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SPECIALEDITION

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Next Blockchain:
Creation of a new ecosystem
for future industries
Reseach Digest

Linkage of Patent and Design Right Data:
Analysis of Industrial Design Activities
in Companies at the Creator Level

What is RIETI Highlight?

2020 Special Edition

79

CONTENTSRIETI’s public relations magazine RIETI Highlight is published in Japanese on a quarterly basis, featuring
RIETI’s most recent activities with the objective of disseminating our research outcomes to a wider
audience. This RIETI Highlight Special Edition is written in English and published annually as an overview
of RIETI’s undertakings for our international readers. We hope this special edition will be helpful not only in
spreading information on our activities and research findings but also in deepening international readers’
understanding of our mission as a leading Japanese policy think tank.

P1

TOPICS

P2

Special Interview with
Atsushi Nakajima, Chairman of RIETI

RIETI Blockchain Symposium

P4

Next Blockchain: Creation of a new ecosystem for future industries

RIETI Special BBL Seminar

P8

The G20 and the World Economy: Performance and prospects
Corporate Governance for Global Companies:

METI-RIETI Policy Symposium

P14 Toward an increase in corporate value

RIETI International Workshop

P16 Frontiers in Research on Offshoring

RIETI BBL Seminar
Event List

Research Digest
Columns

P18

Can Big Data Change Official Statistics?
– Learning from advanced overseas cases

P24 Other Major Events in 2019 & 2020
Linkage of Patent and Design Right Data:

P25 Analysis of Industrial Design Activities in Companies at the Creator Level
P29 Evidence-based Regulatory Reform
Why Japan Lost Its Comparative Advantage in Producing Electronic Parts

P31 and Components

P34 Hiring Challenges for Japanese Companies
Non Technical Summaries

Choice of Invoice Currency and Exchange Rate Risk Management:

P37 2018 Questionnaire Survey of Japanese Overseas Subsidiaries
P40 Do Trade Fairs Promote Exports?

Research Projects

RIETI’s Fourth Medium-term Plan
Research Programs
P43
P44
P45
P46
P47

RIETI Books

Ⅰ Birthrate / Aging Population
Macroeconomy and Low

Ⅲ Regional Economies
Ⅴ Industry Frontiers
Ⅶ Human Capital
Ⅸ Assessment

P43
P44
P45
P46

Ⅱ Investment

International Trade andⅣ Innovation

Ⅵ Productivity

Raising Industrial and Firm

Ⅷ Law and Economy

Policy History and Policy

Gender Inequalities in the Japanese Workplace and Employment:

P48 Theories and Empirical Evidence
P49 About RIETITO P I C S
RIETI Signed MOUs with Two Prominent Institutions in Asia to
Strengthen International Cooperation
On June 27, 2019, RIETI and the Institute of Japan Studies, Chinese Academy of Social Sciences (IJS/CASS) signed
a memorandum of understanding (MOU) to promote mutual research cooperation. For the next five years the parties are
expected to develop mutual efforts on policy research through interaction between fellows, including mutual visits andinvitations to events and meetings.
Another MOU was signed with Mr. Bayarsaikhan Banzragch, the Chairman of The Mongolian National Development
Agency (NDA) on December 20, 2019. The NDA is an agency that reports directly to the Mongolian prime minister. It
implements national development plans and is in charge of attracting and supporting inbound foreign direct investment
to Mongolia. The MOU promotes
research cooperation between RIETI
and the NDA for the next five years.
Through partnerships with majorinternational research institutions
RIETI will continue to strengthen its
international cooperation efforts.

Bayarsaikhan Banzragch (Chairman, NDA, left)
and Atsushi Nakajima (Chairman, RIETI, right)

RIETI-ANU Symposium, “Asian Integration and the Global
Economy: Economics of geopolitics”

To p i c s

From left, Yang Bojiang (Director, IJS/CASS),
Xie Fuzhan (President, CASS), Atsushi Nakajima(Chairman, RIETI), Masayuki Morikawa (VicePresident, RIETI)On November 21, 2019, RIETI hosted a symposium titled “Asian Integration and the Global Economy: Economics
of geopolitics” in collaboration with Australian National University (ANU), with the participation of policy experts
from Australia.
Australia has long been a great partner for Japan in its effort to establish rules for economic security and trade inAsia. Integration and growth of the Asian economy has played a significant role as an engine of the world economy
since WWII; however, the current trade conflict between the U.S. and China has cast a dark shadow not only over
the Asian economy but also the world economy. The world trading system under a framework of multilateral rules isnow facing difficulties, and the emergence of economic blocs would cause disruptions to international supply chains,stagnation of trade and investment, and ultimately, stagnation of the world economy. In order to avoid this, important
discussions were held on: what trade rules are necessary; how Australia andJapan can contribute to Asian infrastructure investment, which is vital for
economic integration; and how to cope with the age of new technologies (i.e.
5G) and the digital civilization to come.
https://www.rieti.go.jp/en/events/19112101/info.html
From left, Shiro Armstrong (Visiting Fellow, RIETI), Gordon de Brouwer (Honorary Professor,
ANU / Former Secretary, Department of the Environment and Energy, and former Associate
Secretary of the Department of the Prime Minister and Cabinet and G20 Sherpa / Panel memberof the Independent Review of the Australian Public Service), Christopher Findlay (Honorary
Professor, Crawford School of Public Policy, ANU)

Economics in the time of COVID-19 : A new eBook
RIETI Faculty Fellow, Eiichi Tomiura along with other leading economists including Richard Baldwin, Professor ofInternational Economics at the Graduate Institute, Geneva, released an eBook which presents 14 essays on a widearray of topics related to COVID-19 economics.
https://voxeu.org/article/economics-time-covid-19-new-ebook

RIETI Highlight 2020 Special Edition1

SPECIAL
INTERVIEW

with Atsushi Nakajima, Chairman of RIETI

Achievements of
the Fourth Medium-Term Plan and
Prospects towards the Next Plan
RIETI’s mission is to conduct theoretical and empirical research, to maximize
synergies with those engaged in policymaking, and to advance the use ofevidence-based policymaking (EBPM). Through the research activities it has
undertaken in its first 19 years, RIETI has developed an excellent reputation
both in Japan and abroad. In this interview, Atsushi Nakajima, the Chairmanof RIETI, summarizes the research activities that have been tackled by RIETI
during this fourth medium-term plan, which will end in March 2020.

Atsushi Nakajima

Q1: Please explain the accomplishments under the fourth mediumterm plan (*Note 1), the implementation of which you haveoverseen.
RIETI sets four or five year periods to accomplish its mediumterm objectives, and in this fourth medium-term (lasting four years)
we have placed the emphasis of research activity on: (1) presenting
policy recommendations that take into account both government
and academic perspectives in order to ensure the highest chance ofthe new policy being ratified; (2) establishing a broad network ofknowledge and conducting cross-thematic research programs; and(3) contributing to policy planning by providing evidence using inhouse databases developed at RIETI.
Based on this approach, RIETI has been conducting researchmainly in nine broad thematic areas. The nine areas are:macroeconomy and low birthrate/aging population; international
trade and investment; regional economies; innovation; industry
frontiers; raising industrial and firm productivity; human capital;

Interviewer: Toko Tanimoto,
Deputy Director of International
Coordination / PR Strategy, RIETI

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RIETI Highlight 2017 Special Edition

law and economy; and policy history and policy assessment.
In order to improve the quality and broaden the range of
research, RIETI has also dedicated efforts to the dissemination ofresearch outcomes through symposiums and periodic publicationsin addition to actively engaging in international research exchanges
with international organizations and research institutions andresearchers in major countries.
During the four-year period of the fourth medium-term
plan, which ends in fiscal year (FY) 2019, RIETI publishedaround 700 discussion papers (DPs) as outcomes of research
activity in the period. Those DPs include many related to AI
and other new technology fields leading to the Fourth Industrial
Revolution, which is an important theme for RIETI research.
Among DPs related to such fields are "An Economic Analysisof the Legal Issues of Artificial Intelligence" and "Forecasting
Firm Performance with Machine Learning: Evidence fromJapanese firm-level data." RIETI also published a book titled Next
Blockchain: Creation of a new ecosystem for future industries,
which summarized relevant research results.
RIETI also hosted or co-hosted more than 60 symposiums
and seminars on research concerning matters such as Japan's
employment system, productivity, innovation, and evidence-based
policymaking (EBPM). On international trade, at a time when thedigital economy is growing on a global scale while U.S.–China
trade friction is escalating, RIETI has taken on a leadership rolein the fields of international trade and small and medium-size
enterprises (SMEs) at Think 20 (T20), one of the engagement
groups under the Group of 20, and has not only held symposiums

and other relevant events, but also submitted recommendations
for the G20 to the Japanese government from a neutral, academic
perspective.
RIETI has been conducting policy evaluations and has been
simultaneously enhancing its capacity to rationally and logicallyformulate and evaluate policy based on empirical evidence.
In order to share its knowledge, RIETI also held three EBPM
symposiums.
Through its research programs and activities disseminating
research results, RIETI, as a policy think tank, has contributed
to the diffusion and sharing of knowledge related to policy
formulation and the future direction of the economy and society
with respect to many themes, including how to adapt to the Fourth
Industrial Revolution and how to manage human capital in an
aging society with a low birthrate.
RIETI is developing unique, in-house databases. We havebeen expanding our database on the Japanese Study of Agingand Retirement (JSTAR) and databases on Japan Industrial
Productivity (JIP and R-JIP), and the use of those databases has
been increasing. During the period of the fourth medium-term
plan, in response to the growing uncertainty over the future of
global economics, RIETI published the Japan Economic Policy
Uncertainty Index in order to help quantitatively measure theperception of risk and facilitate research.
Q2: What role should RIETI play in the current global
circumstances?
Around the world, globalization and major innovations are
gaining momentum, as seen through the Fourth Industrial
Revolution which is represented by AI and IoT. On the other hand,
there is growing criticism for the potential adverse effects of these
innovations on income and employment.
Also the aging of society is progressing in major countries. In
Japan in particular, as the aging of society is coupled with a lowbirthrate, the population has started to decline. If we consider thenatural progression of this trend, action on a social security andfiscal management system adapted to the coming new era and thevision of the economy and society that Japan should aim for are
inevitable.
Looking at the broad trends, new policy responses intended
to develop a more affluent and stable economy and society havebecome essential in Japan and other major economies. However,in major countries, economic and productivity growth are alreadysluggish, but slowing further.
That trend is more conspicuous in Japan. While combined
current profits of Japanese companies have expanded 2.2-foldcompared with 1990, the average nominal wages per employee
have increased only 2%, and this is one factor behind the weak
consumption in Japan. Japanese companies need to raise wages
for employees and increase stakeholder value through raisingproductivity by accelerating innovation.
Japanese companies need to learn to quickly implement new
innovation activities when chances present themselves. Japan islagging behind the United States and major European countries interms of growth in investments in intellectual property, an indicatorof investments in AI-related software and patents that serves asa major benchmark of engagement with the Fourth Industrial
Revolution.
Furthermore, income inequality is increasing worldwide, andin the future, AI could replace jobs now performed by humans.
If these factors are taken into consideration, it is necessary to
promote human resource development by continuing to reform theeducation system and employment practices, although Japan is welldeveloped in these fields. If workers' productivity grows, Japan
will be able to realize an affluent economy and society even with adeclining population due to the aging of society and a low birthrate
and an increasing social security burden on working-age people.
At RIETI, the fifth medium-term plan will start in the next fiscal
year. Under the new plan, in response to new challenges and needs
inside and outside Japan, we are resolved to strengthen the EBPM
system that contributes to policy formulation by further deepening
our integrated humanities and technology interdisciplinary
research activities, by collecting more big data and by making
more effective use of them. We will not only publish research
results through DPs but also make them public more widely
through symposiums and other events so that they can continue tobe shared throughout society.
Q3: Finally, please provide a message for readers.
RIETI will step up efforts to conduct research activities and holdsymposiums that are suited to the needs of the time, while playing
its role as a policy think tank, namely a knowledge platform thatacts as a bridge between academia and policymakers. I hope thatreaders will follow REITI's future research activities as we attempt
to develop a more affluent and stable economy and society, andthat they will help us by further disseminating our research.
*Note 1. The fourth medium-term plan covered FY2016-2019.

