Digital Citizens Wanted
Japan village grows population
with NFTs, Web3 toolsinitiative ﬁts neatly into the wheelhouse of the DX
Neo-Yamakoshi Village This(digital transformation) policy of Prime Minister Kishida
Typical images of rural Japan include terraced riceﬁelds, backdrops of snow-dusted mountains, andincreasingly lots and lots of old people. That last
characteristic is the one worrying Tokyo as depopulation
threatens to turn once idyllic towns and villages into
ghost communities.
Japan s government has thrown buckets of money atthis problem, mostly to try and reverse a collapsingbirth rate, all with little success. The centuries-old
region of Yamakoshi nestled in the Niigata mountains
may not have an immediate solution to fewer babies,
but it is taking a novel approach to survival and it
involves the most modern of Web3 technologies.

If their strategy works, and expands toother villages, we estimate that rural

Japan could look to fund-raise sums in
the region of half a billion dollars,

while also test-driving a new wave ofsocial tech with global appeal.

The Neo-Yamakoshi Village project, led by Niigata
residents, is minting NFTs (non-fungible tokens) thatcan be bought and sold on digital marketplaces acrossthe world. Furthermore, itʼs embracing social
governance in the form of DAOs (decentralized
autonomous organizations). And to top it oﬀ,
Yamakoshi has ventured into the metaverse as apotential way to repopulate its village with new
citizens, albeit digital ones.

Fumio to revitalize the nation s economy.

Still, the challenges are immense. Yamakoshi village
had a population of 2,200 people as recently as 2004.
But an earthquake that year forced local residents toevacuate. When it was deemed safe to return, only halfchose to. The local population is now just 740 and thevillage has been incorporated into nearby Nagaoka City.
It s a story heard across rural Japan. The challenges oflife in the countryside, including harsh winters andnatural disasters, make modern city life increasingly
attractive. The youth ﬂee, leaving behind the elderly
and communities with a dimming future.
The Neo-Yamakoshi Villageʼs response to this is tofocus on the global appeal of traditional Japaneseculture and then digitize it to open access to anyone
on the planet with an internet connection. This includes
NFTs to raise funds and a digital co-operative thatnetizens can join and play a role in local decision making.
One of the cultural levers for Yamakoshi is that it s thebirthplace of the world famous Nishikigoi breed of koi
carp, an obvious image for an NFT.
This report, the latest in the GxxD series from Yuri
Group, takes a close look at the Neo-Yamakoshi Village
project as a response to depopulation and as a businessproposition incorporating digital strategies championedby the government.
The project ticks a lot of boxes in the new ideas
department, not least as a real-life test case of whether
physical and digital humans can actually ʻliveʼ together
and help solve very local problems. The idea seems
sound, but will it work?

We aim to maximize the value of thissmall Japanese village, and to make themost of it. That way, people all over
the world can become villagers andfeel involved, even from a distance.
Neo-Yamakoshi Village Founder, TAKEUCHI Haruka

1 ￨Digital Citizens Wanted

At the forefront of the Kishida administration's digital policy is the use of Web3technologies to deal with socioeconomic problems, including rural depopulation.
But Web3 as a concept is hard to pin down and deﬁne, and that goes for many inthe government promoting it, let alone those in the aging rural communities it ismeant to help.

Web
What?

So what exactly is Web3? It refers to the next generation of the internet, perhaps
better understood by looking at what preceded it.
The ﬁrst generation, or Web 1.0, deﬁnes the earliest days of the world wide web,which functioned as a way to search for and receive information in the form ofstatic web pages. The information was openly available, its transmission free, and it
was beyond the control of a centralized entity.
Web 2.0 introduced interactive elements, paywalls and applications operated bycentralized corporations. These include many of the online tools that the majorityof us rely on today: search engines (Google and Yahoo), social media platforms(Meta (Facebook), Instagram and TikTok) and e-commerce behemoths like Amazon
and the Chinese equivalent Alibaba.
The entities operating these services are some of the world s largest and mostdominant companies ‒ and run by billionaires who have harvested personal data
to build their fortunes. That s now part of the problem for many who saw theInternet as an egalitarian ideal, and Web 3.0 is the response.
This is a new decentralized Internet built around blockchain technologies, digitalassets like cryptocurrencies and NFTs, and the metaverse. In short, an attempt towrest back control of the Internet from the all powerful mega-corporations thatcurrently serve as its gatekeepers.

