Japan Ahead 2April 2018

How This Set of Recommendations Is Positioned➢ Japan Association of New Economy announced “JapanAhead” in 2015 as a proposed basic economic policy.
➢ Its revised version has been mapped out this time around on
the back of developments since the announcement, including
progress in government response and new global trends.
➢ Association set to come up with specific and individual
proposals in the future to realize the basic economic policy.

11. Perception of Historical Backgrounds~ What Is Taking Place in the World Now? ~Global Structural Changes ~ the World in 2050 ~➢ Japan’s rank of purchasing power parity-based GDP: 4th in 2018→8th in 2050
➢ China & India: 2 biggest economic powers (accounting for 35% of global GDP in 2050)
Emerging markets will dominate the world’s
top 10 economies in 2050 (GDP at PPPs)

China

China

USIndia

India

USJapanIndonesia

Germany

BrazilThe US and Europe will steadily lose ground to China and India.
Share of world GDP (PPPs) from 2016 to 2050...

China
USEurope

RussiaRussiaBrazilMexicoIndonesia

JapanUK

Germany

FranceUK

India

Source: IMF (2016 estimates), PwC (forecasts for 2030, 2050)

G7: US, UK, France, Germany, Japan, Canada, Italy
E7: China, India, Indonesia, Brazil, Russia, Mexico, Turkey

Source: Extracted from PwC report of May 2017 “The longview: how will the global economic order change by 2050?”

3

Projected increase in volume ofinternational digital data

(1 zettabyte=1021 bytes)(1 exabyte = 1018 bytes)

Source: Report by “ICT kotozukuri Discussion Panel,” Ministry of Internal Affairs & Communications

10

Smartphone
Augmented reality(AR)

BlockchainDrone

Virtual reality (VR)SocialRevolution

RobotMachinetranslation
Automateddriving

Wearable device

Nanotechnology

Human genome
decoding

iPS/Regenerative
medicine

Internet of Things (IoT)

Human bodycommunication device

Sharing economy
3D printerAI Revolution
AI technology is developing rapidly and constantly calling forth a completely new future in our business and social
lives which is not an extension of our past.
For instance, business decision-making using sentence and image analysis technology and the use of AI insupporting customer service operations are becoming commonplace.
AI will increasingly penetrate into our society in various scenes including medical and legal decision-making,
optimization of large factories, and customer services using robots equipped with AI.

Connected World
It is not AI alone that is on the list of evolving technologies. The IoT, or the Internet of Things, is another example.
It enables each and every thing to be connected via the Internet. Moves to connect house keys, microwave ovens,TVs, etc. with the Internet are already underway. We are going to enter an era when clothes and shoes we wear,
food and drinks, animals and plants, and we human beings themselves are linked through the Internet in the future.
These are combined with AI to create a society where everything connected with the Internet is controlled in an
optimal manner and “what we need is on hand at the right time and as much as necessary while everything is safer,more convenient and more comfortable.”Social system
Revolution
From the Owned Economy

To the Sharing Economy

Blockchain

Bitcoin

Blockchain is another example of disruptive new technologies.
Virtual currencies such as bitcoin use this technology, but its application goes beyond these.
For instance, it is said that blockchain can replace various systems created as means to ensure the reliability oftransactions such as registration, accounting audit, ratings, electricity trading and voting.
This may redefine how companies operate and what the government should be in the future.

Japan Has Potential, Tokyo Ranked 3rd

Source: “Global Power City Index YEARBOOK 2017,” Institute for Urban Strategies, Mori Memorial Foundation

10

What Japan Is Required of➢ Only countries that are quick to have systems matching social
revolution put into shape can survive (an era of competition
between systems)➢ Japan cannot survive as a country without promptly
addressing the issue of fewer children & aging population➢ Team Japan comprising Japanese nationals alone cannot win

11

2. Our Vision of Ideal Economic Society

12Necessary to Cause Innovation in Japan➢ With their industrial structures transformed, U.S. and Chinese companies utilizing
data dominate the world, rapidly weakening the presence of Japanese firms.
➢ Japan has not made much progress yet in the transformation of its industrialstructure.

