Male hikikomori on left using VR headset
Screen down the middle
On right bubbles with the hikikomori doing diﬀerent things in female avatar form
On a date
Going to the doctor
In a classroom
In a work setting (checking items oﬀ a clipboard in factory??

Well Metaversed
The Japanese company leading
the march into virtual reality

The Japanese word hikikomori made its appearance asa loanword in the Oxford Dictionary of English in 2010.
It s a term to describe individuals who may live in bustling
towns and cities, but choose to become recluses,
shunning all social contact and rarely venturing outside
their own homes or even bedrooms.

Mobile communications giant NTT Docomo, which isdeveloping its own XR technologies, invested $57 million in
Hikky in a Series A funding round in November 2021. The
following year, Hikky signed a partnership deal with MediaDo, the biggest player in Japan s ebook distribution
market.

One theory holds that Japan s social and economic
issues today ‒ rapidly aging society, collapsing birthrates, and ballooning government debt ‒ are harbingers
of what s to become more pronounced in other advanced
economies. So with Japan s government having appointed
a minister with a portfolio to deal with hikikomori lonelinessand isolation, what is behind the phenomena and how is it
being dealt with?

The votes of conﬁdence chime with the Japanese
government s buy-in to the metaverse as a way todeal with socio-economic challenges, including how
to bring 1.5 million hikikomori back into the nation s
workforce. Lifetime losses of hikikomori contributions to
the national economy are estimated at $2.4 trillion,
with an additional loss of unpaid taxes of $27 billion.

The word is derived from Japanese characters describing
being pulled inward or conﬁned and has been linked totrends noted some decades ago in Japan where larger
numbers of children started refusing to attend school,
which was in turn linked to extensive peer pressure andbullying.
A 2023 government survey estimated there are now 1.5
million people in Japan living as hikikomori. Thattranslates into 2% of the working-age population (15 to64 years old) and as a result has attracted widespread
scrutiny. As indicated, it s now not just a Japanese issue.
Other countries report similar signs of the so-calledʻHikikomori Syndrome.ʼ
If hikikomori reject all social contact in the real world,
would they feel diﬀerent about contacts in the virtualworld? Thatʼs a question a Tokyo-based metaverse services
company ‒ appropriately named Hikky ‒ is seeking to answer.
Hikky began life in 2018 as the brainchild of thecompany s Chief Virtual Oﬃcer, who goes by the moniker
Phioʼs Moving Castle. Phio is a self-described hikikomori,having suﬀered from social phobia after a struggle withdepression.
Phio began experimenting with the metaverse ‒ virtual worlds
populated by people using digital avatars ‒ as a space forhikikomori to re-experience a sense of community.
More than that, however, the management team at Hikkyview the metaverse as a digitalized global public squareand marketplace. One that uses extended reality (XR)
technologies to open up a new forum for community
building and economic exchange.

1 ￨Well Metaversed

By expanding the XR market and attendant digital
infrastructure, metaverse building services like Hikky
could create virtual employment opportunities andsupport systems for economically inactive groups
like the hikikomori, providing a timely boost to a
Japanese economy that is also struggling to godigital.

Yuri Group estimates that workforce
re-engagement of just 10% of the economicallyinactive hikikomori group through the metaverse
could add at least $240 billion to the Japanese
economy by 2050, while also providing $2.7 billion
in tax contributions. It could also add workers
in several industrial and transport fields.
The reintroduction of 1.5 million workers to theJapanese workforce could also help address a huge
worker shortage expected to accelerate dramaticallyover coming decades.

Japan's Onrushing Labor Shortage (no. of workers)

32040 11 mln

2030= .41 mln=

Global Phenomenon

Psychologists attribute the rising number of extreme recluses in Japan to a variety ofreasons. These include the pressures in strictly hierarchical working environments,
bullying in schools, overprotective parenting, uncertain employment and marital
prospects, as well as internet/social media addiction and undiagnosed mental healthproblems such as depression.
In neighboring South Korea, where individuals experience many similar social pressures,
5% of the population aged 19 to 34 ‒ some 540,000 Koreans ‒ were living in some formof isolation in 2021. In 2023, Seoul introduced a $500 monthly payment to encouragethese young people to re-engage with society.
Elsewhere, the phenomenon has parallels in the U.S. with the post-Covid school refusal
epidemic, and in China with the so-called “lying ﬂat generation,” who reject the working
norms of their forebears in an environment of rising social and economic disparity.
Cases of “hikikomori syndrome” have been recorded in Nigeria, the U.K., Italy, Oman andBrazil.
Categorization and quantiﬁcation diﬀers across regions, but studies ﬁnd that many regions
even overshadow Japan in terms of the percentage of socially withdrawn individuals.

