceanian Affairs
Bureau (2008-2011), counselor of the Japanese Embassy inAfghanistan (2011-2013), and director of the Office of theVice-Minister of Foreign Affairs, among other positions.

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Interview

A free Internet space supports
global economic growth
We spoke with Kazumi Nishikawa of the Ministry of Economy, Trade and Industry concerning measures to promote
the free flow of data across national borders and to stimulate
the economies of Japan and
the Asia-Pacific (APAC) region.

Then-Director for Trade Strategy,
Ministry of Economy, Trade and Industry

Kazumi
Nishikawa

12— There are concerns aroundrestrictions on free flow of data inforeign countries. Would you please
describe the background of these?
Digital and Internet have become basic infrastructure not only in Japan but
around the world. At the same time,in recent years increasing numbers ofcountries have taken steps such as imposing restrictions regarding transfersof data across national borders anddata localization. According to a survey
by the European Centre for International Political Economy (ECIPE), since2000 the number of countries implementing restrictions on data exchange
has grown fourfold. While their reasonsfor doing so vary, including concerns
on privacy, cybersecurity, consumer
protection, and law enforcement, such
restrictions are spreading from developed countries to emerging markets. In
response, both the Japanese and U.S.
governments have made efforts to halt
the spread of protectionism in the digital space.
—Specifically, what kind of effort
has the Japanese government taken?

The Japanese government and Japanese companies have joined with
the U.S. government and Americancompanies to raise awareness of theimportance of a free Internet space.
However, it is true that we lack in materials and evidence to demonstrate thereasons why the free flow of data is so
important to governments in emerging
markets. Data flows are not consideredin gross domestic product (GDP) statistics, and they are not included as monetary figures in international exchanges
such as trade statistics or the accountbalance. The best practices have notbeen shared with regard to the issuesof cybersecurity and privacy either. This
is why some governments believe thatthe government control of the Internet
will lead to increased cybersecurity.
Thus, the lack of a system to share
best practices and bad practices is amajor problem here.
The TPP’s e-commerce chapter is an
important achievement in rule making. In addition, emerging markets’
understanding of the digital economy
is advancing rapidly. One symbolic
example was the discussions at theRegional Comprehensive Economic
Partnership (RCEP). When negotiations
on the RCEP began, only a few Asian
countries were thinking seriously about
efforts to address e-commerce transactions, but now many countries havebegun calling for the creation of rules
on e-commerce because it is important for their SMEs to go global. I think
this was a result of continued dialogueduring the RCEP negotiation process
on how each country would benefit
from rule-making on e-commerce.
— How are emerging markets
accepting the effectiveness of thedigital economy?
I believe there is a gap between theactual efficacy and usefulness of digitaltechnologies in emerging markets andhow Japanese people imagine it. One
example that makes it easier to understand is the M-Pesa mobile banking

service in Africa that began during thefirst half of the 2000s. Mobile banking
spread explosively when central banks,
centered around Kenya, began providing the M-Pesa that integrated the mobile system and the payment system.
Later, M-Pesa developed a businessmodel that allows international payment
as well, and now it has expanded tocountries including India and the Philippines.
The reason why nothing similar developed in Japan was because it
already had services such as convenience-stores, ATMs, the bank payment
network, and credit cards, and did notneed a service like M-Pesa. Also in
China, in regions that lacked sufficient
infrastructure such as credit cards,
retail stores, distribution, and logistics,
the Alibaba business model grew explosively. These can be described as
growth models in the digital economy
that occur in parts of the world where
existing infrastructure and businesses
have not yet developed fully.
Today, in places like ASEAN and SouthAsia, rather than simply applying Japanese or American business models unchanged, more efforts are made to use
IT to leap over the lack of infrastructure
and the business environment. I believethat starting now, Japan needs to learn
from and work together on digital businesses and innovation taking place inemerging markets.
—What kinds of efforts are being
made to import such new businessmodels from emerging markets?
The other day, a report presented to
the Industrial Structure Council proposed a course of action for deploying
the regulatory sandbox (deregulation
effort temporarily suspending the current regulation) across sectors not onlyin the financial field alone. I think thiswill play an important role in introducing
business innovations from emerging
markets to Japan as well.
On the business side, Japan-affiliatedcompanies have begun collaboratingwith the ASEAN Business Advisory
Council, an organization made up ofbusiness associations from the 10
ASEAN member states, and the ASEAN Business Club, an organizationof business managers like the Japan
Association of Corporate Executives,in efforts to stimulate digital business-