1
2
3
4
5
678
910

Rankings of global companies’ market capitalization
End of 1997
Sept. 29, 2017
General Electric (US)Apple (US)Coca-Cola (US)Alphabet (Google, US)
Microsoft (US)Microsoft (US)Exxon Mobil (US)Facebook (US)NTT (Japan)
Amazon.com (US)Merck (US)Berkshire Hathaway (US)Royal Dutch Petroleum (Netherlands)
Alibaba Group (China)
Intel (US)
Tencent (China)
Philip Morris (US)Johnson & Johnson (US)Toyota Motor (Japan)
Exxon Mobil (US)
Source: Extracted from Nikkei newspaper article dated Oct. 1, 2017

Rankings of Japanese firms’ market capitalization
Rank

12345
678910Dec. 5, 1996

NTT
Toyota MotorBank of Tokyo-Mitsubishi
Sumitomo Bank
Dai-Ichi Kangyo Bank
Fuji Bank
Industrial Bank of JapanSanwa Bank
Matsushita Electric Industrial

Nomura Securities

Market capitalization(1 tril. yen)Oct. 11, 201713.2 Toyota Motor
12.2 NTT
10.5 SoftBank
6.1 MUFG Bank
5.7 NTT DOCOMO
5.5 KDDI
5.4 Japan Tobacco
5.2 Keyence
4.2 Japan Post Bank
3.6 Nintendo

Source: Extracted from Nikkei newspaper article dated Oct. 11, 201713

Market capitalization(1 tril. yen)

22.6
10.9
10.5
10.2
10.1
7.6
7.4
7.3
6.3
6.2

Our Vision of Ideal Economic Society

Innovation powerhouse➢ A society that thoroughly allows the private sector to do
whatever it can, ensures free economic activities, andminimizes regulations➢ A society where failures are tolerated, and one is given
another try➢ A society abounding in diversity➢ A society where information is fully disclosed to thepublic, and fair credit & evaluation are given by diverse
methods based on every bit of visualized information
14

3. Our Goals & KPIs to Be Pursued

15

Policy Goal: Generate ¥150 Trillion or More from Three Pillars

Japan Ahead 2¥150+trillion or More(=approx. 1.4 trillion USD / 1.2 trillion EUR, as of 2018.5)

KPIs

Intelligent Hub concept

Cutting-edge Society
Smart Nation

Address the population decline
and labor shortage issues

Turn Tokyo into
Silicon Valley

Sharing economy
Digitalization

Immigration policy

E.g. market size of the sharing
economy, ratio of cashless payments

E.g. Immigration target
Annual number of inbound tourists
Annual spending of inboundtourists

E.g. Effective corporate
tax rate,
new business entry rate16

List of KPIs of Planned Measures (1)PlannedmeasureKPIs (examples)
Foster Japan-originating next-generation corporate leaders likeToyotaCurrent
value

Targetvalue

Birth of 20 tril.
None* Toyota 19 tril. yen company
yen, SoftBank 10in market
tril. yencapitalization

English ability (average ＴＯＥＦＬ score)(1)
No. of foreign firms transferring head offices/Asian HQ to JapanIntelligent
Hubconcept Effective corporate tax rate
New business entry rate
Ranking of “legal system on ICT,” IT competitiveness rankings,
Global Competitiveness Report, World Economic Forum
Balance of internal investment by foreign companies

71

80

10/year29.97%(29.74% from Around 20%
FY 2018)

5.2%(2015)
27th(2016)24.4 tril. yen(end of 2015)

10% range
within
top 1050 tril. yen（*）(*) Existing government target is 35 tril. yen by 202017

List of KPIs of Planned Measures (2)Plannedmeasures

KPIs (examples)
Size of sharing economy market(2) Cuttingedge
society:
Administrative procedures made online in principle
SmartNation
Ratio of cashless payments

Immigration target(3)
Population
decline &Annual number of inbound tourists
labor
shortageissuesAnnual spending by inbound tourists

Current
value

Targetvalue

1,180 bil. yen

10 tril. level(2025)(InfoCom Researchsurvey, 2016)

100% inprinciple(FY2020)
18%(2015)

90% within
3 years(Ref.) Foreign Set by basic
residents’ ratio ofimmigration
populationlaw
1.9% (end-2016)28.69 mil.
persons(2017)

100 mil.
persons(2030) （*）

4,416.2 bil. yen(2017)

30 tril. yen(2030) (*)(*) Existing government targets are 40 million persons, 8 trillion yen by 2020.

18

4. Details of Specific Measures19

4-1. Intelligent Hub Concept~ Turn Tokyo into Silicon Valley ~26

Silicon Valley Ecosystem

Stockmarket(IPOs)•

Diversified talent, presence of mentors•

Talented people gather from around the world

50% of business founders are immigrants (*1)

Venture capital

Angelinvestors

Silicon Valley
Venturebusinesses

Universities(Stanford, etc.)