Regions with notable hikikomori populations(estimated percentage of total population)

Source: Takefuji Yoshiyasu, 'Review of hikikomori: A global health issue, identification and treatment,' 2023

Still, Japan remains at the forefront given the lengthy history of hikikomori syndrome in the
country and its growing impact on society. The phenomenon contributes to Japan s
perilously low national fertility rate and the labor shortages hitting key areas of the economy.
In the context of Japan s “super-aging” society, there are other looming consequences.
A growing number of parents in their 80s now ﬁnd themselves responsible for adultchildren in their 50s that have withdrawn from society, with the whole family living on
the pensions of the parents. By 2030, many of these parents will have passed away,
leaving a generation of socially withdrawn individuals to fend for themselves.
In 2021, the Japanese cabinet oﬃce appointed a minister for loneliness and isolation to
tackle these issues. In June this year, the government passed a law urging regional andmunicipal governments to focus on alleviating loneliness and isolation in theircommunities as a matter of national urgency.
2 ￨ Well Metaversed

The metaverse is one of a basket of digital technologies being explored by Japan sgovernment to tackle hikikomori and other socioeconomic problems. As a feature of
the country s DX (digital transformation) policy, it has the backing of the administrationof Prime Minister Kishida Fumio.
Yet despite the communications ministry s release of a metaverse white paper in Julylast year, it is still unclear how the government intends to make use of the technology,
how it can be rolled out nationally, and who might be willing to pay for it.

Going
Meta

Beyond Japan, the global acceptance of the metaverse to date has been far fromsmooth. A so-called “metaverse boom” during the peak Covid-19 pandemic period wasstrongly fueled by Mark Zuckerberg. The social networks billionaire bet big on the
metaverse as the next big thing and even updated his companyʼs name from Facebook
to Meta. The ﬁrm has invested almost $50 billion in its metaverse division since 2021.
But since the explosion of generative AI, which has largely sucked up venture capitalfunding since Open AI took the world by storm with its Chat GPT chatbot, momentum
to shift human communications to the metaverse has largely stalled. Even Zuckerberg
seems more tilted toward AI nowadays.
The becalming of the metaverse initiative has been linked to fuzzy deﬁnitions of what it
actually is, let alone how it can be used to solve social problems.
For example, is an immersive multiplayer shoot-em-up game like Fortnite a part of themetaverse? Does the metaverse necessarily require 3D-enabling hardware, like a virtual
reality headset? Or can it be accessed via 2D handsets like the smartphones in our pockets?
Answers to these questions are subject to theinterpretation of creators and users. What consensus
there is deﬁnes the metaverse as a series of virtualworlds enabling online relationships using digitalavatars.

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These engagements mimic those of the physicalworld, without the pesky limitations of time andspace, and usually conform to one of four separate
categorizations: VR (Virtual Reality), AR (Augmented
Reality), MR (Mixed Reality) or XR (Extended Reality)

Telling your XR, from your VR and AR

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3 ￨ Well Metaversednd virtual spectr
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While the metaverse buzz may have quietened in the West, the same cannot be said forAsia. China leads the world in metaverse patent applications, with local governments
throughout the country recreating themselves online to boost regional commerce.
Chinese high-tech private sector giants Huawei, Tencent, and ByteDance are alsobuilding metaverse platforms to prepare for any future based on XR technologies.
South Korea is also in the game. Last year, the capital city launched the ﬁrst stage ofMetaverse Seoul. This $1.5 million metaverse promises citizens access to various
services (tax information, youth counseling, document issuance, and more) via a 3D
online creation of the city complete with digital avatars.