Through active participationin symposia, workshops
and discussions around theworld, the Ministry of
E c o n o m y, Tr a d e a n d
Industry is enhancing
e f f o r t s t o w a rd p u b l i c private partnership inadvancing the digital
economy.

es and e-commerce, to propose new
businesses, and to formulate newpolicy recommendations. In this process too, Japan is learning about theperspectives of Asian businesses andsharing a sense of speed, in an attempt
to stimulate its businesses.
—What are your hopes and expectations for private-sector businesses in Japan?
Domestically, it is very important toenhance privacy and cybersecurity. As
cross-border data flow becomes more
active in the future, it will be vital todemonstrate internationally that privacy
is protected thoroughly.
One effective means of doing so is theparticipation in the APEC Cross-Border
Privacy Rules (CBPR) system led by
Japan and the United States. Participation in the CBPR system is a way todemonstrate not just to Japan but toall participating countries that a company protects privacy. I would like to
see private-sector companies to takeproactive steps such as participating insystems like the CBPR.
— Lastly, please tell us aboutpublic-private partnership efforts inpromoting the digital economy.
It is vital that the Ministry of Economy,
Trade and Industry and the Japanese
government firmly consider global
conditions and global business trends
when making new policies. As the Ministry of Economy, Trade and Industry
we would like to listen to views from awide range of businesses in the field,
including not only Japanese companies but also those from a wide rangeof countries and regions including theU.S., Europe, China and Asia. For
this reason, the Ministry of Economy,

Trade and Industry has taken part ininternational collaborations such as theWorld Economic Forum’s Center for
the Fourth Industrial Revolution in San
Francisco and strengthened its efforts
to participate proactively in symposia,
workshops, and discussions overseas.
Also, the Ministry of Economy, Tradeand Industry has begun efforts to analyze the economic impacts of data incooperation with the Research Instituteof Economy, Trade and Industry (RIETI)
and is working on a project to analyze
data localization regulations with ECIPE. Each of these projects is an attempt to work together with businesses
and experts around the world and touse information in the world, instead ofstaying entirely inside Japan. I would
encourage any organizations or business people interested in these projects
to contact the Ministry of Economy,
Trade and Industry.

ProfileKazumi Nishikawa
Joined the Ministry of International Trade and Industry
in 1996. Prior to taking his current position, served in the
Defense Policy Division of the Defense Agency, the Multilateral
Trade System Department, the Finance Division of the Smalland Medium Enterprise Agency, and the Minister’s Secretariat
Policy Planning Committee, Special Assistant to DirectorGeneral of the Industrial Policy Bureau, as Executive Director,
JETRO Singapore, and in other posts. Responsible for drafting
trade strategy and globalization of industrial policy.

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Industry Voice
Companies around the world engaged in data-driven
businesses and reflecting trends in the digital economy
The progress of the digital economy has generated opportunities for companies around the world to succeed in
global markets, by breaking down various barriers between businesses or across borders. This section introduces
various voices of the private sector from different industry categories, countries, and scale of businesses: the U.S.
construction-equipment manufacturer Caterpillar, which was quick to ascertain the trend and shift course toward
becoming a digital company; New Zealand Tech, whose country has capitalized on the advantages of its small size
to advance digitalization on a nationwide scale; and Sendo, which operates an e-commerce site that is generating
continued rapid growth in Vietnam—one of the world’s leading mobile markets.