RIETI Highlight 2020 Special Edition

3

RIETI Event

RIETI Blockchain Symposium

Next Blockchain:
Creation of a new ecosystem for future industries
Date:
Venue:

October 7, 2019
Nikkei Hall

EventsWill 2019 be remembered as 'the first real year of blockchain'? Just as the iPhone hit the scene in 2007 and played avital role in shaping the current smartphone-centered society, the appearance of 'Libra', a crypto currency developed by
Facebook, hints at great social changes led by blockchain technologies.
Blockchain is a technology that enables safe and secure data transaction by registering data in 'ledgers' that are
irrevocable. While crypto currency receives the most coverage in the media as a use of blockchain technology, there
is a vast range of uses for the technology for governing any form of business and other transactions in areas ranging
from healthcare to preference data analysis. It is thought that it will have more impact on society than the internet as
an 'infrastructure' in fostering new industries. On the other hand, there are rising concerns about data hoarding of giant
global platformers and the possible disrupting effect of blockchain technology on national monetary policies.
Based on this, RIETI has been conducting various front-line research studies and analyses related to blockchain
technology. In this symposium, in addition to President Yano presenting our research results, Mr. Vogelsteller, an earlyand constant pioneer in blockchain development, and Mr. Pu, who is putting blockchain to creative use in various
promising business ventures, delivered the two thought-provoking keynote presentations, and we hosted a panel
discussion with various top-level panelists from different backgrounds. Through these programs, we discussed ideal
ways of utilizing blockchain technology as a system for fostering next-generation industries.
The following is a short excerpt of the symposium in the form of summaries of the speech by RIETI President Yano andpresentations by Mr. Vogelsteller and Mr. Pu. The symposium included various other fascinating presentations andconcluded in a panel discussion and Q&A session which have not been included here, but the video record of the entire
event is available on the RIETI website.
https://www.rieti.go.jp/en/events/19100701/info.html

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RIETI Highlight 2017 Special Edition

Makoto Yano
President and CRO, RIETI

Digital Data: The third factor of production
Today, there is a lot of focus on digital data. In addition to laborand capital, many people think that digital data will become thethird factor of production. Google, Amazon, Facebook, and otherlarge companies have been quite successful. Why is it that thosecompanies are so highly valued? I believe, and many would
agree, that the value comes not just from their public products
but from data. Data has become increasingly important and now
has industrial value.
Blockchain technologies were originally developed to produce
virtual currencies. However, one of the most important functions
is, I believe, blockchain makes it possible to assign each piece ofdata to a unique owner. This opens up the possibility for data to
be used efficiently and fairly.
Why is data ownership so important? It is because many “datatitans” have been born, and many more are expected to be born.
In other words, monopolization and abuse of data have started tooccur. The Economist talks about taming these “data titans,” andwe need to think about this issue. Many Western newspapers,such as The Guardian, frequently have similar articles. Somepeople hope that blockchain is a way to tame these “data titans.”
What is Blockchain?
Blockchain is a digital ledger that is immutable and tamperresistant, meaning that data also can be immutable. This gives
industrial value to data. Modern bank deposits are nothing
more than digital data. They have value only because they
are immutable and tamper-resistant. Banks manage theirdata (or deposits) centrally. However, that is very costly. A
large amount of money is spent by banks to manage data on
deposits. Blockchain technology can significantly reduce thesemanagement costs. This is because blockchain can decentralize
the management to many independent people.

How can we achieve Society 5.0?
We need to link new technologies to people’s daily lives.
If that is done, blockchain will bring large value. However,technology alone cannot accomplish this. We need to havean ecosystem in which technology and social institutions areintegrated with daily lives. To use data efficiently and fairly, safe
data ownership methodologies, methods of transacting data, an
appropriate institutional framework and people who understandthe ecosystem are all necessary.
I hope that this symposium will enhance our understanding of
the first step towards building such an ecosystem. Together withtechnical experts from outside Japan, we need to focus on newtechnologies and the industrialization of these new technologies,
as well as the type of ecosystem that will be necessary tounderpin the applications of these new technologies. We also
have to look at the future of digital data with blockchain as a key
technology. Today, I hope that we will be able to discuss the typeof future we are going to usher in with these new technologies,
including blockchain.

EventsKeynote Speech

The ability to decentralize systems is where many people
have high hopes for blockchain. According to the Science andTechnology Basic Plan, integrating cyberspace and physicalspace will enable a comfortable, healthy, and high-quality life.
It is clear from articles pertaining to “data titans” that not every
company can be trusted to deliver this vision. Blockchain could
provide a method of advancing this new world of Society 5.0
safely.

Presentation
Economies Powered by the Internet of
Blockchains
Fabian Vogelsteller
Founder and Chief Architect at
LUKSO, Ethereum Developerand Author of ERC-20

When we think about blockchain, everybody probably
thinks about Bitcoin. Bitcoin started in 2009 and it allows
global economies to transfer value without a middleman. ThisRIETI Highlight 2020 Special Edition

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RIETI Event

RIETI Blockchain Symposium

is something conventional banking infrastructure could notachieve. This is the first time that we have a global economy
based on a common infrastructure. It also introduced the concept
of decentralization, which allows for economic exchanges
without the need for trust.
The Ethereum Blockchain
In 2015, this whole technology was in a way upgraded with theintroduction of the Ethereum blockchain. This new blockchain
not only allowed the exchange of value around a blockchain,but it allowed for the programming of smart contracts. These
programs have the same properties as Bitcoin which means thatwhatever you install or interact with can be verified globally
without a central authority.

Events

One thing the Ethereum blockchain and smart contracts allow
is something called composability. Composability means thatanybody can build other systems on top of the main system andothers can do the same on top of systems others built. In otherwords, it is an open economic infrastructure where everybody
can build economic systems which can interact. That is one of
the reasons for the explosion around tokens we have seen on
Ethereum. In fact, roughly 86% of all blockchain development iseither on Ethereum or Ethereum-related technologies. It is the defacto standard when it comes to programmable blockchains andit is the most active blockchain in the world right now.
An Internet of Blockchains
We would all like to have one single blockchain that everyone
could use. With such a blockchain, we would be able to not
only transfer value, but any kind of ownership like transfers ofproperty etc. However, this is not likely anytime soon because
blockchains do not have unlimited scalability. Therefore, I
proposed the idea of an internet of blockchains. Instead of
having one super blockchain, we have one common protocol.
The closest thing to a common protocol that we have so far
is the Ethereum Virtual Machine (EVM) and Ethereum Web
Assembly (eWASM).
Most smart contracts today run in the blockchains using theEVM, but many are not on the Ethereum main network. Theinternet of blockchains, as I see it happening in the next few
years, is an internet of blockchains running similar protocols,
but with dedicated networks for dedicated communities orindustries.
Currently, if we think about the enterprise world, most people
think about private blockchains. However, with blockchain,
you ideally want to have many different players. That is exactly

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RIETI Highlight 2017 Special Edition

where blockchain is the strongest. There are reasons to build
private blockchains between different enterprises, but for themost part, blockchains are most successful as public blockchains.
These are blockchains driven by the public and are publicly
verifiable and therefore trustable. They allow anybody to join
and build decentralized applications on top of this infrastructure.
We are currently seeing the development of new dedicatedblockchains built for specific purposes or communities. Thesepublic blockchains are creating the next wave of big value
concentration. Those are not platforms, but ecosystems. They are
not isolated, as they can be connected either directly or throughsomething called umbrella networks. This is an internet ofblockchains.
The Benefits of an Internet of Blockchains
The reason we want to have separate networks is scalability
and synergies. Blockchains have limits and in fact, the Ethereum
blockchain is almost at 80%-90% of its capacity. We do need tospread over many more blockchains. A blockchain can benefit
from communities and synergies which result in global standards
that are agreed upon by all.
One thing that is very important to understand, is that every
blockchain that runs in a public setting and has no single party
to run it, requires a cryptocurrency. Without one, a network
would stop functioning immediately because there would be no
incentive for anyone to run and secure this blockchain system.
The ecosystem’s cryptocurrency not only captures the value andattracts participants to the blockchain, but it actually benefits
everybody by creating security.
With a separate blockchain ecosystem, you can incentivize
everyone to be a stakeholder along the growth path of theecosystem. If you have a common infrastructure and you are able
to distribute the shares of that network to everyone, then you cancreate growth and create strong traction. The characteristics ofthese blockchain ecosystems make them closer to the economy
of a country than that of a company.
We are now on the transition from platforms to (blockchain)ecosystems.

Presentation
Practical IoT Applications on Blockchain

Founder & CEO, Taraxa.io

Today, the number of connected devices is increasing and they
are becoming more and more embedded in our daily lives andbusinesses. There are two main pain points which blockchain
is particularly suited to addressing, one short-term and one
long-term. The short-term problem is that for business models
to succeed, businesses need to be able to trust the data theseconnected devices are producing. Blockchains can help with this.
The long-term problem is that if we stick with today’s centralized
governance structures, we will run into problems with scalability
and security as well. Blockchain’s decentralized infrastructure isideal in addressing this problem.
What can Blockchain do for IoT Devices?
Blockchain has the potential to give IoT devices unique
identities and to allow IoT devices themselves to have theconcept of asset ownership and be able to conduct transactions.
This is a critical capability required for devices to be able to
make economic decisions. This is necessary for autonomous
device ecosystems to scale and become more secure. In the end,
these properties will make devices independent and self-reliant.
Before going into the applications of blockchain technology, it
is important to know that decentralized systems are not here to
replace centralized systems. They are here to make centralized
systems more efficient, honest, and secure.
Applications of Blockchain Technology
First, trusted devices enable fair business models. We areworking with an arcade renting business in Japan. They had no
way of knowing exactly how much money their machines weremaking. What we did was build a wireless module that plugs into
the machines that reports how much each machine is earning andsends the data to a cloud. To make the data trustworthy, while thedata is generated and uploaded to the cloud, the data is anchoredonto a blockchain. It essentially puts a cryptographic signature
on it. This process guarantees two things: that the data camefrom a specific machine and that the data was not tampered with.
This establishes a basis of trust between the lessor and the lessee.

Second–open standards to encourage collaboration. As
technology becomes more complex, so do projects which
involve collaboration among many partners in various countries
within global supply chains. How do you coordinate the flow of
information? You could build a centralized enterprise resource
planning (ERP) system and force everybody around the supply
chain to get on your system, but today, there is a very goodchance your suppliers do business with other companies in
addition to you. It is inefficient for them to install and maintainmany different systems for their different partners. Instead of a
proprietary standard, you could develop an open standard. Thatway, everyone in the supply chain faces the same problems.
Instead of having one very large and difficult problem, you turnit into many smaller and easier problems. Every entity can decideto develop their own data standards and anchor them onto theblockchain.
Third, decentralized permission and certifications enable data
democratization. We are working with a large automotive original
equipment manufacturer (OEM) on democratizing mobility data.
We have lots of centralized data-driven business models that work
well today, but at the same time we see a lot of regulatory pressureand negative public sentiment with data leaks and security
breaches, so aggregation business models may not necessarily
work well in the future. We need to think about how to make ourbusiness models more future-proof for the next generation.