Hightechnology

Professional
services

66% of workers engaged in jobs related tocomputers/math are foreigners (*2)

•Culture that admires start-ups•

Legal environment easy to dobusiness•

Partnership between universities &venture businesses(*1) Research in 2015 by Mr. Richard Florida of University of Toronto. Immigrants are core members at more than half of all venture companies launched in Silicon Valley in the past 20 years.
(*2) Data from Joint Venture Silicon Valley report “2018 Silicon Valley Index”

21

List of Detailed Measures
Plannedmeasure

Specific measures(1) Flow talent, wisdom, money toward Japan(2) Reduce corporate tax (to around 20%)

Intelligent
Hubconcept(3) Support innovation/start-ups(4) Put into place environment of workstyle competitive& globally applicable(5) Nurture globally competent talent(6) Promote corporate philanthropy to return profit tosociety
22Specific Measures: Genuinely Competitive and Global-Standard Workstyle➢ Uniformly tightening regulations to control long working hours alone
will not prepare us for a new era and will reduce Japan’sinternational competitiveness.
➢ The system should center on performance-oriented, professional
workstyle.
Shift and redefine the overall lifestyle to a new knowledge society.
➢ To achieve the above, it is necessary to examine various systems
including the existing labor laws and social security system fromscratch.
We will make specific proposals for this purpose.
* Our Association has established corporate categories such as venture company and knowledge-society company andhas been proposing that companies falling under these categories establish a new, flexible working hour system on anindividual company basis to which work hours, holidays, breaks, and penalty rates are not applied.

23

4-2. Cutting-edge Society: Smart Nation

26

交通・輸送生活・行動

電力

ショッピング

Toward the World’s No. 1 “Most Advanced Society: Smart Nation”
メディア

トラベル

国境・国家

教育・学習

マーケティング

医療
出版

金融
通信・コミュニケーション

11

List of Detailed Measures
Plannedmeasures

Specific measures(1) Build digital-first society(2) Promote cashless society(3) Put into shape personal/corporate/administrative data infrastructure(thorough use of Individual number system, etc. & completion of data infrastructure)

Cuttingedge
society:
Smart
Nation(4) Promote sharing economy(5) Make administration smart on government’s own initiative & reduce
administrative costs(6) Promote “xxx tech” in demonstration tests (using special zones,sandboxes, etc.)(7) Design systems/institutions matching new economy(8) Fair regulations/taxation for both domestic & overseas companies(9) Nurture talent specialized in IT/AI26

Specific Measures: Fair Regulations and Taxation for
Both Domestic and Overseas Companies➢ Ensure fairness in terms of taxation and regulations to enable
domestic companies to compete with overseas companies
under the same conditions in the era of cross-border economy.

Taxation・Handling of the base erosion andprofit shifting (BEPS) issue

Regulations
・Achieve the extraterritorial application andappropriate enforcement of regulatory laws
and ordinances for overseas companies
providing services to Japanese residents

Organize an act for collectively preparing
relevant regulatory laws and ordinances*・In principle, make the extraterritorial application of
all laws/ordinances a norm.
・Organize enforcement rules/structures*Current examples
Under the Act on the Protection of Personal Information of Japan, thePersonal Information Protection Commission is not authorized to give orders
to overseas companies and does not enforce penal provisions.
There is no extraterritorial application of the Travel Agency Act andTelecommunications Business Act.

27

4-3. Response to Population Decline & Labor Shortage Issues

26

List of Detailed Measures
Planned measures

Specific measures(1) Discuss immigration policy head-on
Response topopulation decline &labor shortageissues* Measures to address demand
shortage/market shrinkage
stemming from population
decline, etc., insufficient supply
system due to labor shortage,etc.

(2) Reform social security system(3) Promote use of sharing economy such as crowd
delivery & ride sharing(4) Super tourism-oriented country29Specific Measures: Discuss Immigration Policy Head-on■Consider establishing a basic immigration law■Consider setting an immigration target■Actively receive immigrants who are not skilled immigrants or not in
professional, technological areas■Accept immigration of those requiring humanitarian consideration such as
refugees■Examine citizenship based on the place of birth in relation to Japanesecitizenship[Reference] Ratio of foreign-born population invarious countries (OECD survey)

US 7%; UK 7.7%; Germany 9.3%; Estonia 16.1%;
Switzerland 23.3%; Japan 1.9%
(The figure for Japan was as of the end of 2016 andthe figures for others were as of 2013.)

30