Sendo Joint Stock Company

DigitalBusiness
RaisesStandard of
61歳で起業、ジョブズと直接交渉しLivingin Vietnam
アップルへ会社を売却
In this interview, Trai Hai Linh, CEO of a start-up business which operates the
popular Vietnamese EC site called “Sendo.vn” was asked to give his insight
into digital business conditions in Vietnam.
In Vietnam, even though approximately
half of the total population of 94 million
is using the Internet, it is considered
to be a mobile powerhouse with apenetration rate exceeding 50% andthe number of sim cards being issued
reaching numbers in excess of the total
population. The man behind the management of the EC site, “Sendo.vn,”
that boasts a large share in Vietnam is
Mr. Tran.
“In Vietnam, there are a significant
number of people with mobile devices
even though they may not have a TV or
PC. Mobile penetration is helping bringsuperior products, information and education to people not only in major cities
like Hanoi and Ho Chi Minh but also inregional areas,” said Mr.Tran described
the current situation in Vietnam.
“Sendo strives to improve the qualityof living for middle-class people. The“Sendo.vn” operation currently has
more than more than 120,000 merchants and 10 million users selling andbuying everyday products. With thedigitalization of livelihoods, Sendo is tripling its growth every year and we still
have the potential to continue growing.”
The APAC nations including Vietnam
are the engine that drives the economyof the next century. The key factor of
their growth is digital. For enterprises inemerging countries to be successful,they must utilize platforms and technologies including the cloud, big data andAI (artificial intelligence) and collaborate
in partnership with other digital experts.
“Free and borderless data exchange isa prerequisite for this business. If theSendo Joint Stock Company
CEO

Tran Hai Linh

ProfileHe has held his current position since 2014 after astint as a national general manager of a computer
manufacturer and CEO of an e-payment enterprise.
He also has a deep relationship with Japan.

14Internet access from Vietnam to othercountries were interrupted or slowed
down, not only would “Sendo.vn” face adecrease in sales but also the features
themselves that the site offers would
suffer significant damage,” said Mr.
Tran. For example, “Sendo.vn” offers
advertisement tools for merchandisers
to attract customers to their products.
For the indispensable parts of this tool,such as automation and data analysis,
the site has partnerships with enterprises that are experts in their fields. "Interruption of data exchange would freeze
these partnerships and negatively impact our business,” Mr. Tran points out.

Ideally Digital Business Should
be Led by Private Sector
Not limited to Sendo, a number of
medium and small size enterprises in
APAC implement their business while
maintaining partnerships with various
companies in the fields of cloud, bigdata analysis, marketing automationand so on. Mr. Tran, therefore, insiststhat the entire digital business must beconnected as a whole.
Cross-border data flow and cooperation between various enterprises reduces business costs and brings about asignificant number of benefits to consumers and business partners. All thisassumes the safety and security of theInternet; a reliable infrastructure mustbe established. Administrations needto provide guidance and rules thatshow us how data should be handled
to achieve security instead of restricting data exchange in order to protect
privacy and security. Ideally, the private
sector should voluntarily facilitate theirown efforts, and administrations should
promote a policy that does not interrupt

Vietnam’s largest-class EC “Sendo.vn:” https://www.sendo.vn/

Caterpillar

Theworld’s largestジ
manufacturerof general construction
61歳で起業、
ョブズと直接交渉しmachineryadvances reforms toward becoming“Smart Iron”
アップルへ会社を売却
Famous for its construction machinery in use in places like construction sites andmines worldwide, Caterpillar is effecting a bold transformation from its traditional
manufacturing business to become an advanced firm utilizing digital technologies.
Caterpillar, a general manufacturer of
construction machinery with a history
spanning more than 90 years, now istransforming itself into what aptly could
be called a digital company.
Megumi Tsukamoto of Caterpillar
explains, “Although it’s not very wellknown, our digital initiatives have been
progressing for quite some time.” Beginning about 15 years ago with theuse of GPS technology to ascertain thelocations and operating conditions ofmachinery, since then it has collected awide range of data and analyzed it for
ERP purposes through various initiatives including equipping its machinerywith onboard technologies to sense allits operations and movements, operator
performance measurement, safety systems that stop the machinery automatically when it gets too close to people,
and use of onboard cameras to ascertain operators’ physical conditions fromthe irises of their eyes. Furthermore,its 3D construction machinery capable of loading 3D design data enables
high-precision construction work on
civil-engineering sites.