Generations of the Internet

Web1.0(c. 1995 to 2000)

Web2.0(c. 2000 to 2020)

2 ￨ Digital Citizens Wanted

Web3.0(c. 2021 onward)

In Japan, the U.S. internet giants of Web 2.0 are referred to as GAFAM (Google, Apple,
Facebook, Amazon, and Microsoft). Japanese business and government circles areworried that the nation s own Web 2.0 ﬁrms are so far behind GAFAM ‒ as well as China
competitors such as WeChat and Alibaba ‒ that Japan is losing the ability to competeinternationally.

Kishidaʼs
Web3
GambitThe Nikkei reports that domestic companies provide just 30% of Japan s cloud services.
In 2023, the digital-related balance of payments deﬁcit was $35 billion, a 16% increaseon the year before and twice the level of ﬁve years ago.
The government addressed thespiraling issue in its updated
Priority Policy Program forRealizing Digital Society, which
it released on June 21.
This sense of losing the plot is
exacerbated by the Japanese
yen falling to more than 30-yearlows against the U.S. dollar.
While a weaker yen can makeJapan s exports cheaper, it also
serves to feed inﬂation at homeas the cost of imports surge.

1 USD = JPY
200

150

100

50

In the Web 3.0 era, the digital economy is expected to shift
towards a more decentralized network based on blockchain
technologies such as NFTs and crypto assets, where independent
users are directly connected to each other without being
dependent on a specific platform.
Liberal Democratic Party, ʻNFT White Paper,ʼ 2022

3 ￨ Digital Citizens Wanted

4 e
202e Junlat

While the LDP, to which Prime Minister Kishida belongs, is a conservative politicalgroup hardly known for its revolutionary thinking, it is throwing its weight behind
Web3. In 2022, the Kishida administration established a dedicated Web3 Project Teamthat has since released a series of white papers ‒ the latest update in April 2024 ‒ tooutline the importance of Web3 to Japan.

0

202

5

201

0

201

5

200

0

200

5

199

0

0
199r. 23
Ap

So if the future is digital, what to
do? For the Liberal Democratic
Party, which was founded in
1955 and has pretty much run
Japan since, Web3 holds someanswers.

Japanese yen at 3.5 decade low to USD

Meet Society 5.0

The Kishida administration also sees Web3 as a means to achieve what the government
dubs “Society 5.0.” This is a long term policy framework for a so-called “super smart
society” ﬁrst drawn up during the second Abe administration (2012-19). It's a plan tobuild a more sustainable, advanced society and economy by marrying together
technologies such as artiﬁcial intelligence, Internet of Things, and Big Data among others.