Asia
Calling

Vietnam, ranked by the Vietnam Insider magazine as the world s most mataverse
friendly country, produced the once hugely popular Axie Inﬁnity play-to-earn game, ametaverse based platform that rewards users with cryptocurrencies for completing
various tasks.
Before a multi-million dollar hack in 2022 by the North Korea-linked Lazarus cybercrimegroup, the game had an estimated player base of 2.5 million. In three months alone in
2021 during the height of the pandemic, the game generated almost $500 million, with
40% of the gamers hailing from the Philippines.
Similarly, for popular blockchain-based virtual world platform The Sandbox, three Asian
territories ‒ Hong Kong, South Korea and Japan ‒ are the company s top markets.

Asiaʼs Expanding Metaverse Market

Metaverse Global Top Ten
Number of users (millions)

200

China

170.9

41.43

India

37.14

Indonesia

23.47

Brazil

20.48

Japan

14.73

Russia12.9

Mexico11.5

Philippines

9.88

Turkey

9.84
0

150

140.1

106.4

100
76
53

50

50

Source: Welt der Wunder4￨ Well Metaversed

100

150

200

(billions USD)

U.S.A.

17.5
0

2022

21.3

'23

27.4

'24

37.4

'25

'26

Source: Statista Market Insights, March 2024

'27

'28

'29

'30

The metaverse
could be a way toprepare people forsocial interactionsin the real world,such as studying
abroad, which could
help to reduce stress.

In the physical world, people tend
to categorize themselves by a job
title. But by using an avatar in the
metaverse they can change who theyare. In the case of Japanese people,
they stop talking about work
altogether in the metaverse,
adopting the persona of their avatar.

The ability to freely
choose an avatar
means freedom
from gender andappearance, andliberation fromsocial constraints.

Source: Ministry of Internal Affairs and Communications, Metaverse Whitepaper 2023, social impact section

Big inJapan

In Japan, a number of cultural factors contribute to growing optimism around thedomestic metaverse market. For one, the artwork used in the creation of digital avatars
and virtual locations borrows heavily from the immensely popular world of anime andmanga. It is hard to overstate the ubiquity in Japanese society of these pop culture
staples, which both now boast huge audiences in markets overseas.
The country is also home to the VTuber (or Virtual YouTuber), a form of digitally
animated metaverse character. VTubers fulﬁll similar roles to physical celebrities, suchas fronting online chat shows, music videos and advertisements. VTubers clocked up
1.1 billion hours of viewing time in 2023, up 14.2% on the year before, with almost 40%of the world s VTubers based in Japan.
Japan s cultural inclination toward reticence, reserve and even anonymity also bodes
well for adoption of the metaverse in the country. Applications such as Facebook (usedby 29.9% of total social media users), require users to use their real names and images
to post and lag in popularity of, say, Twitter/X (45.3%) where users can choose to postanonymously.

In the virtual world, everything can be expressed digitally, so
you can inhabit your own ideal form which you createdyourself from scratch. If you communicate in that form, it
gives you a sense of confidence and performative ability thatyou never had before. This is not just an experimental or
hypothetical idea, but something that is really happening.
HIKKY CEO, FUNAKOSHI Yasushi$13 billion market by 2027
15

12.99

12
9.2

9
6.05

(billions USD)

6
3
0

0.51
2021

0.89
2022

1.85
2023

3.24

2024

2025

2026

2027

Source: Yano Research Institute, Domestic Metaverse Market Trends 2023

The projection of a sense of self that is bothanonymous and idealized appeals broadly across
the Japanese population. This applies to groups
beyond simply the hikikomori, with domestic
shipments of VR headsets up 70% YOY for 2023
as individuals increasingly seek out a means ofcommunication that bypass the usual pressuresof workplace etiquette and social standing.
The cultural ﬁt has prompted various research
institutions to make bullish projections about the
future of the virtual reality market in Japan, withestablished and experienced metaverse creation
services like Hikky set to lead the charge.