Ms. Tsukamoto says, “The advantagesof digital construction include quality
improvements thanks to precise construction work, shortened working
hours thanks to eliminating the needfor inspection and measurement after
completion of construction work, costsavings from shortening the hours themachinery is in operation, reducing
operator fatigue, and improving safety.
In addition, semi-automatized construction machinery helps to alleviate labor
shortages by enabling even less-experienced workers to carry out high-quality
civil-engineering work.”Thanks to the trademark yellow colorof its machinery, Caterpillar has cometo be known as “Yellow Iron.” However,
the headquarters in the United States

data exchange.”
Sendo is a company enjoying a deep
relationship with Japan, stemming fromwhich it receives funds from Japaneseenterprises including SBI Holdings. Mr.
Tran himself visits Japan every year.
“Japan has many advanced businessmodels such as EC, e-payment, FinTech, IoT from which Vietnam canlearn many things. Some of these
Japanese business models are 5 to 10
years ahead of Vietnam, and we would
be greatly indebted to Japan if such
advanced business models and experiences were transferred and shared withus,” Mr. Tran talks of his expectations
regarding Japan.

has declared that it would aim to become “Smart Iron” as it prepares forthe next 100 years, by advancing useof digital technologies.
Ms. Tsukamoto says, “Today, when theterm ‘technology’ is used within thecompany it generally refers to digitaltechnology. This tendency is so strongthat it’s difficult to get a new budget
request approved if it does not incorporate digital technologies. One of theimportant goals of relocating the head
office to Chicago in 2017 is the ability
to secure human resources well versed
in digital fields, such as data scientists
and IoT experts.”
Caterpillar also has a proactive approach toward alliances as well as
mergers and acquisitions (M&As) withdigital startups. Examples include
development of a digital platform in

Director, Government & Corporate Affairs

Megumi Tsukamoto

ProfileAfter a career in marketing and other fields with IBM
Japan, Ltd., Ms. Tsukamoto was seconded to theJapan Association of Corporate Executives. She
later returned to IBM, serving in concurrent positionsat its global headquarters and its subsidiary inJapan. In November 2015 she joined Caterpillar.

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partnership with Uptake of Chicago
and the start of a brand-new service toshare unused construction machinery,
like Airbnb, by acquiring Yard Club of
California.

Collecting and putting to use datafrom across national borders is
the lifeline of business
Caterpillar employs Big Data analysis byhaving its local dealers gather data on
machinery in use around the world andcollecting this data at its U.S. headquarters, using the results in improving
the precision of preventive maintenanceas well as product development andother uses. Its promotional campaign
involving guaranteed fuel efficiency forconstruction machinery, which has generated a high degree of interest since
being introduced in Japan recently, alsobegan from analysis of data on past
operation of tens of thousands of unitsof construction machinery.
Ms. Tsukamoto stresses, “Collection ofdata across national borders is a fundamental part of our business, and astoppage of the flow of data would befatal. If the flow of data were to be divided, then the affected country would
face the risks of being unable to receive
advanced services, falling behind incompetition, and suffering economic
disadvantages as a result.”
She says that Caterpillar also sees
exchange of data across the boundaries between companies as being important. This is because machinery andequipment from other manufacturers
are used on civil-engineering and con-Caterpillar http://kenkipro.com/

struction sites. She notes, “It’s impossible to improve productivity and safety
without sharing data among thesepieces of machinery. To promote suchexchange, we are cooperating with other companies to develop frameworks
to enable data linkage.”
Ms. Tsukamoto says that since the
Ministry of Land, Infrastructure, Transport and Tourism introduced the i-Construction concept, awareness of digitaltechnologies has advanced throughout
the industry, and this has led to considerable results. At the same time, shepoints out that one general concern
is the possibility that the high degreeof compliance consciousness in Japan could lead to restrictions on thebreadth of innovation as companies
strive to comply fully with government
policies.
She comments, “Isn’t it the case that indigital fields growth can be accelerated

by first encouraging the private sector
to take on challenges by leaving things
to their own free thinking to some degree, while the public sector discusses
matters either simultaneously or ata later date? In advancing the digital
economy, through now IT firms havetaken the initiative in making proposals
to government, while companies like
Caterpillar centered on digital users
have not had much involvement in theprocess. However, today we too havebecome a digital company, and webelieve that in the future we will needto create more opportunities for communicating to government the views of
those in the industry, on topics such as
the kinds of policy improvements thatwould make it easier to do business.”
She believes that promotion of thedevelopment of such an environment
should lead to innovation in the construction machinery industry.