EventsSteven Pu

Fourth, “coopertition” through open standards. This is aterm I made which means collaboration between competitors.
We are working with one of the largest parking lot operators
in Japan and one of the things we have seen is that the parking
lot management business is very fragmented. There are many
players managing many kinds of parking lots. It is a twosided market with a lack of synchronization. You could createa centralized platform where all the data is synchronized, but
it would not work because this is a situation where a group ofcompetitors refuse to collaborate.
What we could do instead is deploy parking sensors into theparking lots which can track which parking lot is occupied, for
how long, and when. That data can then be anchored onto theblockchain. It is not a centralized platform so they can join orquit anytime they want. That way, even as competitors, they havea safe way to collaborate collectively, creating a much better
experience for both the demand side and the supply side.
As we progress through new technologies and markets, we arecontinuously looking for archetypical business models where wecan address problems with blockchain technology.
Note: Titles and affiliations are as of the day of the event

RIETI Highlight 2020 Special Edition

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RIETI Event

RIETI Special BBL Seminar

The G20 and the World
Economy:Performance and prospects
Date: October 17, 2019

Speaker:

Dale W. Jorgenson
Samuel W. Morris University Professor, Harvard University

Moderator:

Masayuki Morikawa
Vice President, RIETIIn the 21st century the balance of world economic growth has shifted from the G7 industrialized economies, led
by Europe, Japan, and the United States, to the emerging economies of Asia, especially China and India. While world
growth will continue at a rapid pace, members of the G7 will grow more slowly than the world economy, while China

Eventsand India will grow more rapidly. Growth in the advanced economies will recover from the financial and economiccrisis of the past decade, but a longer-term trend toward slower economic growth will be re-established.

Introduction
In this presentation I will talk about the outlook for economic
growth of the world economy. Every year there is a meetingof the International Monetary Fund (IMF). That meeting is
now underway. There has been an announcement by the new
managing director that the IMF has changed its outlook for
the world economy in a negative direction. They are now
much more pessimistic than they were even very recently.
This is something that we need to discuss and this is a great
opportunity for us to share our views.
Let me begin with an introduction of the basic framework. I
am going to focus on the world economy and then look at theG20. The G20 replaced the G7 as the primary internationalorganization for consultation on important world economic
problems in 2009, so it is now a fairly mature institution.
I want to pay special attention to the G20 because that is
the organization that we need to think of as articulating theconsensus about how the world should develop over the next
decade.
Following that, I am going to look more carefully at theadvanced economies of the G7, comprised of Canada, France,
Germany, Italy, Japan, the UK, and the U.S. I will also look

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RIETI Highlight 2017 Special Edition

carefully at the seven major emerging economies of the G20
which I will call the “emerging seven” (EM7). The EM7 iscomprised of Brazil, China, India, Indonesia, South Korea,
Mexico, and Turkey. I will compare the growth prospects of thetwo groups, the G7 and the EM7.
As for the basic findings, the IMF has discovered that theworld economy is slowing. The advanced economies aregoing to recover from the financial and economic crisis of
the past decade, but slower growth is going to continue and it
has already slowed substantially. I am going to focus a gooddeal of attention on the fact that the balance of the world
economy is shifting from the advanced economies of the G7
to the emerging economies of the G20. We will look carefullyat the reasons for that and try to address the question of how
permanent that change is. Finally, we are going to recognize
the fact and try to understand the implications of the fact thatthe transformation of the world economy has led to a newinternational order. It is a surprising development, but it is now
quite well-established that this new order is led by China andnot by the U.S., but the U.S., India and Japan will be the next
largest players and will therefore all maintain significance inglobal affairs.
The methodology that I am going to use originated sometime ago in a book that I wrote with Frank M. GOLLOP andBBL Seminar RIETI’s periodic Brown Bag Lunch (BBL) seminars welcome an array of guest experts to share their research and views.
The sessions encourage lively discussions that contribute to dynamic policy-related debate.

What we showed in our papers and in the books that I havedescribed is that growth and productivity can now be integrated
into the United Nations System of National Accounts (SNA).
This is important because of the fact that it is what we use tointerpret economic activity. It is extremely significant that theconcepts that we are going to focus on such as capital input,
labor input, and productivity, are developed in a way that is
consistent with the SNA.
Japan is developing its own version of an integrated system.
It will become part of the official SNA in Japan in about two
years. It is going to be part of the official statistics of morethan a dozen countries including Canada, Italy the U.K. andthe U.S. from the G7. This methodology has been proposed for
integration into the new System of Expanded and Integrated
Global Accounts (SEIGA) by the United Nations. The data forthis system has been developed in regional projects around theworld.
First, there is the European project called EU KLEMS. It
started in 2003 and is supported by the European Commission(EC) through its Research Directorate-General. It is included
in what they call their Sixth Framework Programme, Priority
8, Policy Support and Anticipating Scientific and Technological
Needs. The results for Europe were published by four European
economists, Marcel TIMMER, Robert INKLAAR, MaryO’MAHONY, and Bart VAN ARK, in their book, Economic
Growth in Europe: A Comparative Industry Perspective.
Matilde MAS and Robert STEHRER have edited a second
report on EU KLEMS called Industrial Productivity in Europe:
Growth and Crisis. This presented studies involving Europe,
as well as comparisons with economies in Asia and North
America.

A second phase of the EU KLEMS project was initiatedby Kirsten JAGER in her report, Productivity and Growth
Accounts in 2016. This covered 10 countries of the European
Union (EU) and is a very important development. She
developed this further in 2017 to include all members of theEU, as well as comparable data for the U.S. and Japan. This has
been incorporated into the work of the Economic and Financial
Affairs Council of the EC. The first of a new series of reports
has been published and is going to be developed further.
In Latin America, the story about growth involves thecountries from the Economic Commission for Latin America
and the Caribbean (ECLAC) in a report published in 2010 by
Mario CIMOLI, Andre HOFMAN, and Nanno MULDER in
Santiago, Chile, called Innovation and Economic Development:
The Impact of Information and Communication Technologies
in Latin America. A second project of this type was establishedby the Inter-American Development Bank in 2016.
Finally, in Asia, the Asia KLEMS was established by the
Asian Development Bank Institute in Tokyo in 2010. I justcame from Beijing where the fifth Asia KLEMS conference
was held. It includes the China Industrial Productivity (CIP)
database developed here at RIETI, and the Japanese Industrial
Productivity (JIP) database which has been a collaboration
involving Hitotsubashi University and RIETI since 2006. The
India KLEMS database is supported by the Reserve Bankof India and described by an Indian team in 2016 in a report
called Measuring Productivity at the Industry Level: The India
KLEMS Database.

EventsBarbara FRAUMENI, called Productivity and U.S. Economic
Growth, published in 1986. This established a standard
methodology for analyzing growth and productivity that is
appropriate for our objective. We are going to use the version
that I described in a series of papers with Paul SCHREYER,
the chief economist of the Organisation for Economic Cooperation and Development (OECD). There is also a moredetailed treatment of capital in my book with Mun S. HO and
Kevin J. STIROH, called Productivity: Information Technology
and the American Growth Resurgence, published in 2005.
The information technology component that is important in
the research program here is now fully developed and wassummarized by SCHREYER in our paper. His reports are thereports for the OECD on measuring productivity and capital.

Major trends in the world economy
What are the trends in the world economy? Throughout
the last century, the idea of a fundamental transformation of
the world economy seemed to be very implausible. However,the World Bank’s International Comparison Program (ICP)
showed that China had overtaken Japan in terms of purchasing
power parity a decade earlier. By 2012, India overtook Japan,
and it became the world’s fastest growing major economy in2015. The question is, when will China overtake the U.S.? The
World Bank reported that this actually occurred in 2014 with
China becoming the world’s number one country in terms ofpurchasing power.
We come to a very important methodological point whichis that we are using purchasing power parities. Purchasing

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RIETI BBL Seminar

power parities are relative prices of similar goods in different
countries. Using China and the U.S. as an example, theseprices enable us to express U.S. gross domestic product (GDP)in terms of Chinese prices and Chinese GDP in terms of U.S.
prices. The U.S.-China purchasing power parities are indexesof relative prices that combine the data for the two countries.
Why do the financial press magazines like The Economist
and newspapers like the Financial Times and The Wall Street
Journal continue to report that China is the world’s second
largest economy? Their reports are based on a different conceptof exchange rates. However, purchasing power parities arereflected in the statistical practice of international institutions
like the IMF, the OECD, and the World Bank, so you could say
it is the standard methodology.

most important factor, capital, which itself is divided into
information technology (IT) capital and non-information
technology (non-IT) capital. A third important factor is thegrowth of labor input, although it is less important than bothproductivity and capital. Other factors include labor quality andhours worked.

RANGE OF WORLD OUTPUT PROJECTIONS, 2018-2028
Average annual growth rates, weighted by the income share
4.00
3.50
3.00
2.50
2.00
1.50
1.00

EventsUsing these prices, we can identify three major trends in theworld economy. First, the growth of the world economy has
declined. This is nothing new, but 2005-2010 was the most
severe economic downturn since the 1930s, due to a policy
mistake on the part of central banks. The downturn was most
severe for Japan, where it was due to the failure of the Bankof Japan to respond to the rapid expansion of the Japanesemoney supply through unconventional monetary policy. As
a consequence, the yen appreciated rapidly, relative to othercurrencies, and Japanese exports collapsed, leading to a sharp
economic downturn.
Second, the growth of the world is shifting from theadvanced economies to the emerging economies, especiallyChina and India. We have already observed that Japan was
overtaken by India in 2012 and that the U.S. was overtaken by
China in 2014. This is based on the International Comparison
Project 2011 from the World Bank, which is described as thelargest economic research project ever undertaken.
Third, the transformation of the world economy has
generated a new world order led by China followed by the U.S.,
India and Japan.

Sources of world economic growth
How did this occur? To explain, I am going to make useof another economic concept which is the sources of world
economic growth. They are divided between productivity(output per unit of input) for which I will use the term totalfactor productivity (TFP), and what turns out to be the10

RIETI Highlight 2017 Special Edition

0.50
0.00

2000 - 2005

2005 - 20102010 - 2015

2015 - 2018

■ Hours ■ Quality ■ Non-IT Captal ■ IT Capital ■ TFP

From 2005-2010, two changes took place. Labor input andproductivity shrank in terms of growth, and the contributionof capital input increased. From 2010-2015, the world economy
continued to grow more slowly. Even though labor input
increased, capital input shrank and productivity growthcontinued to shrink. From 2015-2018, there was basicallyno change in labor input, a bit of a decrease in capital input,
and a bit of an increase in productivity; a continuation of thetrend from 2010-2015. That is our overall picture of the world
economy. What we can see is that the growth of the world
economy has been declining and slowing for more than 20
years.
Does this look like the world as we read about it in our
economic textbooks? If we look at the overall picture, from
2000-2018, productivity accounted for about 20% of economic
growth, while capital and labor accounted for about 50%
and 30% respectively. The capital and labor inputs together
accounted for about 80% which is the opposite of what our
economic textbooks told us. Robert SOLOW and SimonKUZNETS, who invented the idea of the sources of growth,
attributed 20% of economic growth to capital and labor and
80% to productivity. They said that economic growth is allabout productivity. Well, that turns out to be totally wrong.
What did they do differently in their analysis?
One thing they did was they left out the growth of labor
quality. They simply counted the hours. That was a very
important omission. They also left out the part about

You can find out more about this in chapter five of my bookwith HO and STIROH. Also, in SCHREYER’s report fromthe OECD, we discussed the measurement of capital input
and concluded that capital services, not capital stock, reflect
the contribution to the sources of growth. This debate led
to SCHREYER’s OECD Capital Manual which establishedinternational standards for the measurement of capital, labor,
and productivity. It has been adopted by 40 countries and ispart of the official statistics in more than a dozen countries.
Those changes are going to be made in Japan as well within
the next two years and are something that every economist inJapan is going to learn about very soon.
The conclusion is that this framework reversed the mostimportant conclusion of the KUZNETS-SOLOW approach to
growth accounting. It changed our methodology for economic
measurement and set the direction for understanding thedevelopment of the theory of economic growth. It is probably
the most significant development in empirical growtheconomics in the post-war period.

growth rate is 6.15% during the period of 2000-2005. There isa huge jump from 2005-2010, a bit of a decline from 2010-2015,
and then finally a decrease to 5.77% from 2015-2018. Overall,
inputs are dominant and productivity is less significant.

SOURCES OF G20 ECONOMIC GROWTH
Average annual growth rates, weighted by the income share
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00

2000 - 2005

2005 - 20102010 - 2015

2015 - 2018

■ Hours ■ Quality ■ Non-IT Captal ■ IT Capital ■ TFP

SOURCES OF G7 ECONOMIC GROWTH
Average annual growth rates, weighted by the income share
2.50
2.00

Eventsinformation technology. That was a very important limitation.
Furthermore, they used capital stock and asset values rather
than capital services, and they misestimated the contribution ofcapital and labor input.