c

ita

So

Dig

i

y
et
H

1.0

un

ti

Gather
i
ng &

So

ng

cie

ty 2.0Agrliculture

Society 3.0
Indu

S

ie
oc

str

ty 4.0Information

Source: Cabinet Office of Japan; updated design by Yuri GroupThe Society 5.0 concept dovetails with the ideas underpinning Web3. Namely,
decentralization, independence and self-suﬃciency.
This all sounds utopian ‒ having entities such as DAOs replacing centralized top-down
leadership whether corporate or political ‒ but, in some ways, it is mirroring recent
governance trends. Japanʼs national government sets out the overarching direction but
is moving more toward delegating regional administrative functions to municipal orprefectural-level authorities.
The theory goes that Web3 technologies and Society 5.0 could be a way for towns andvillages like Yamakoshi scattered throughout rural Japan to take more control of theirown destinies and equally reap more of the beneﬁts.
Hence, the LDP is oﬀering startup capital ﬁnancing to independent collectives, like the
10 million yen provided to the Neo-Yamakoshi Village project to experiment with anduse Web3 tools.
The promoters of these projects point out that Apple Computer started oﬀ in a garage
and dropouts founded other technology giants. So, as Web3 and Society 5.0 merge,
who knows what could be born out of small experiments in rural Japan?
4￨ Digital Citizens WantedialDeath of the Village

Urban Population Growth in Japan

Urban Population
Rural Population

150
120

75.9%

78.7%

92%

2010

2022

60

56.1%

30
0

37.3%
21.6%
1925

1950

1955

1975

2000

Source: National Institute of Population and Social Security Research + The World Bank

Traditional Japanese life once revolved around the village. 100 years ago, 80% of thetotal population lived in the countryside. By 1950, ﬁve years after the end of the PaciﬁcWar, that ﬁgure still stood at around 63%. That began to change dramatically from themid-1950s as the country entered the so-called “economic miracle” period.
Rural populations ﬂocked to the major cities ‒ Tokyo, Osaka, Nagoya ‒ and Japan wentfrom a largely agrarian society to nationwide industrialization over the course of a few
decades. The percentage of the population living in rural communities plunged andeventually plateaued in the 2010s at around 8%.
The eﬀect is the slow death of the village. Japan s population as a whole is rapidly
declining and is expected to fall by around half to 63 million people by 2100. But the
dropoﬀ is particularly pronounced in rural areas.
A report released in April by the Population Strategy Council assessed how many ofJapan s 1,729 municipalities are likely to experience a 50% reduction in the number ofchildbearing age women (deﬁned as 20-39 years old) between 2020 and 2050.
According to this metric, an alarming 40% of Japan s municipalities are at risk ofvanishing as a result of population decline.

Disappearing Towns

sk

At
-R
i

Total Population (millions)

90

91%

s
alitieicip
nuM

Source: Population Strategy Council

744

1729

Total Mu

nic

ip

t
ali

ie

s

5￨ Digital Citizens Wanted

Village
StrifeYamakoshi is perched high up in the Niigata mountains. It s an isolated, hard-to-reachpart of the country that oﬀers picturesque views in summer of koi carp ponds andterraced rice paddies, but is blanketed under 2 meters of snow in the long winter months.
Like other settlements in rural Niigata, the Chuetsu earthquake in 2004 was a wakeup
call to the depopulation problem. Neo-Yamakoshi Village founder Takeuchi Haruka ﬁrst
arrived in Yamakoshi as part of the post-disaster recovery eﬀort.
She says she quickly developed an aﬃnity with the way of life in the area, but at thesame time realized the extent of the demographic issues facing the local community. It
was a desire to ﬁnd solutions that led her to experiment with Web3 tools.

No. of settlements

Koi carp raising

No. of households

Permanent residents

Bull-on-bull wrestling

Elderly population (over 65)

Rice farming

No matter how small a village it is, the culture cultivated by the region is extremely
valuable. i want people the world over to recognize this value, as i think it's important
for the future of Japan as a whole that it preserves the culture and spirit it has
nurtured.
Neo-Yamakoshi Village Founder, TAKEUCHI Haruka

6￨ Digital Citizens Wanted

Nishikigoi NFT

NFTs are considered to be the catalyst that will powerfully
expand the digital economy in the Web 3.0 era. NFTs…have madeit possible to add rarity to digital assets and dramaticallyincrease their economic value.
Liberal Democratic Party, ʻNFT White Paper,ʼ 2022