NZTech New Zealand Technology Industry Association Inc.

New Zealand’s industrial organization“NZTech” was originally set up as anindustrial organization for technology
enterprises. As digital technologies are
utilized across the traditional industrial
boundaries, the organization has transformed itself into one of the nation’slargest organizations in which many
companies from various industries
participate. Graham Muller, who is thechief executive of NZTech, talks about
the organization’s involvement in thehistory of this revolutionary project of
New Zealand in this interview.
“Until two years ago, the New Zealandgovernment was not necessarily inter-

New
Zealand Aiming
theWorld’s Most
61歳で起業、ジョブズと直接交渉しThriving“Digital Nation”
アップルへ会社を売却
The New Zealand government aims to become a “Digital Nation” that incorporates digital technologies with industry participations to foster its economic and social development.
New Zealand has set a goal to become a “Digital Nation” that improves
productivity and living standards byincorporating digital technologies into
all fields including business, agriculture,16

trade, education, medicine and government administration. The country
has been promoting such a large-scale
project through public-private partnerships.

ested in a digital economy. The members of NZTech naturally felt a sense ofcrisis that New Zealand would be left
behind in the world’s rapid transformation to a digital economy if the situation
continued. To avoid this, we publishedthe results of a comprehensive 12month study in a large report thatpointed out the indispensable nature ofa digital economy and inadequacies inconventional policies. We advocated forthe legal revisions working with related
authorities and member companies
and submitted a proposal to the government in 2016.”
By building allies in the private sector
and government authorities, we can saythat NZTech has successfully cultivatedan environment where the importanceof a digital economy is recognized andagreed upon. As a result, within a few
months after receiving the proposal,
the government announced its specific goals to become a “digital nation.”
New Zealand declared the possibility of
becoming the most prosperous “digitalnation” precisely because of the nation’s compact scale.
The government set four concrete targets to establish the foundation of a“digital nation;” Skills (creation of laborwith technical abilities for a digital economy), Connectivity (providing fast andaffordable infrastructure to the entire
population), Security & Privacy (construction of a safe and secure Internet
environment) and Regulations (establishment of a framework that enables
free flow of data regardless of the industries), and started to take actions to"Digital Nation” portal site operated by NZTech: http://www.digitalnation.nz/

realize these targets.
What would be the New Zealandgovernment's stance on free andcross-border data flow?
“Until a few years ago, the New Zealand government had insisted that data
must be located within the country. It
was especially inconceivable for themto have data such as the nation’s financial records placed in cloud. However,after formally conducting a detailed
study of the Ministry of Finance's data,
the government came to find out thatfor the majority of the data there wereno significant issues even if the data
being viewed by anybody. Rather, theycame to the conclusion that it would be
more secure if the data was managed
by globally operated cloud service
companies instead of storing it on thegovernment’s servers and PCs. Avoiding data localization and promoting
active utilization of cloud is the current
basic policy that the government has,"
Mr. Muller explains the New Zealandgovernment’s policy strategy.

For the APAC Nations to Prosper fromthe Benefits of a Digital Economy
Having an extremely high share ratio ofinternational trade in its economy, the
New Zealand government launched a
New Zealand Technology Industry Association Inc.
NZTechChief Executive

Graham Muller

ProfileHe has held his current position after working as amarketing director for multiple sectors and regions,a t e c h n o l o g y & b u s i n e s s re s e a rc h e r, a n d amanagement consultant. He currently advocate forthe impact technologies have on the economy.

plan called “TRADE AGENDA 2030”
that provides guidance to secure thebest business deals over the next 1015 years in the midst of a continuously
changing global economy. This agenda
also includes the government’s policy
on a cross-border digital trade.
“The major part of the nation's trade
until now has been customable products such as daily goods and agricultural products. However, we need topromote a digital trade agreement tosecure custom-free data flow in the future. The growth of digital trade is oneof the main policies listed in “TRADE
AGENDA 2030,” said Mr. Muller whosits on the Ministerial Advisory Board
for Trade to help drive “TRADE AGENDA 2030.
We asked Mr. Muller about the role
Japan should play in the APAC region
to prosper from the benefits of a digital
economy.
“For the economic development of the
APAC region, free flow of data, information, talent, financial resources, andintellectual property will be the crucial
factor. Free flow of data will lead to the
4th industrial revolution, bring about
benefits not only to its own country but
also to its trade partners, and create avirtuous cycle encompassing the entire
APAC economic region. As witnessedin Japan leading global technologicaldevelopment in the 3rd industrial revolution based on manufacturing in thepast, I would like to see Japan also
exhibits its leadership in the forthcoming 4th industrial revolution,” Mr. Muller
explains his expectations of Japan’s
leadership.