1.50
1.00
0.50

The G20 consists of the EU and 19 countries. You can see
the same basic picture that productivity is important, but it is ofrelatively minor importance by comparison with the growth of
the inputs. That is true of the G20 and that is true of the world
economy. In fact, the G20 makes up about 75% of the growthof the world economy. The rate of economic growth started ataround 3.73% from 2000-2005 and went up a little to 3.79%
from 2005-2010. This increased further to 3.86% from 20102015, before falling a little to 3.77% from 2015-2018.
Let us take a look at the G7. It is a totally different picture.
Rather than having stable growth or slightly declining growth,
we have an economic catastrophe that took place during theperiod of 2005-2010. The growth was 2.23% from 20002005 and became 0.90% from 2005-2010. That was the GreatRecession, the most significant economic downturn since theGreat Depression. There was a revival from 2010-2015, anda further revival from 2015-2018, but it never got back to thelevel of 2000-2005. The sources of G7 economic growth havebeen one of steady decline and productivity is an insignificant
factor.

0.00
-0.50
-1.00

2000 - 2005

2005 - 20102010 - 2015

2015 - 2018

■ Hours ■ Quality ■ Non-IT Captal ■ IT Capital ■ TFP

SOURCES OF EM7 ECONOMIC GROWTH
Average annual growth rates, weighted by the income share
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00

2000 - 2005

2005 - 20102010 - 2015

2015 - 2018

■ Hours ■ Quality ■ Non-IT Captal ■ IT Capital ■ TFP

Looking at the EM7, again, a totally different picture. The

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RANGE OF WORLD OUTPUT PROJECTIONS, 2018-2028

Projections of world economic growth

Annual percentage growth rates
4.5

What we need to focus on is the future growth of the world
economy. We derive projections of output and capital input
from future trends of demography and productivity growth.
This is a standard economic growth theory that we referto as the neo-classical model of economic growth. Trends
in demography, whether at the world level or the level ofindividual countries, are relatively slow to change. Productivity
growth is highly variable and future productivity growth is themain source of substantial uncertainty.

Events

To visualize the future growth of the world economy, I utilize
various sources of data, such as the United Nations’ projectionsof world population growth due to changes in age, gender, andeducational attainment. I use productivity projections fromwork I have done for a conference board in New York, based on
future trends in the development of information technology andnon-information technology, and use a model to derive output
and capital projections. Future economic productivity growth isgoing to be the main source of what we are going to see as themost substantial uncertainty.

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

2008 - 2018

Pessimistic Case

Base Case

Optimistic Case

■ Hours ■ Labor Productivity

RANGE OF G20 OUTPUT PROJECTIONS, 2018-2028
Annual percentage growth rates
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

2008 - 2018

Pessimistic Case

Base Case

Optimistic Case

■ Hours ■ Labor Productivity

What does the future of world economic growth look like?
Using data from the last decade of 2008-2018 for reference,
we can construct a base case which is the projection of thenext decade of 2018-2028. Comparing the last decade with thenext decade, the baseline case is that overall world economic
growth is going to decline from 3.36% to 3.24%. For the G7,
growth is projected to slow from 1.45% to 1.18%. For the EM7,
growth is projected to slow from 6.26% to 4.46%. For the
G20, growth is projected to slow from 3.6% to 3.1%. Using theslowest growing five years and the fastest growing five years
from the last decade, we can project a pessimistic case andan optimistic case. For the G7, the pessimistic case is 0.91%
and the optimistic case is 1.46%. For the EM7, the pessimistic
case is 3.7% and the optimistic case is 5.69%. For the G20, thepessimistic case is 2.5% and the optimistic case is 4.0%.
To summarize, the world economy is entering a period ofsustainable growth at a rate of 3.24% during the next decade,2018-2028. This is only slightly below the growth rate of thelast decade, 2008-2018. Even with slower growth, the relative
importance of emerging economies like China and India willcontinue to increase. Potential growth will decrease in the G7
and shrink the relative importance of advanced economies in
the world economy. The upside potential for the world economy
is considerable, but this will require ambitious changes inacademic policy which appear to be very unlikely.

12

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RIETI Highlight 2017 Special Edition

RANGE OF G7 OUTPUT PROJECTIONS, 2018-2028
Annual percentage growth rates
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

2008 - 2018

Pessimistic Case

Base Case

Optimistic Case

■ Hours ■ Labor Productivity

RANGE OF EM7 OUTPUT PROJECTIONS, 2018-2028
Annual percentage growth rates
6.0
5.0
4.0
3.0
2.0
1.0
0.0

2008 - 2018

Pessimistic Case

Base Case■ Hours ■ Labor Productivity

Optimistic CaseConclusion

order for the 21st century which is going to continue to develop.
If you are interested, all of this is discussed in my book with
FUKAO Kyoji and Marcel P. TIMMER entitled The World
Economy: Growth or Stagnation (https://www.rieti.go.jp/en/
publications/summary/16120010.html ).

In conclusion, the base projection for the world economy isfor moderate but sustained growth, and most importantly, ashift from the advanced economies of the G7 to the emerging
economies of the G20. We have now established a new world

Q&A
Q1:
You said investment in IT is decreasing, but according tosome analyses China is working very hard and has invested
a lot in IT. Could you please elaborate on that?

countries have adhered to, is something which could bringabout the necessary changes.

Q2:
Measures against climate change could have a positiveeffect or a negative effect on the global economy. Whateffects can we expect from measures against climatechange on the global economy?
Dale W. Jorgenson:
The effect of climate change on the global economy isgoing to be negative. There is going to be slower growthand it is going to be necessary to have investments thatmake growth possible. Japan is going to have to bring
their remaining nuclear plants back into operation. Thereis a very important opportunity in the energy sector todeal with this issue. The Paris Agreement, which manyIn the future projection of 2018-2028, you had pessimistic
and optimistic cases. Right now, the Fourth Industrial
Revolution is ongoing with artificial intelligence and othernew technologies coming in. Are these technologies
included in the projections, or are there other explanations
for the optimistic projections?
Dale W. Jorgenson:
The difference between pessimistic and optimistic isessentially a representation of the uncertainty that is
associated with any of these projections. The fact is that
there is an enormous amount of uncertainty. For example,
productivity is of relatively minor importance, but it isan area where I think we can see that the opportunities
are characterized as those that are associated with thedevelopment of new technologies. The key is to understandthe forces controlling the development of new technologies.
This is not something that is limited to information
technology. There are many other new technologies that
could play a role in this picture. It is clear that most ofthese new technological developments are not going to
be occurring in advanced economies, but are going totake place in emerging economies, where the role ofmanagement will become critical, but where management
capability is underdeveloped. This is where I think Japan
can play a significant role, as a country with economic
ties to China, India and other emerging economies, wherebridging will be important. Japan is in a unique position of
being an advanced economy right in the middle of the area
where the uncertainty is greatest. Japanese management
and technological potential could pay off if opportunities
can be identified and exploited effectively.

EventsQ3:
Dale W. Jorgenson:
China’s investment relative to its GDP is the highest in
the world, but it is something which it is going to have togradually decrease. I do not see a way for China to avoid
this situation. I have just come from Beijing and it is quite
clear to me that it is going to be necessary for China tomaintain or even decrease their level of the investment, toincrease their level of consumption, and to move people
from relatively unproductive parts of the labor force,
mainly in agricultural areas, to urban situations where they
can get a better education and become more productive.
The IMF is focused on output for growth, but what mattersfor economic growth is the input side. The growth of inputs
through investment in capital is the way that I view thetransformation that is taking place in the world economy. It
requires change in the composition of the input side, not of
the output side.

Note: Titles and affiliations are as of the day of the event

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RIETI Event

METI-RIETI Policy Symposium

Corporate Governance for Global
Companies:
Toward an increase in corporate value
Date:
Venue:
Hosts:

September 2, 2019
Iino HallMETI / RIETI

In recent years, it has been increasingly
important for global companies to actively
manage their portfolios and to ensure effective
control of subsidiaries with the shrinkage ofthe domestic market due to various factors,
including rapid changes in the industrial
structure caused by the Fourth Industrial
Revolution and the aging of society with a lowbirthrate. Against the backdrop of this challenge,
the Corporate Governance Systems Study Group

Events(CGS Study Group) at METI formulated andpublished the Practical Guidelines for Corporate
Governance Systems (CGS Guidelines) in June 2019 after one and a half years of debate. At this symposium, Professor
Hideaki Miyajima, who is a member of the CGS Study Group and who serves as the leader of RIETI’s Frontier ofCorporate Governance Analysis project, explained the results of his research on the topic. In addition, panelists withexpert knowledge in this field, including researchers, practitioners, lawyers and administrators, held discussions
on the role of corporate governance in increasing corporate value over the medium- to long-term and achieving
sustainable growth. This is an excerpt from the symposium focusing on Professor Miyajima’s presentation.

Global Companies' Group Governance:
Toward Increasing Corporate Value
Problems related to group governance
Since the 2000s, Japanese companies have made significant
progress in shifting to group management. This comes against
the backdrop of the globalization of Japanese companies andan increase in overseas group companies. However, Japanesecompanies' group governance has not necessarily achieved
sufficient results. There are five major problems related toJapanese companies' group governance.
First, the profitability of Japanese global companies is
low by global standards. Second, they are lagging behindin carrying out business reorganization, resulting in a
decline in overall profitability. Third, large-scale mergers
implemented through cross-border M&A activity have not

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RIETI Highlight 2017 Special Edition

always generated profit, with some companies reporting
impairment losses. Fourth, in some recent cases, misconduct
occurred due to inadequate internal controls, increasing
reputational risk for parent companies. Fifth, friction between
parent companies and subsidiaries and between controllingshareholders (parent companies) and minority shareholders
have become conspicuous at some listed subsidiaries.
In order to seriously consider these problems, the Ministryof Economy, Trade and Industry (METI) has held meetingsof the Corporate Governance System Study Group (CGS
Study Group) since 2017, and the results of the meetings
were presented in the form of the Practical Guidelines for
Corporate Governance Systems (CGS Guidelines).
A question related to the design of a groupstructure
Regarding the design of a group structure, companies
adopting a pure holding company structure have increased

The Guidelines also propose four steps toward resolving
other organizational issues for diversified businesses, i.e. thechoice of establishing a subsidiary or a division within a legal
entity. First, it is necessary to consider optimal governancefor achieving synergy effects on the financial and operational
fronts. Second, it is important to consider the merits oflegal personality. Third, the optimal balance between
decentralization (transfer of authority) and centralization(control by the head office) should be identified. Fourth,although Japanese companies are proceeding with thedecentralization process, the systems of the parent company
should be strengthened because some synergy effects
will disappear after devolution, as various units become
independent.

evaluation of business feasibility as infrastructure and it isalso necessary to develop a system to determine optimal
capital costs. The Guidelines emphasize the important role
to be played by the chief executive officer (CEO) in the final
implementation of this system.
A governance issue related to listed subsidiaries
Regarding governance of listed subsidiaries, thesimultaneous listing of parent companies and subsidiaries
has emerged as a major issue. Previously, in many cases, alisted subsidiary was established when the parent company
carved out a business division. However, since the 2000s, it
has become more common for a company taken over throughan M&A to become a listed subsidiary. The kind of conflict ofinterest faced by listed subsidiaries differs depending on how
they come into being.
The Guidelines propose the following three solutions.
First, the raison d'etre and rationale for maintaining listed
subsidiaries should be regularly reviewed and explained toshareholders because they are an unstable presence. Second,
the regulations governing independent outside directors
should be strengthened because such directors at subsidiaries
must not be prejudiced in favor of the parent companies.
Third, outside directors should account for at least onethird, or even a majority, of the board of directors of listed
subsidiaries because they need to adopt a more rigorous
governance system than ordinary listed companies.