*USD-YEN conversion at 1=153.92 (2024/7/30)

5￨ Well Metaversed

Worldwide Marketplace
Hikky made its name with the VKet (Virtual Market) online event space and virtual
showcase venue. Now in its 12th iteration, Vket is the world s largest virtual reality
marketplace, having attracted over 1.4 million guests since 2018. It also holds a
Guinness World Record for hosting the most virtual reality booths at a single event.
Event spaces are modeled on certain real life Japanese locations, such as otaku (geek)culture paradise Akihabara in Tokyo, overseas cities like Paris, or inventions from theminds of Hikky s digital creators. Participants navigate these spaces in the form of a 3D
digital avatar, exploring the various booths, performances and activities in much thesame way they would a physical trade fair.
Corporations pay to exhibit in virtualbooths, where participants can view
digital representations of their products
and discuss the items with a company
representative. They can make purchasesof virtual goods, such as avatars andaccessories, or real versions of the items
represented. Participants enter thevirtual event space for free using a VR
headset, or simply by logging in with
their PC, tablet or smartphone.
Concurrent events take place in thephysical world. At the Hikky Virtual
Summer Market 2024 (July 20 toAugust 4), participants at physicalevents in Japanese cities Yokohama
and Osaka, but also in Dubai, canjoin the event in person while also
engaging in virtual activities in the
metaverse.

6￨ Well Metaversed

As the metaverse develops, a wide
variety of jobs will be created in
the virtual space, value will becreated, and a unique economic
sphere will develop.
Hikky Chief Virtual Oﬃcer, Phioʼs Moving Castle

A key element of the Hikky oﬀering is the reciprocal nature of metaverse creation. As
creators build the new virtual world from the ground up, each addition adds a newlayer to the digital landscape of the metaverse. As the landscape grows and becomes
more expansive, so do the possibilities inherent within it, increasing the points of entry
for potential users and creators alike.
For Hikky management, the more possibilities to replicate physical activities in the
metaverse, the more opportunity this creates for users. In theory, someone who isunable to leave the house may still participate economically in the metaverse, by doing
an online version of physical activities.

VirtualHikky s Chief Virtual Oﬃcer calls the activities enabled by the metaverse the “virtual
Economic economic sphere.” To expand that sphere, the company created the VKet Cloud service.
This tool allows both individual and corporate clients to build their own virtual worlds
Sphereusing the Hikky platform and creative tools.
For an individual, this might meancreating a virtual space to meet withfriends, a 3D multiplayer game, or aninteractive website. It might also meanusing the HIkky tools to become apaid metaverse creator for your own
clients.

For a corporate client, this might meancreating a bespoke digital event hall, aninteractive conference room for online
meetings, or even a branded 3D exhibit
space where potential customers canimmerse themselves in virtual representationsof the company s corporate philosophy
and product oﬀering.
Vket Cloud can be accessed via a browser using a computer or smartphone. It is free forindividual users and paid for collaborative projects, including diﬀerent payment plans foruse by businesses. The site contains detailed instructions on how to use the featured
tools, meaning no additional software or coding skills are required. When a project iscomplete, it can be shared immediately using a QR code or by posting a link via social
media.
7￨ Well Metaversed

The Hikky management team say the metaverse oﬀers opportunities to users that may not
be available in the physical world. For example, virtual employment openings currently
exist in sales, consultation services, and digital infrastructure building and design.

Big
Business

Throw into that potential opportunities in virtual education, administrative services,
health consultations and elderly support, and it helps to understand why the Japanese
government is getting behind the metaverse idea. And in that mix is the potential toreintroduce groups like the hikikomori back into the workforce.
Japanʼs Ministry of the Environment is already a Hikky customer, using the service todisplay homes ﬁtted out with green, sustainable technologies. Major private corporations and quasi-public institutions such as Canon, Cup Noodle (Nissin Food Products),
East Japan Railway Company and the Japan Racing Association have also built their own
branded exhibition spaces in the Hikky metaverse.
Elsewhere, multinationals Mitsubishi UFJ and Fujitsu head up a ﬁnance and manufacturing consortium that last year announced it would create a national “metaverse economic
zone.” Leading printing ﬁrms Toppan and Dai Nippon Printing are also lending theirexpertise to build out metaverse projects by regional governments throughout Japan.
These developments suggest the metaverse future looks relatively bright in Japan, butsome pressing questions do remain.
Namely, metaverse development is extremely pricey. The skilled people needed to build
virtual economic worlds do not come cheap and are short on the ground in Japan. Whopays for the education to train a generation of tech workers capable of constructing suchgrand, national or international metaverse worlds?
Secondly, who gets to decide the parameters of metaverse development? The players
range from Hikky on the startup end of the spectrum to Fujitsu on the corporate behemoth side. This suggests that any metaverses built will be siloed, which is typically an
obstacle to innovation.
Japan is trying to position itself as an arbiter on the legal structure of a globally relevant
metaverse, e.g., how to build a cross border virtual world that, say, allows free downloads
of a particular product in the U.S. without simultaneously breaking several IP laws in Japan.