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Special Dialogue

Japanese and American leadership needed
to promote the digital economy
Toshinori Kajiura of the Japan Business Federation (Keidanren) and Yoshitaka Sugiharaof the American Chamber of Commerce in Japan (ACCJ) — cosponsorsof the U.S.-Japan Internet Economy Industry Forum held in Washington, D.C. in April 2017,
in which representatives of industry and government from both countries took part—talked
about the Forum’s outcomes as well as Japanese and American leadership in the digital economy.

Japan Business Federation (Keidanren)

Toshinori KajiuraCommon understanding between
U.S. and Japan on the digital
economy, confirmed through the
Dialogue
Kajiura: It is without any doubt now
that digital technology drives theworld’s economy, and the dialogue at
the Forum confirmed the fact that useof data is especially critical in it. Japanese and U.S. industry would like toraise the level of the global economy
as a whole by informing that the datautilization contributes to productivity
improvements and innovation to more
and more countries. Today, data is the
lifeblood of the economy, and if any
country were to close itself to flows ofdata it could lead to the necrosis of thatcountry as a whole.
Sugihara: Today, all businesses, including those engaged in manufacturing and distribution, have adopted
digital technologies. It is a sharedunderstanding among both Japaneseand American industries that inclusion
through the use of IT is essential forcompanies to improve their service levels in the future. To realize this, there are
four important points; privacy, cybersecurity, Internet governance in a broader
sense, and digital trade. Both countries
recognize that for a topic of privacy it
would be a beneficial solution to havemore economies adopt the Asia-Pacific
Economic Cooperation (APEC) Cross
Border Privacy Rules (CBPR) system.
While there is a concern on what would
happen with the CBPR since the new
U.S. administration has announced
a policy not to enter into multilateral

American Chamber of Commerce in Japan

Yoshitaka Sugihara

agreements, Commerce Secretary
Ross has indicated that U.S. continues
to promote the CBPR based on theunderstanding that it would be impossible for them to conclude 150 separate
agreements with 150 different countries. In the area of cybersecurity, Japanand U.S. continues to discuss to sharea framework proposed by the National
Institute of Standards and Technology(NIST) about three years ago. For othertwo items, I believe that Japan and the
U.S. should work toward mutual understandings and collaborate.

Aiming to become the world
leader by utilizing each other’s
strengths in new horizontally
specialized businesses
Kajiura: With the progress of artificial
intelligence (AI) and the internet ofthings (IoT), industries that had nothing
to do with digital technologies until now
are forced to become integrated into
the digital economy. This will result ina shift from vertically integrated to horizontally specialized businesses. After
shifting to a horizontally specialized‘millefeuille’ structure, all companies willneed to think about the layers at which
they should survive. I expect that the
automotive industry, which has a broad
supporting base, may be faced withsuch a reality. While the discussions at
the Industry Forum did not dive into thissubject in such depth, I believe we all
expect such a future to come.
Sugihara: The digital economy willlead to a paradigm shift from operating as a single company or a verticallyintegrated organization within Japan
into Japanese and American firms“In the digital economy,business is shifting
toward horizontal
specialization ”
Acting Chair, Sub-Committee on Information andTelecommunication Policy,
Japan Business Federation (Keidanren)
Chair, Cyber-Security Working Group,

Toshinori Kajiura(Senior Researcher, Hitachi, Ltd.)

integrating their mutual strengths tobecome world leaders. Taking a lookat the whole industry, at the forefront ofindustries where both Japan and U.S.
already have industrial competitiveness,there are many areas where the twonations complement each other, and I
think proceeding with such an integration would lead to a win-win situation.
I think it would benefit the U.S. as well
if it takes the leadership in the digital
economy together with Japan.
Kajiura: While the new U.S. administration has advocated protectionist
policies, a look back at Japan’s policies shows that no companies havesucceeded by being protected as anindustry. I think this is an understanding
and the logic shared around the world.
Today, when the world has become
smaller as a single entity, it is in my view
that, as a matter of fact, the only way tosurvive is to be the best in the world. In
the old days, IBM was the world leader
in computers, and we at the IT divisionof Hitachi used to say “we can aim tobe the number one in Japan, even if wecannot be so in the world”. Such a logic or a way of thinking no longer works
today.