Eventsrapidly in recent years. However, which types of companies
should choose a pure holding company structure and whichtypes should choose a holding company structure while
maintaining their status as operating companies is a criticalquestion. Based on the existing theoretical and empiricalresearch, the Guidelines propose that companies which needto rapidly restructure business portfolios or which can expect
to achieve synergy effects on the financial front should choosea pure holding company structure, while companies which
can expect to achieve synergy effects in terms of technology
and product development are better suited to an operatingholding company structure.

Problems related to business portfolio
management
With respect to business portfolio management,
the diversification trend is growing, but it is obviousthat the profitability of Japanese companies is low
by international standards. The more diverse andthe larger Japanese companies have become, the lessprofitable they have become.
Therefore, the Guidelines recommend thatcompanies identify their core businesses and theyalso point out the importance of identifying the "bestowner" who is capable of unlocking the potential ofindividual businesses. The Guidelines also point to
the need for the parent company to play the leadingrole and the need for outside directors to proactively
involve themselves in optimizing the businessportfolio.

Hideaki Miyajima
Faculty Fellow, RIETI /Professor, Faculty of Commerce, Waseda University / Executive Vice
President, Waseda University / Adviser, Waseda Institute for Advanced

Concerning the restructuring of business portfolios,
it is essential to lay the financial foundation for the

Study

Note: Titles and affiliations are as of the day of the event

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RIETI International Workshop

RIETI Event

Frontiers in
Research on
Offshoring
Date:
Venue:
Hosts:

August 2, 2019
RIETI's seminar room
RIETI / Hitotsubashi Institute for Advanced Study

On August 2, 2019, the "Frontiers in Research on Offshoring" workshop was held as a part of the Analyses ofOffshoring project led by Jota Ishikawa (RIETI Faculty Fellow). In the workshop, four distinguished scholars in thefield of international trade—Keith Maskus (University of Colorado), Monika Mrazova (University of Geneva), Amber Li

Events(Hong Kong University of Science and Technology), Carsten Eckel (University of Munich)—and two project memberspresented and discussed their papers.

Keith Maskus | University of Colorado
Keith Maskus presented the paper entitled "Intellectual Property Related Preferential Trade Agreements
and the Composition of Trade." This paper investigates the effect of preferential trade agreements (PTAs)
associated with intellectual property rights protection (IPP) on trade. Because PTAs with the U.S. and EU
often entail IPP and IPP rules are demanded by the U.S. or EU, IPP induced by PTAs is exogenous topartner countries. Hence, the identification strategy is to use countries whose partners are the U.S., EU or
European Free Trade Association (EFTA). The effects are investigated by the income level of countries andIP-sensitive sectors. Empirical results show that high-IP goods exports rise after PTAs and the exports by
non-member countries also rise in high-IP sectors, which suggest that IPP has a positive effect on trade
when IP matters.

Jota Ishikawa | RIETI / Hitotsubashi University
Jota Ishikawa presented the paper entitled "Tax Havens and Cross-border Licensing." Taking advantageof the differences in tax systems among countries, multinational enterprises (MNEs) try to save tax
payments. To cope with tax avoidance, OECD proposed the arm's length principle (ALP). The paper deals
with multinational enterprises' (MNE's) transfer pricing of intangible assets which is licensed by meansof ad valorem royalties and investigates how the ALP affects MNE's licensing strategy and welfare in thepresence of a tax haven. It is pointed out that the ALP may distort MNE's licensing decisions and hence
welfare may deteriorate. This analysis sheds new light on how to apply the ALP to transfer pricing.

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RIETI Highlight 2017 Special Edition

Monika Mrazova | University of Geneva
Monika Mrazova presented the paper entitled "Trade agreements when profits matter." The paper focuseson the fact that trade policies in oligopolistic markets give rise to not only the terms-of-trade externality but
also the profit-shifting externality among trading countries. The paper considers import tariff and export
subsidy as trade policies in the repeated-game framework, and finds that the above two externalities makeimport tariff more self-enforcing than export subsidy. The novelty of the paper is to identify a new role ofoligopolistic markets in understanding the reality that WTO member countries negotiate on import tariffand ban export subsidy.

Toshihiro Okubo | Keio University
Toshihiro Okubo presented the paper entitled "Individual Preferences on Trade Liberalization: Evidence
from a Japanese Household Survey." In recent years, developed countries have seen offshoring of
manufacturing firms and uncertainty of international trade. It is important to investigate individuals’
preferences toward trade liberalization such as TPP. Using a series of questions on trade liberalizationin KHPS (Keio Household Panel Survey), this paper conducts econometric analysis. It is found that
individuals’ preferences on trade liberalization depends not only on income and education as traditional
happiness, risk attitudes, social stance, and morality. As globalization proceeds, it is important to study
more about individuals’ trade preferences.

Eventstrade theories have suggested but also on non-economic factors and non-cognitive factors such as

Amber Li | Hong Kong University of Science and Technology
Amber Li presented the paper entitled "Processing Trade, Productivity and Prices: Evidence from a
Chinese Production Survey." This paper examines the productivity differences between exporters anddomestic firms in China. In particular, this study compares the productivity of processing trade, ordinary
trade, hybrid (both processing and ordinary), and domestic firms. Because output quantity data isavailable, not only revenue-based productivity, but also physical productivity is estimated. Empiricalanalysis shows that while exporters' productivity is not higher than domestic firms when using revenuebased measures, the productivity of processing trade is higher than otherwise using physical productivity.
This implies that the prices of processing trade firms are lower, which results from the low input prices.

Carsten Eckel | University of Munich
Carsten Eckel presented the paper entitled "CATs and DOGs." This paper theoretically analyzed CarryAlong Trade (CAT), by which a manufacturing firm exports final goods fabricated by other manufacturingfirms when it exports its own final goods. Although there have been a few papers analyzing CAT, thispaper is distinct in that it compares CAT with the case where firms directly export their goods (Delivery of
Own Good, DOG) and uses an oligopoly model to take strategic interaction between firms into account.
The results suggest that firms may choose CAT over DOG even if transportation cost is higher for CAT,
regardless whether goods are substitutes or complements. Besides that, the shift from DOG to CAT may
increase prices and hurt consumers when goods are substitutes. Given that CAT accounts for a certain
fraction of the real-world exports, these new welfare results provide useful policy implications.
Note: Titles and affiliations are as of the day of the event

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RIETI Event

RIETI BBL Seminar

Can Big Data Change
Official Statistics?
– Learning from advanced overseas cases
Date:

Speaker:March 14, 2019

Yoko Konishi
Senior Fellow, RIETI / Specially Appointed Professor, Graduate
School of Economics, Osaka University

With the accumulation of large amounts of data and the development of new technologies as a consequence of thedissemination of big data, artificial intelligence (AI) and IoT technologies in recent years, there is a growing interest in
applying big data to official statistics. What degree of benefit would be seen in statistical surveys and their accuracy if

Eventstechnology were applied to data collection in order to reduce statistical survey costs, or if private sector big data andadministrative record information could be used in creating statistical indicators? In this report, advanced examples
in the UK, the Netherlands and Singapore are introduced as outcomes of overseas fact-finding tours made as a partof METI’s 2018 big data project, along with discussions about potential advantages or challenges in applying private
sector data to official statistics, which is a topic METI is currently working on.

Introduction
Today, I would like to talk about the positive effects that theuse of big data and AI-related technologies would have on official
statistics, which have been prominent in the news media since
2018, as well as a bright perspective for the future. Specifically,
I will introduce initiatives undertaken by the world’s leading big
data user countries, based on an overseas investigation report we
made as part of the “2018 Project by the Ministry of Economy,
Trade and Industry (METI) for Undertaking/Reviewing Resultsof the Current Survey of Commerce Using Big Data andDeveloping New Indices,” in addition to some results from the
Ministry’s “New Index Development Project.”

Tailwind for big data, AI, and statistics booms
First, to help better understand the recent growth of interest
in official statistics, I would like to explain their current
circumstances. AI has been a subject of study since as earlyas the 1950s. However, there were no computers capable of18

RIETI Highlight 2017 Special Edition

implementing the theory with the algorithms they had alreadydeveloped at that time, and once the capabilities of computersreached an appropriate level, there was still insufficient data toadvance the study of AI further until the early 2010s. Machinelearning, which is one approach to AI, has also been flourishingsince the 1990s, but encountered the same problem in that theamount of available data was insufficient to qualify as “bigdata,” which is what facilitated the intense boom in the use ofmachine learning today. During those days, researchers were
engaged in R&D activities focused on deep learning and othertopics, providing a basis for the current AI boom. In 2012, a deeplearning technology won the first prize in an image recognition
contest. As a result, AI attracted the world’s attention, whichcaused the third AI boom in Japan starting in 2013. The AI
boom was fueled by the big data boom that occurred in the same
period in 2012.
In 2012, after a long period of disarray, AI, machine learning,and big data booms started to move in a concerted way,
generating a growing interest in statistics. An increase in thenumber of data users resulted in more people paying attention to
official statistics, which had previously been of interest only to alimited number of experts.

BBL Seminar RIETI’s periodic Brown Bag Lunch (BBL) seminars welcome an array of guest experts to share their research and views.

Currently, a number of factors—the dissemination of AI andIoT technologies, development of new technologies throughthe use of big data, and the new demand from industries
wishing to apply these technologies—provide unprecedented
opportunities, and a significant boom has been observed, alongwith its impact on society as a whole. With this in mind, in 2014,
METI launched a big data project. I have participated in the
project since 2016, and act as its Chair for this year. The project
team aims to further develop official statistics and create new,data-based businesses in Japan by linking big data and newtechnologies.

only by email or mobile phone. These diversifications have madeit challenging to collect questionnaire responses and to identify
types of operations using conventional approaches.
In response to these situations, our project team has been
undertaking activities to use big data and new technologies in
the production of official statistics. The reason for the longevityof this project is partly attributable to the government's mentionof the use of big data as a new source of data for official statistics
in the Basic Policy for the Fundamental Reform of Economic
Statistics, which was adopted at a meeting of the Council on
Economic and Fiscal Policy in December 2016.

Difficulties in producing official statistics

How will the official statistics workflow change?—
Initiatives under the project

Recently, there is a growing demand for increasing theaccuracy of official statistics. On the other hand, the survey
environment has been deteriorating. This means that it has
become difficult to maintain the quality of official statistics
using only traditional statistical survey approaches which rely on
the data obtained from such sources as households and reports
submitted by corporations. For example, the rapid emergenceof new types of businesses represented by the sharing economy
has made it difficult for official statistics producers to identify
and classify industrial structures in a timely manner. Further,as a result of changes in corporate activities (e.g. servicificationof manufacturing industry and manufacturing by the service
industry), it has become difficult to identify industrial structures
based on the existing industry classification approach. Somecompanies have no specific office address and can be contacted

We, the project team, are considering the roles to be playedby big data and new technologies in the current workflow
of statistical surveys (see the chart below). There is a great
possibility that we can apply new technologies to the current
workflow. For some examples (among many), we can use thefollowing: 1) AI technologies to input data and find outliers inquestionnaire responses and aggregate data; 2) data science
technologies to aggregate and process data; 3) robotic process
automation (RPA) to tabulate data or transform data into graphs
and texts; and 4) digital dashboards to publish results for theconvenience of users.
The project team also undertook an initiative which replaces
the paper- and web-based questionnaire responses with big
data held by private sector data vendors. Specifically, after
obtaining approval from the Minister of Internal Affairs andEvents

The sessions encourage lively discussions that contribute to dynamic policy-related debate.

Current Official Statistics’ Workflow
Cloud technologies
Artificial
intelligence

Online submission

Finalization of
aggregated data

Summary examination

Artificial
intelligence

Aggregation

Adjustment ofquestionnaire data

Questionnaires

To be replaced by
big data

Data input

Paper-based
submission

Receiving/Organizing

Questionnaires

RPA*

Tabulation/
Transformation
into graphs
and text
Publication

Analysis/Secondaryprocessing/
Editing

Booklets/
Websites,etc.