Artist: raf
Artist: ykxotkx

In formulating its Web3 strategy, the government has both promoted and consulted
Neo-Yamakoshi Village as a project that utilizes the digital asset toolkit to help addresssocio-economic issues aﬀecting Japan. The fundamental element underpinning the
project is the Nishikigoi NFT.
As a non-fungible token, NFTs are unique digital identiﬁcation codes recorded on theblockchain, an immutable digital ledger maintained by a global, decentralized networkof veriﬁers. As an immutable piece of code, NFTs cannot be replicated or copied. In theirmost essential form, NFTs are therefore an eﬀective form of veriﬁcation andcertiﬁcation.
Reliability as a form of proof of ownership is particularly prized by collectors. This
popularity prompted the explosion of the NFT “art” market in 2021, with some of theso-called Bored Apes series of NFTs trading hands for millions of dollars. The
subsequent NFT market bubble and its rapid collapse contributed to the broader
cryptocurrency market losing around two-thirds of its $3 trillion market capitalization inwhat was known in crypto-speak as the “winter” of 2022. The market is now valued ataround $2.4 trillion.

Artist: Okazz

Neo-Yamakoshi Village created their Nishikigoi NFT series to leverage the region s own
uniquely saleable cultural asset ‒ its claim to being the birthplace of Nishikigoi, Japanʼsmost recognized breed of brightly colored koi carp.
Since its inception in 2021, the Nishikigoi art series has generated over $400,000, which
the creators have used for community projects. That includes a sports day for local
school children attended by both physical and the “digital” residents who traveled
there for the event.

1ETH= $

3,500

120ETH= $Ether (ETH) is the cryptocurrency
on the Ethereum blockchain used
to buy NFTs

423,000

Total sales of
Nishikigoi NFTs

7￨ Digital Citizens Wanted

Nishikigoi NFT also serves as a tool for administrative purposes. It acts as a form of
Yamakoshi The
identiﬁcation for the “digital citizens” of Yamakoshi, a proof of membership in thevillageʼs “phygital” community, and a governance token for use in voting processes
DAO

administered by the projectʼs in-house Decentralized Autonomous Organization or DAO.

Nishikigoi NFT uses
1

2

Community access rights

3

Identiﬁcation tag

4

Governance token (with voting rights)

Digital asset

DAOs, as the name suggests, are a form of digital organization designed to be both
decentralized and autonomous. DAOs are governed by a ﬂat organizational hierarchy toreplace top-down structures that usually come with an all-powerful authority ﬁgure,such as a CEO, at its center.
Anyone in possession of a governance token ‒ in the case of the Yamakoshi DAO a Nishikigoi NFT ‒ can cast a vote and have a say in the operation of the DAO. One token equals
one vote and anyone, anywhere in the world can participate.
So far, the Yamakoshi DAO has held 6 rounds of voting using this method, including thedecision to allocate Nishikigoi NFTs as governance tokens to physical villagers free ofcharge. Founder Takeuchi says that the average participation rate is only around 40%(voter turnout for Japanʼs most recent general election was 56%). She said she hopes thiswill improve to 60-80% in future votes.

Nishikigoi NFT

pa
id

n
io
ut
rib
ist
ed
fre

DigitalVillagers
People, funds,
ideas

8￨Digital Citizens Wanted

The idea driving the Yamakoshi DAO isthat by granting access to village lifeand voting rights on matters of community relevance, the project can build asense of aﬃnity with the village among
digital residents far beyond the mountain ranges of Niigata Prefecture.

Yamakoshi
DAO

Village
Resident
Local resources,
cultureDigital residents purchase NFTs to help
in preserving a unique way of life andlocal physical residents receive muchneeded funding and outside expertise.

So far, the project has added
1,700 “digital residents” to the
population of Yamakoshi, withthe management team hoping
to grow that number to 10,000.

GlobalTown Hall

Another instrument in the Web3 toolkit is the metaverse. The technology oﬀers immersive experiences using VR (virtual reality). Users select a digital persona, or avatar, torepresent their presence online.