8￨Well Metaversed

Implications
Hikky CEO Funakoshi Yasushi is bullish about his companyʼs future in the Japanesemetaverse market, citing long-standing relationships with clients that spanned the
pandemic-era metaverse boom and continue today. The companyʼs successful Series A
round in early 2022 means that he has the ﬁnances to build.
But the same economic assurances do not necessarily exist for Hikkyʼs target audience,
whose buy-in is necessary for the business model to grow. On the bargain side, Hikkyʼsoﬀerings include low priced or even free access to metaverse services via ubiquitous
smartphones.
But the VR headsets are a diﬀerent story. The fully immersive element of the metaverse isa key aspect of its appeal, but the equipment requires deep pockets. The latest VR headset by Meta, Quest 3, costs twice as much as a Nintendo Switch console and 25% morethan the new Sony Playstation. And thatʼs the ʻaﬀordableʼ segment. Appleʼs Vision Pro VR
headset is close to ¥600,000 ($3,900) ‒ ten times the price of a Playstation.
Funakoshi argues that the hardware issue must be addressed before the Japanesemetaverse market can evolve. But as this report has shown, the market is there, should
these issues be ironed out.

We estimate that around $10 billion a year ($240 billion total
through 2050) can be injected into the Japanese economy should
just 10% of the nation’s 1.5 million hikikomori re-engage in theworkforce via the metaverse.
This is obviously a conservative estimate based on a small percentage of the hikikomorigroup alone. Take into consideration other groups: individuals with disabilities, theelderly, and workers who would prefer to opt out of the Japanese oﬃce straightjacket
and this number becomes a lot larger.
Economically, the governmentʼs embrace of the metaverse concept makes sense.
Expansion of virtual reality employment, and the educational and social opportunities
oﬀer a possible innovative solution to various social issues, including the hikikomori
phenomenon.
But will it work? As discussed, building virtual worlds needs lots of IT talent with the rightskill sets. So, training up and/or importing domestic IT cadres is crucial. The price of VR
headsets and other tech that provides the entrance ticket to online worlds will also needto drop to prevent a digital class divide. Perhaps a more fundamental issue to be carefully monitored is whether adding an additional virtual layer to the existence of those whohave withdrawn from society alienates them further.
Whether the metaverse is broadly embraced today or in ﬁve or ten years time, the evolution of social communication and networks into 3D virtual worlds seems highly probable. Today's children are growing up as metaverse-natives (think Pokemon Go, Fortnite,etc.). In that sense, hikikomori are the pioneers, the pathﬁnders to the next transformation of our society in which all realities, digital and physical, are mixed and shared.
9￨ Well Metaversed

The GxxD reports series covers the megatrends,
business models, and innovations at the crossover
between digital and clean energy. With stories onareas as diverse as AI, the CO2 economy, robotics,
and fusion, we share intelligence that anyone withan eye on Japan will want to explore further.

For further details about the GxxD project:

info@yuri-group.co.jp

www.yuri-group.co.jp/gxxd
linkedin.com/company/yurigr/

Writer:
Editor:Hulic Ochanomizu Bldg. 3F, 2-3-11, Surugadai,
Kanda, Chiyoda-ku, Tokyo, 101-0062

Will FeePeter Langan

Yuriy Humber
Designer: Memi Fee ‒ memiart.com
Editor:

Disclaimer: This communication has been prepared for information purposes only. Yuri
Group retains all copyright to its content. Yuri Group is not registered as an investment
advisor in any jurisdiction. The information contained in this report is obtained from sources
believed to be reliable and in good faith. No representation or warranty is made that it isaccurate or complete. No responsibility is accepted for the use of or reliance on theinformation provided. In no circumstances will Yuri Group be liable for any indirect or direct
loss, or consequential loss or damages arising from the use of, any inability to use, or any
inaccuracy in the information.
All rights reserved June 2024.

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