Digital dashboards

Data science
technologies* RPA: An abbreviation of Robotic Process Automation. A concept of technologies that streamline or automate white-collar jobs (mainly routine work) using a software-type robot
in personal computers. (Excerpted from WinActor website)

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19

RIETI Event

RIETI BBL SeminarCommunications in July 2018, we applied this new survey
approach to METI's Current Survey of Commerce andconducted the Survey as one of the General Statistical Surveys
in accordance with the Statistics Act. The results were publishedin February 2019. Although it was applied only to a part ofthe data collection process, as shown in the chart on Page19,
we succeeded in developing a new survey approach based on
approval from the scheme owner, which means that we havetaken the first major step forward.

Fact-finding tour to countries that are most advanced
in using big data

EventsWe embarked on an overseas fact-finding tour in December
2018. On the tour, we visited multiple cities and organizations in
the UK, the Netherlands, and Singapore. These countries wereselected from among those that had referred to the promotionof digital government and the use of big data; had examples of
empirical studies; and implemented or used big data in official
statistics.
During interviews, we checked whether they were engaged
in the development of additional human resources responsible
for the production of statistics, as well as systems put into place
to better the analytical and publishing processes. The term “bigdata” here refers to both data held by private sector companies
as well as administrative record information held by thegovernment.

Use of big data in official statistics
First, in relation to our test survey, in which the private sector’s
big data was aggregated and used in official statistics instead of
paper- and web-based responses, we conducted interviews on
the use of big data in official statistics and implementation statusof statistical surveys. As a result of the interviews, we foundthat while big data was used to determine a portion of consumer
price index (CPI), none of the three countries was engaged in an
initiative designed to replace the survey itself with big data.
On the other hand, we identified many cases where big data
was partly used for the creation of indices.
In the UK, the government created the UK House Price Index(UK HPI) as official statistics in cooperation with multiple
institutions. Other examples included the use of Google Street
View information to measure the depth of greening, as well as
the use of ships’ transportation data to forecast GDP.
In the Netherlands, the government works in partnership withprivate sector firms during the index-development period anduses their big data (e.g. mobile phone location information) free

20

RIETI Highlight 2017 Special Editionof charge for research purposes. The government’s policy is that
if the big data contains any information that is highly accurate
and useful, it should be approved as official statistics.
In Singapore, we found that administrative record information
was used in a highly advanced way. Tax information wasanonymized so that it could be used for statistics production
purposes, even within a limited environment. However, withprivate sector think tanks and research companies alreadyconducting extensive surveys and rapidly publishing a wide
range of indices, the government appeared less motivated to use
private sector big data for official statistics. .

Development of human resources in the field ofstatistics production
In terms of human resource development, the UK was themost advanced among the three countries. The UK government
provided a detailed definition of “data scientist” and establishedthe Data Science Campus within the Office for National
Statistics (ONS) in 2017. On the Campus, 40 data scientists
work as faculty to educate 500 data scientists by 2021. One of
the characteristics of the Campus is its learning environment, inwhich experts are provided with advice on their career path andscope of work after the completion of the course, so that they canlearn without worrying about these issues.
In the Netherlands, the interview session was conducted in
the form of a workshop to allow participants from both sides
to mutually report on their activities. Most of the officials who
participated from the Netherlands’ side had a PhD degree instatistics, physics, or economics, indicating the high level ofresearch ability held by the staff working in the field of statistics.
The Singapore government has concluded an MOU with
the National University of Singapore (NUS), setting a goal of
making government employees digitally literate, by teachingbasic digital literacy skills to all of them and providing data
analysis/data science training to 20,000 of them by 2023.
Consequently, we found that all of the three countries were
engaged in the development of data scientists by setting highnumerical targets and concluding MOUs with academic andpublic research institutions.

Framework for producing official statistics
In the UK, as a result of recent revisions to statisticsrelated laws, access to administrative record information, tax
information, and private sector data for the purpose of producing
statistics is now allowed. In conjunction with this, relevantorganizations have been joined by privacy protection and inter-Improving the method of publishing statisticalinformation
When producing official statistics, most time is spent
finalizing the survey results. However, in order to disseminate
the results, it is indispensable to develop some systems designed
to improve the publication method. We investigated eachcountry’s efforts on the publication method, with regard to which
Japan is seemingly lagging behind.
The UK seemed less proficient at disclosing information
online, but once statistical surveys were produced, they weretranslated into different source codes and shared among relevant
personnel.
The Netherlands is very active in analyzing and publishingstatistics, and effectively undertaking PR activities using avariety of media, including the website, Facebook, Twitter,
Instagram, RSS, newsletters, and videos. This is against thebackground that, being a multi-ethnic country, a wide rangeof languages are spoken in the Netherlands, and therefore
sometimes images and pictures might be more effective thanwords to communicate information. In addition, due to the factthat some generations are not accustomed to accessing paper-

based media or websites, the government is eager to use social
network services to disseminate information. While information
providers may be required to perform multiple tasks, thecontinued use of different media seems to be importantin publishing survey results nationwide. Another major
characteristic of the country is that the government sticks to inhouse production in the aim of preventing outsourcing-derived
complexities from interfering in daily work.
Singapore actively uses data visualization. It has published1,691 datasets and 13 APIs on the GovTech's Data.gov.sg portal,
in a manner that is friendly to those who use them for statisticalanalysis and data creation. The government saves development
time and costs by assigning an in-house team to the systemdevelopment and by using open source software. One of its soonto-be-achieved goals is to provide statistical data immediately
in an easy-to-use state—namely, in an integrated data format—
upon a user’s request, just like water coming out of the faucet.

Using big data as data sources for the Current Surveyof Commerce: Test survey
As mentioned earlier, we conducted a test survey in which theCurrent Survey of Commerce was partly replaced with big dataand published as official statistics. None of the three countries
we visited has conducted such an initiative, indicating that Japanis one step ahead of them. In the following paragraphs, I would
like to introduce our initiatives.
First, in 2017, we created the “Scanner Data-based Index ofCommerce at Large-scale Specialty Retailers for Home ElectricAppliances” for the purpose of identifying weekly sales trends
using POS (point of sale) data collected by large-scale electric
appliance retailers. In cooperation with GfK Marketing Service
Japan (hereinafter “GfK”), we developed a sales trend index
by collecting, cleaning, and aggregating data based on thesame standards as those of existing commercial trend statistics.
The index had slight differences from existing statistics but
captured the trends almost as accurately. In view of the successof this attempt, we conducted a statistical survey using a new
approach, which was designed to obtain information from POS
data collected by large-scale electric appliance retailers and todevelop questionnaire data for the electric appliances category
in the Current Survey of Commerce. In the past, each survey
participant company submitted questionnaire responses to
METI. However, under the new approach, the questionnaire data
is input by entrusted private enterprises that are already doinga data business with the survey participant companies. Afterthe scheme was approved by the Minister of Internal Affairs
and Communications in July 2018, the survey was conducted
as a General Statistical Survey in accordance with the Statistics

RIETI Highlight 2020 Special Edition

Eventsorganization data transmission legal experts. In this context,
personnel who can act as coordinators between experts havebecome valuable. These staff members must have sufficientknowledge to understand technical terms as well as strong
communication skills. In Japan, it is often the case that one
single person plays a number of roles. However, in the UK,
coordinators are valued and their positions are highly regarded,
which leads to people working smoothly as a team.
The Netherlands established the Center for Big Data andStatistics (CBDS) in 2016, and concluded partnerships with 45
corporations, including the University of Amsterdam, Leiden
University, private sector companies such as IBM and Microsoft,and foreign bureaus of statistics. In addition, the government
employs statistics officials who have a PhD in statistics, physics,
or economics and are capable of performing advanced statisticalanalyses including the use of AI technologies. They are active in
conducting analyses that are useful for the development of new
statistical indicators and policies. The results of the analyses areproactively released as a beta version on the CBDS’s website.
In Singapore, Data.gov.sg was established in 2014 as anorganization that reports directly to the Prime Minister,
separately from the existing Department of Statistics. While
the government pays less to its statistics officials than GAFA,
it competes with the big four tech companies in terms of HR
development, and offers women-friendly working conditions to
attract talented data scientists.

21

RIETI Event

RIETI BBL Seminar

Act. Its results were published in February 2019. This may seemto be a small step, but has a significant meaning. As a result ofprivate sector companies with big data having been authorized
as official statistics reporters, the following will become
possible: 1) reduction in the burdens on survey participants(reporting companies); 2) product classification using big data;3) more detailed area classification; 4) more timely and accurate
data aggregation/publication; and 5) creation of business
opportunities for data vendors.

Characteristics of test survey results (Category:large-scale electric appliance retailers)

Events

The advantages of creating a sales trend index for the Current
Survey of Commerce using POS data include the following:1) increased frequency of data aggregation (weekly insteadof monthly); 2) acceleration of publication; 3) more flexible
aggregation than the Standard Industrial Classification (because
POS data is classified by commodity) including the availabilityof quantity-based information in addition to price-based
information; 4) reduction in the burdens on survey participants;
and 5) more efficient performance of statistics tasks.
The use of test survey results obtained in the project will makeit possible to aggregate data to create statistics tables on electric
appliances sales trends on a weekly basis, which may lead to an
earlier publication of statistics. In addition, users will be able
to view each commodity’s sales records by prefecture, in moredetailed commodity breakdowns. Furthermore, it will enable
users to get e-commerce-based sales data, which was unable toseparate previously. In the following sections, I will introduce
new indices that relate to the use examples.

Examples of using test survey results and creation of
new indices
For example, users can analyze weather data and sales trends
by reviewing the weekly air conditioner sales data. In 2018,
Japan recorded the highest temperature after mid-July since1964, when weather statistics were first developed. In a typicalyear, sales of air conditioners reach a peak only once in early
July; however, we found that there were two peaks in 2018—thefirst one in early July and the second and higher one in late July.
Similarly, in December 2018, a large-scale cashback campaign
was run for product purchases. If a year-on-year comparison was
done using nationwide monthly data, the impact of the campaign
would only have been seen on a national level and would havelacked any granularity. However, in reality, the comparison wasmade based on prefectural weekly data, leading to a finding thatthe impact was most evident in Tokyo. As mentioned above,

22

RIETI Highlight 2017 Special Edition

when data is categorized by period, area, or commodity, users
can measure the impact of an event, policy, natural disaster, etc.
in a more detailed manner.
The new indicator, in the development of which I took part
together with GfK, uses each electric appliance product’s
country-of-origin information. This enabled us to identify
whether the product was made in Japan or another country—
so we calculated the ratio of made-in-Japan products to imports
on both product-by-product and monthly bases. Needless to say,because the data was POS-based data, we were able to makecomputations based on both sales value and sales quantity.
As a more advanced attempt, we focused only on domestic
products and estimated the amount of domestically produced
products using the data on made-in-Japan products purchasedby consumers. Specifically, we estimated the final Indices ofIndustrial Production (IIP) using domestic products’ sales value
and sales quantity data, for eight items included in the Consumer
Electric and Electronic Appliances category. Considering thefact that we were going to use sales data, we assumed that thedata had a time lag of one month from the production period.
Then, we compared the trends and found that the estimate
could be used as a “nowcast” of final IIP figures and that the
publication date could be earlier, if only slightly.

Future prospects and challenges
Advantages of using private sector big data include thefollowing: 1) their publication can be accelerated; 2) the
frequency of aggregation can be increased; 3) aggregation can bedone in a more flexible way compared to the Standard Industrial
Classification as the data is commodity- or behavior-based; 4)burden on survey participants can be reduced; and 5) statisticaltasks can be performed in a more efficient way. On the other
hand, disadvantages are the following: 1) it is difficult to control
accuracy and bias; and 2) continuous availability of data cannot
be guaranteed because of possible merger or bankruptcy ofprivate sector data holders. These disadvantages are not relevant
to administrative record information (e.g. tax, registration,and vehicle-inspection information) as it is collected by publicagencies.
If the project’s test survey becomes a Fundamental Statistical
Survey from a General Statistical Survey, Japan may become theleading county in the field of using big data in official statistics.
To achieve this, it is necessary to strengthen cooperation
between relevant ministries and private sector companies, obtainadministrative record information and big data at low cost, anduse them in a more active way. We consider that there is anurgent need to enhance the implementation structure, provide

While it may be possible and meaningful to use private sector
big data and administrative record information in statisticalsurveys, such use requires budgetary reallocation, additional
procedures, and appropriate human resources. However, what’smore important is the eagerness to use big data, the discoveryof talented people who have new and unique ideas, and an
environment that is supportive of these people. I strongly hopethat in the future Japan can play a leading role in this field.

training and educational opportunities, and develop humanresources including the use of external staff.