This could be a virtual representation of
their own image, a character from popular
culture (often anime for Japanese users), ora character of the users’ own design.
These avatars enter the metaverse, which functions as a forum and an online event spacefor communications. The space is personalizable according to the nature of the forum
and the goals of the organizers.

In the case of the Neo-Yamakoshi Village, the management team uses the metaverse tohold town hall meetings. This enables both physical residents and “digital residents”
from all over the world to gather in one virtual space ‒ which itself is styled on the Yamakoshi region ‒ increasing the sense of participation in village life.

The difficulty is that we don't show our faces, don't reveal
our real names, and use nicknames, so sometimes it's hard tocommunicate. But the advantage of having meetings throughthe metaverse is that no matter where you live, whether it's
here in Yamakoshi or America, you can share the same issues atthe same time, despite the physical distance.

Neo-Yamakoshi Village Founder, TAKEUCHI Haruka

9￨ Digital Citizens Wanted

Advocates say Web3 harnessed correctly oﬀers opportunities to address social andeconomic problems, such as those facing Yamakoshi, and in turn help Japan into a moretech savvy and prosperous future.
But to grasp the uses and implications of Web3 requires a reset and education for theuninitiated to which much of the technology-speak seems like so-much digital hot air
around confusing acronyms.

Implications

Takeuchi said in an interview that the project has had its fair share of problems with how
to explain the beneﬁts of the technology to elderly Yamakoshi residents the project ismeant to serve. She said that the DAO voting process has proved diﬃcult to demonstrate, perhaps helping to explain the low voter turnout. For a project that aims to incorporate digital citizens from overseas, the language barrier is also a stumbling block,though AI is rapidly oﬀering solutions to that.
Other issues include how should the DAO weigh the votes of actual Yamakoshi residents
against their digital equivalents? Are there decisions that NFT governance token holders
should be excluded from voting on? Is there a point when local residents revolt against
giving voting rights to so-called “digital residents” who theyʼve never met?
But the ﬁnancial beneﬁts are real. The sale of Yamakoshi NFTs so far has generated$423,000, which is equivalent to an additional $1,252 for each of the 367 Yamakoshi
households ‒ nothing to be sniﬀed at in a rural village where a little extra cash can go along way.
Yamakoshi has its speciﬁc cultural assets, but so do scores of villages and towns in rural
Japan that developed over centuries.

Based on the Yamakoshi model, if the 744 municipalities at risk of
disappearing were to adopt similar Web3 initiatives and win startup
funding from the government, it could generate something in theregion of $300 million to $500 million for those rural communities,
according to Yuri Group estimates.
Of course, Yamakoshiʼs additional cultural capital is the presence of Takeuchi and herteam, who are tech-savvy enough to pull together a project of this kind. Other regions
would also need a similar level of digital expertise and manpower, something that Japan
currently lacks ‒ as noted in the ﬁrst report in the GxxD series.
Still, the Yamakoshi project does oﬀer up intriguing possibilities and not just for Japan, ofcourse. Could the latest in Web3 technology preserve centuries of cultural traditions andhelp knit communities together in towns and villages facing similar challenges acrossthe world? Could this be the creation of a cultural economic marketplace that attracts
collectors or patrons, much like the NFT boom did albeit brieﬂy in the early part of thisdecade?
Japan was one of the ﬁrst nations to gain global ʻfameʼ for falling birth rates, becoming
almost an international media byword for shrinking societies. As many developed
nations now follow in Japanʼs demographic footsteps, the nation also has the chance topioneer the solutions. What seems like a utopian ideal today, could emerge as the global
consensus to evolve our social and economic realities tomorrow.

10￨ Digital Citizens Wanted

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.

Interested in becoming a digital citizen?
To contribute to the Neo-Yamakoshi Village project, you can purchaseyour own Nishikigoi NFT (the ﬁrst step toward digital citizenship!) here:nishikigoinft.com