The thoughts behind the Joint
Letter prepared as the outcome of
the Forum
Kajiura: Japanese industry has continued to stress to the government theneed to give digital industries a higher
degree of importance in negotiations.
This was the intention behind submitting A Letter to the U.S. and Japanese
Governments and bringing it to the“Prosperity thrives whenvarious companies
work together acrossborders. ”
Chair, Internet Economy Task Force,
American Chamber of Commerce in Japan

Yoshitaka Sugihara(Head of Public Policy and Government Relations, Google Japan)

meetings between Vice-President
Pence and Deputy Prime Minister Aso
as well as those between Commerce
Secretary Ross and Minister of Economy, Trade and Industry Seko. I thinkthat A Letter to the U.S. and Japanese
Governments submitted this time was
the shortest summary that expresses
issues (agenda and topics) between
Japan and the U.S. in international
negotiations and our request to give
digital agenda a high political value as
an area of partnership.
Sugihara: In addition to emphasizing, in extremely concise terms, theimportance of the digital economy inJapan-U.S. policy dialogue, A Letter tothe U.S. and Japanese Governments
also refers to the importance of theroles to be played by Japan and the
U.S. in the Asia-Pacific region and theworld in developing Internet environments and related policies that support
the success of the digital economy.
While the U.S. government’s policy
lacks a multilateral approach, somebody needs to fill in the gap in theleadership. Under such conditions, I
think Japan is the only nation that candemonstrate leadership in promoting
the growth of the digital economy.

The leadership that Japan should
demonstrate in the APAC region
Kajiura: I think Japan’s leadershipin the Asia-Pacific (APAC) region will
be based on the support for humancapacity development and education.
I believe teaching people the literacy
needed to use IT and increasing thenumbers of IT talents will prove to bebusiness opportunities and foster economic cooperation, joint development,
and joint businesses. In the past, official
development assistance (ODA) was
not effective because it only built thedam itself and didn’t train people for its
operation. To avoid repetition of such asituation it is essential to help local people being able to do the operation. I believe such an educational support for IT
talents is the area in which Japan candemonstrate its leadership the most.
Sugihara: Japan has earned a degreeof trust thanks to the various aid andinterpersonal exchange programs it has
implemented in Asia. I believe that onerole Japan should play is to present a
vision of the future to people in Asia
leveraging such trust. There are two
choices available in Asia’s development.
One is to protect the local industry
through restrictions such as server localization. The other is to implement an
open approach to steadily incorporate
the best from the world and deliver services and products to the world in the
new business domains. People in theprivate sector and government in Japan
with better understanding of the future
are trying to adapt to the new economy
through various means including open
innovation. I think communicating suchan experience of success or the difficult
decisions you had to make after toughdeliberation to countries in Asia to gain
more trust and support and working
together with companies from various
countries will lead to the prosperity of
APAC region.
Kajiura: It long has been said thatJapan is the first country to face various social issues. However, it cannot
be said that Japan has resolved all of
those successfully. The greatest issue inrecent years has been the shortage ofhuman resources. The number of companies going bankrupt due to a shortage of human resources has reached a
new record high, and as they face thepossibility of being unable to continue
their businesses, companies that haveavoided adopting digital technologies
until now because they did not seemsuited to their operations can no longer
stick to that attitude. I think that Japan
can take leadership by first applying
digital technologies to solve its own human-resource shortage problem, also
through Japan-U.S. international cooperation, and then by proposing such amodel to the APAC region.

* A Letter to the U.S. and Japanese Governments (tentative Japanese translation)http://www.keidanren.or.jp/policy/2017/031.html

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