Conclusion
What is the answer to the title question, “Can big data change
official statistics?” I think the answer is yes. To change official
statistics using big data, we need to actively learn from overseas
cases and continue the efforts to use data that we have on hand.

Q1:
I would like to ask about the use of data obtained from private
sector service providers. I think that it is often the case thata private company produces statistics and sells the results.
What do you think about the division of roles between thegovernment’s official statistics and private sector statistics?
Has this topic been discussed in other countries?
Yoko Konishi:
Recently, the media has highlighted the private sector’sdata businesses. Some argue that official statistics may beunnecessary if the government encourages competition
between companies and collects reliable data from thewinner, or that the production of official statistics may beoutsourced to private sector companies. However, I thinkthat at this point in time, there is a difference in quality
between the government’s official statistics and commercial
statistics produced by private firms in accordance with
their customers’ needs. Singapore seems to have a realistic
approach to the division of roles. For example, short-period
statistics such as monthly or weekly reports for economic
trend are published by the private sector because shopping
malls have a significant amount of commercial data and thinktanks have high analytical capabilities. On the other hand, thegovernment produces official statistics with longer publishing
periods.

Q2:
When producing Fundamental Statistics, necessary data isprovided free of charge, because data providers are legallyrequired to do so. However, in the case of General Statistics,
the government needs to pay outsourcing fees to private
sector companies. What measures are taken in other countries
to address cost-related issues?

Yoko Konishi:
We did not ask questions about actual costs incurred to
conduct respective surveys. We hope we can carry out
additional research on this point in the future. In the UK and
the Netherlands, companies are legally required to submit data
if their cooperation is requested by the bureau of statistics forthe purpose of producing official statistics. Our investigation
found that the bureau obtains data based on agreements, or byusing amicable approaches. It seemed to me that these laws
played a significant role in supporting the statistics production
team.

EventsQ&A

Q3:
I think that there is useful big data that remains untapped. Tell
us if there is any underused area of data that can be used for
official statistics.
Yoko Konishi:
In other countries, we did not find any cases in which official
statistics were directly replaced by private sector statistics.
However, they rapidly used extremely detailed big data inpolicy development. For example, they decided the typeand location of new schools based on data about school
distribution that was the best for both parents and children.
That data was obtained by combining data concerning actual
commuting-to-school distance and the data concerning
subjects being learned by the children. In Singapore, wheretraffic congestion and terrorism are major concerns, they
actively used traffic volume, car movement, and parking
lot (regardless of state or privately run) data to predict
traffic jams, plan new roads, and prevent terrorist attacks
by identifying unusual patterns of congestion. Japan is also
trying to measure power demand using smart data.

Note: Titles and affiliations are as of the day of the event

RIETI Highlight 2020 Special Edition

23

RIETI Event

Event List

Other Major Events in2019 & 2020
September 26, 2019

November 21, 2019

RIETI Policy Seminar

RIETI-ANU Symposium

Entrepreneurship, Innovation, and Finance:
New growth avenues in developed economies

Asian Integration and the Global Economy:
Economics of geopolitics

https://www.rieti.go.jp/en/events/19092601/info.html

https://www.rieti.go.jp/en/events/19112101/info.html

EventsJuly 18, 2019

September 11, 2019

The 21st RIETI Highlight Seminar

RIETI Open Seminar

Thinking about Widening Gaps in the Reiwa Era– What will happen to corporate governanceand wage gaps?

American Views on Trade, the Economy andthe Upcoming US Election in Year Three of the
Trump Administration

https://www.rieti.go.jp/en/events/19071801/info.html

https://www.rieti.go.jp/en/events/19091101/info.html

October 8, 2019

January 10, 2020

RIETI Workshop

RIETI BBL Seminar

Dynamics in Finance and Economy on
Economic Networks

Collective Action in a Fragmented World

https://www.rieti.go.jp/en/events/19100801/info.html

https://www.rieti.go.jp/en/events/bbl/20011001/info.html

February 26, 2020
RIETI Policy Symposium

The Fourth Industrial Revolution and Japan's Economic Outlook
https://www.rieti.go.jp/en/events/20022601/info.html

24

RIETI Highlight 2017 Special Edition

Research
DigestIn Research Digest, we interview authors of Discussion Papers (DP) to provide a simple introduction to theirunderstanding of problems addressed in their papers, along with the major points and policy implications.

Linkage of Patent and
Design Right Data:
Analysis of Industrial Design
Activities in Companies at theCreator Level
Profile: Fellow, RIETI (2016~). Ph.D. in Economics, Hitotsubashi University (2015).
Research Fellow, National Institute of Science and Technology Policy (NISTEP),
Ministry of Education, Culture, Sports, Science and Technology (MEXT) (2011~2016).
Visiting Scholar, National Graduate Institute for Policy Studies (2014~).
Recent publications:"Why Was Japan Left Behind in the ICT Revolution?" (with Kyoji Fukao, YoungGak
Kim and HyeogUg Kwon), Telecommunications Policy , 40(5),432-449, 2016.
"International Competitiveness: A Comparison of the Manufacturing Sectors in Korea andJapan" (with Kyoji Fukao, YoungGak Kim, HyeogUg Kwon and Tatsuji Makino), Seoul
Journal of Economics , 29(1), 43–68, 2016.

In the era of the Fourth Industrial Revolution, how should companies increase competitiveness and promote innovation?
In addition to traditional technological superiority (functional value), product differentiation through design is becoming
increasingly important and inventions are often protected through design rights. Recognizing design right data, which hasreceived little attention, as an important element for analyzing corporate design innovation, in this research we conductedname disambiguation of inventors/creators using a new method. We then interconnected such design right data with patent
data at the inventor/creator level and implemented quantitative analysis. As a result, it was found that the division of innovativelabor into invention activity and design activity is underway. Furthermore, we confirmed that this division of labor is particularly
advanced among major patent applicants.

Searching for clues for promoting innovation- What is the motivation for your research?

I have been interested in productivity and have been conducting
research in the field for some time. To promote innovation
activities, I thought it was necessary to clarify related processes.
By conducting quantitative analysis using design right data, I
hoped to make new discoveries on non-technological innovation,
which is said to be difficult to measure.
When I was in charge of the Japanese National Innovation
Survey at the National Institute of Science and Technology Policy(NISTEP), I had an opportunity to experience international
discussions and read manuals relating to the measurement ofinnovation and learned that distinguishing between technologicalinnovation and non-technological innovation (design) is importantin measuring innovation.
Technological innovation is a field with a high affinity forpatents. The flow of R&D, innovation, and patents is relatively

Research Digest

Kenta Ikeuchi Fellow, RIETI

clear, and so it’s easier to grasp the situation. Furthermore, major
companies in Japan engage in many R&D and patent acquisition
activities.
But in recent years, innovation activities have been stagnant
and productivity has apparently been slowing down. We started
this research because we wanted to clarify the reasons for this. I
thought the key might be non-technological innovation, including
design, and conducted research focusing on design right dataclosely linked to design activities.
The Design-Driven Management report (2018) by the Japan
Patent Office (JPO) and METI refers to “design linking invention
and innovation.” When companies develop new technologies into
products, they differentiate them by registering their designs. So,
in this research, we decided to use design right data.
- Has research in this field been pursued for a long time?

Patent-related research which measured innovation indicators
was already underway. While analysis on patents in universities is

RIETI Highlight 2020 Special Edition

25

DP No. 20-E-005

Linkage of Patent and Design Right Data: Analysis of Industrial Design Activities
in Companies at the Creator Level
https://www.rieti.go.jp/jp/publications/dp/20e005.pdf

Research Digest

relatively new, there have been many research projects targetingcompanies. Regarding patent rights, the Institute of Intellectual
Property (IIP) Patent Database has been developed and used forlots of empirical research.
Meanwhile, design right data has not received much attention asa research theme mainly because there was not a comprehensive
database of researchers. But design right data has the potential
to help in the analysis of corporate design innovation. Design
rights are intellectual property rights that protect industrial design.
Design novelty lies in the appearance and shape of products,
and so design rights are different from patent rights, which
aim to protect industrial technologies. In industries where it isimportant to differentiate products with design (daily goods,
home appliances, electronics, etc.), the protection of design rights
is comparatively common. Also, design right examination isfaster than patent right examination, and costs associated withthe application and retention of design rights are less expensive.
In terms of product invention, design rights play the role ofsupplementing patent rights. So, we decided to use design rightdata in addition to patent data.
In this research, we interconnected NISTEP’s database ofdesign rights for researchers, which comprehensively integrates
design right information published by the JPO, and the IIP Patent
Database at the design creator/patent inventor level and thenanalyzed the characteristics of design right data at the creator level.

Investigate by identifying and tracking individuals- Why did you focus on individual creators?

All inventions, designs, and other creative activities startwith intellectual activities of individuals. I thought that some
information can be gained through the observation of thosestarting points. In addition, company-level observation would
be difficult in terms of checking against patent applicantsand distinguishing companies with the same name. We chose
individual-level analysis partly because personal data was easier tohandle. The ideal for the future is to develop research to the stage
where we can investigate both individuals and companies.
Identifying individuals and establishing ways to do so,
including this research, are of great significance. Disambiguation(distinguishing different persons with the same first and lastnames) is one field of research. With my coauthor Kazuyuki
Motohashi, I identified individuals using disambiguation ofJapanese patent inventors and analyzed the connection withacademia. We intended to apply that methodology to design rightdata and conduct analysis involving patent data.
In the future, by increasing the precision of identification, we
will be able to trace how influential persons, which we called“star scientists” and “ace designers,” move from organization toorganization and make innovation happen. It will also be possible

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RIETI Highlight 2017 Special Edition

Interviewer

Yoshiaki Ishii Consulting Fellow, RIETI(Director, Science, Technology and Innovation,
Cabinet Office)to advance analysis by following not only these influencers but
also joint inventors, members of design teams, and their transition.
- Please tell me about determining the identity of individual creatorsand your findings.

The IIP Patent Database contains the name and address of eachpatent inventor, but there is no common identifier for inventors
such as their social security number or tax number. Determining
the identity of persons using only names and addresses while
trying to distinguish from persons with the same name may befurther complicated by changes in addresses and careers.
Therefore, we adopted a method for determining the identityof inventors based on machine learning. This machine learning
system conducts model parameter tuning and model choice(learning) based on reliable training data, uses the pre-trainedmodel and statistically infers the whole data pattern.
We constructed training data based on rare name informationfrom telephone books, with no persons with the same name, andspecified the discriminative model for the identity of inventors. We
then constructed training data that regarded a group of inventors
with the same name contained in rare name information as a groupof the same inventor, and also compared background data such as
overlapping of joint inventors and identity of applicants.
Out of the training data, we randomly selected two million
record pairs with the same rare names and two million record pairs
with different rare names, and applied classifiers based on thesefour million record pairs. We then carried out clustering using pretrained classifiers. As a result of applying pre-trained classifiers
and clustering methods to all data, 2,577,432 inventors wereidentified with an average of about nine patents per inventor.
Subsequently, we connected inventors/creators in the IIP
Patent Database to those in the NISTEP’s database of design
rights. By using rare name information again, we referred tonames, organizations, and content of patents and designs filed,to determine the identity of inventors/creators. As a result, it wasfound that patent inventors also participated as creators in 220
thousand designs out of 380 thousand (about 60%).

Design ability receives more attention- Japanese companies excel at technology, but why can’t they win in- Aren’t there many cases where people just acquire design rights asmeasures against counterfeit products?

I think there are challenges regarding how to shape the Design
Act and define design. Interest in design right data as information
for analyzing corporate design innovation seems to be increasing.
However, we have to be careful when using design rights as
proxy variables for design innovation. First, it should be notedthat more than half of design rights registered to date werecreated by patent inventors, meaning that some technologicalcharacteristics of products are also represented. Although the
Design Act defines design as something which “creates anaesthetic impression through the eye,” the current reality may
be that a significant number of the design rights that have been
granted were originally pursued as protection for intellectual
property and measures against counterfeit products. In fact, the
JPO somewhat recommends in its promotion pamphlet that multilayered protection should be pursued through mixed establishmentof intellectual property rights. In short, today’s design rights are
just intellectual property rights for protecting industrial designand do not necessarily focus on characteristics including surface
superiority as design.
There are various kinds of design. Design rights are supposed totarget independent product appearance (such as distinctive shapesof plastic bottles). The Act should exclude, at least, designs that
do not protect the entire appearance of the product, such as partial
designs. This was another new discovery made from this research.
In future analysis, there is room for tracking other data, such as
design right data of designers and companies that won the Good
Design Award, which evaluates designs themselves.
- What is the profile of a person who is both an inventor and a creatorat the same time?

We have not yet developed a profile, but possible profiles arediverse. There may be persons who can start from technology
when thinking about design and persons who can handle
technology and design at the same level. Because data shows thata patent that is invented and created by the same person has a higheconomic value, there are probably many cases where design
registration is used to protect products from counterfeiting. We
can identify individuals, so I think we can get deeper insights byclassifying those persons and conducting surveys. This will also
help collect information for policymaking.

business?

As seen in the success of Apple and Dyson, design activities
are important elements for corporate competitiveness, and that isproven by many empirical studies. Japanese companies have been
increasingly interested in product competitiveness based on design
ability as emerging countries catch up with them technologically.
But METI’s research shows that the percentage of companies thatregard design ability as a source of corporate competitiveness isstill small—less than 10%. Besides, Japanese companies tend
to use internal designers for their design activities, making it
difficult for exclusive design companies to emerge. Due to thesecircumstances, in May 2018, the Design-Driven Management
report published by the JPO, an extra-ministerial bureau of METI,
suggested policies for supporting corporate design activities,
including the cultivation of advanced design talent and acquisitionof talent from outside Japan.
- What’s really happening in terms of the division of labor between
technology and design?

In this research, we used data for 2013 and before. So I think thetrend has been further enhanced recently, but anyway, the divisionof labor between technology and design has slightly advanced
since 2009, mainly in major companies, partly in response to theeconomy and corporate performance. The division of labor at
the individual level has also advanced, especially among prolificpatent applicants.
Since the financial crisis, however, the patent registration rate
has increased while the scale of R&D and the number of patentapplications have decreased. This reflects a shift from valuing
quantity to focusing only on promising projects. That is also true
for design. It is possible that the division of labor just seemed tobe advancing due to this focused R&D and application. At thismoment, we can’t correctly evaluate what’s been happening to thedivision of labor in the economic upturn since 2013.
While this division of labor advances, R&D cycles haveaccelerated with designers participating in or leading thedevelopment process in parallel with technological development,
under the name of design thinking. We have to separately discuss
how this movement will affect patent and design right data.
Careful observation of individuals, teams, and companies will
enable us to understand the trend in changes in the development
process.

Research Digest

How the Design Act should be shaped- Please explain policy implications of the results of this research andfuture prospects.

More studies and analysis are needed to make specific policy
recommendations, but I hope this research will attract people’s

RIETI Highlight 2020 Special Edition

27

Figure: The number of designs involving and not involving patent inventors as creators (by application year)
20,000■Not involving inventors■Involving inventors

18,00016,00014,00012,00010,000

8,000

6,000

4,000

2,000

Research Digest
28

0

1998

1999

2000

2001

2002

2003

2004

attention and help produce related studies.
In this research, we used disambiguation of inventors/creators.
By interconnecting each inventor's and creator's identifiers ineach database, we identified design creators who also made patentinventions. Next, using this information, the design creator’s
participation status in the patent invention (and of the patentinventor in the design creation) was organized by time series anddesign category. The result we found is that more than half ofdesign creators are also patent inventors.
It should also be noted that the division of labor between
designers and engineers is underway, especially in large
companies. This seems to reflect a shift of the productdevelopment approach from engineering-based industrial design(where internal engineers also engage in design creation) to aframework in which companies employ independent designers
and focus on not only functional but also design superiority(semantic value). In this regard, it is important to conduct moredetailed analysis looking at the characteristics of each applicant(company). In terms of aesthetic impression, using objective
indicators of design superiority, such as the Good Design Award,
is helpful.
This research focused on design rights that involved inventors
and technologists. Conversely, analysis on patent inventions withwhich design creators are involved will also be possible. Designers
play an important role in breakthrough technological innovation.

RIETI Highlight 2017 Special Edition

2005

2006

2007

2008

2009

2010

2011

2012

2013

By clarifying the detailed characteristics of design creators, wemay be able to quantitatively analyze patent inventions with which
great product design creators are involved.
Analysis using design right data is not common in Europe
and the U.S., either. In 2016, NISTEP released a databasefor researchers that comprehensively integrates design rightinformation published by the JPO. Since it is open to everyone,
I hope this research, which uses Japanese data, will ignite newresearch that produces world-class results. I also expect it to help
strengthen the design competitiveness of Japanese companies andpromote innovation. I think this research can provide perspectives
that may contribute to the revision of the Design Act.
I want to deepen the research by identifying individuals
and determining the characteristics of teams that can produce
good designers and the elements that increase talent mobility, a
key to promoting innovation. Also, I think we can observe therelationship with performance indicators by performing companylevel identification. I want to find causal evidence showing thatdesign intervention has a good effect on economic growth.

COLUMN
Evidence-based Regulatory Reform

What has improved in recent years?
The year 2020 will be the eighth year since Abenomics started.
Although quantitative policy impacts are difficult to identify,
many economic indicators have improved over these few years.
Corporate operating profits have increased by 70% from FY2012
to FY2018, and non-manufacturing profit margins have hit arecord high (Note 1). The unemployment rate has declined to thelow 2% range, a level before the “lost two decades.” Against thebackground of labor shortages, labor participation rates of womenand elderly people have risen.
Life satisfaction score has improved in Japan, hitting a post-war
record in 2018 (Note 2). This is probably because of the improved
employment environment and low rates of price increases. The
2% inflation target set by the Japanese government and the Bankof Japan has not yet been met, but low inflation rates positively
affect people’s life satisfaction. The life satisfaction score has
especially increased among young males, although this may bepartly attributable to their lowered aspirations. However, high life
satisfaction itself is good news.
It can also be pointed out that political stability has helped
reduce uncertainty. Between 2006 and 2012, there were many
short-lived (about one year) administrations before and after the
regime changes. Many studies show that factional conflicts andunstable politics have negative influences on the business cycleand economic growth (Note 3). Since the beginning of the second
Abe administration, especially since the summer of 2013 when
the divided Diet was resolved, political uncertainty has decreased
significantly (Note 4). Japan is unable to avoid influences arisingfrom heightened uncertainty abroad, such as Brexit negotiations,
U.S.-China trade conflicts, and growing tensions in the Middle
East. But domestic political uncertainty has decreased, causing
less negative impacts on Japan’s economy.

Sluggish productivity and declining international
competitivenessa slowdown in productivity growth, sluggish wages, decreased
international competitiveness, accumulation of government debt,
and declining local economies. The average economic growth ratein the last few years is about 1%, slightly beyond Japan’s potential
growth rate. Therefore, to further increase the growth rate, weneed to raise the potential growth rate. While Abenomics hashelped increase the potential growth rate by 0.3 percentage points,
this increase is dependent on increases in inputs such as labor
participation of women and elderly people; in fact, the growth rateof total factor productivity (TFP) has been gradually decreasing.
According to the estimates by the Cabinet Office and the Bank ofJapan, the TFP growth rate decreased by 0.5–0.7 percentage points
from FY2012 to FY2018. The current no-wage-increase trend isregarded as a problem, but wages and productivity are strongly
linked. Although changes in labor share also affect wages, thoseeffects have been quantitatively very limited. Movement in wages
is largely explained by productivity growth (Note 5).
Japan’s international competitiveness has also experienced along-term decline. While the word “international competitiveness”
can have many meanings, from the viewpoint of economics, it
can be captured by movements in terms of trade (Note 6), which
is defined as the prices of exported goods and services relative toimported goods and services. Changes in terms of trade are notreflected in GDP or macroeconomic productivity measures, butthey do have influences on gross national income (GNI) in theform of trade gains or losses. Japan’s terms of trade have declined
by about 40% since the 1990s. When calculated mechanically,
Japan’s relative international competitiveness has weakened bysome 2% annually. The decline seems to have flattened in the last
few years, but the improvements are marginal.
Innovation—especially product innovation involving thedevelopment and diffusion of excellent new products andservices—plays a major role in improving both productivity andterms of trade. Investments in innovation involve uncertainty
and so require active risk-taking. That is why it is important tocreate an environment where engineers and companies engaged
in innovation activities have the ability to work on their projects
flexibly, without excessive external constraints.

COLUMN

Masayuki Morikawa Vice President, RIETI

On the other hand, there are many unsolved problems such as

RIETI Highlight 2020 Special Edition

29

Regulation, compliance, and productivity

COLUMN
30

Until recently, Japan’s growth strategy had emphasized reformof bedrock regulations in order to encourage a productivity
revolution. Regulations have negative effects on productivity
and innovation through (1) direct cost increases associated withcompliance, (2) negative influences on business start-ups andincumbent companies’ entry into new markets, and (3) decreasedrisk-taking that arises from uncertainty in interpretation andexecution of laws and regulations.
You may think that the number of industries that are regulatedby the government is quite limited, but our survey targeted at
Japanese companies reveals that 56% of companies engage
in businesses requiring legal licenses or permits (Note 7). By
industry, the percentages are 49% of manufacturing companies
and 64% of service companies.
While industry-specific license and permit systems still exist
in fields such as transportation, electricity and gas, health andwelfare, and education, the majority of current regulations arecross-industry social regulations, rather than licenses and permits
targeted for specific industries. These social regulations include
labor regulations, environmental regulations, and land use
regulations. Some studies show that these regulations exert a great
negative influence on GDP and productivity (Note 8).
A significant portion of labor hours is used for development
and execution of internal rules in response to government
regulations and administrative guidance. Even regulations thatare less stringent than those requiring specific licenses/permits
force companies to undertake various tasks such as providing
regular reports and preparing documents for inspection. Although
the costs for each individual rule may be small, they are a steadydrain on productivity. According to our survey, direct costs forregulatory compliance account for 2.6% of operating costs on
average (although they are very heterogeneous by company). This
may sound like a small amount, but relative to value-added, thesecompliance costs account for about 16%. In other words, if thecosts can be halved, productivity will increase by about 8% on
average (Note 9).
Since compliance costs are in a sense fixed costs, it is likelythat they have a larger effect on smaller companies. It is indeed
observed that the ratio of compliance costs rises by around 8% for
half-sized firms. This may be one cause of the lower productivityof SMEs and may also decrease market entry rate by raising costs
for business start-ups.
According to our survey, a significant majority of companies
report that labor regulations represent the largest compliance costs.
The second most expensive field of regulations they point to isenvironmental regulations. These two fields are far more notable
than business licenses/permits (See Table 1). Companies wish
most for deregulation of labor regulations, followed by land use/
construction regulations, environmental regulations, business

RIETI Highlight 2017 Special Edition

licenses/permits, and the corporate law and related regulations. A
large number of labor regulations and other social regulations aredesigned to ensure safety and security, not to improve productivity
or economic growth, so deregulation may involve tradeoffs
between these different values. In this respect, easing of social
regulations is important as a growth policy, but it is politicallydifficult. Yet, in the current situation where public and private
sectors are experiencing labor shortages and work style reforms
are expected, it is desirable to put in place a simplified mechanismthat will reduce the labor inputs necessary to deal with laws andregulations.
Table 1: Views of Companies on Regulations(1) Requires large
compliance costs(2) Deregulation ismost wished for bycompanies

Business license/
permits

16.7%

26.6%

Labor regulations

66.6%

66.1%

Environmental
regulations

33.7%

27.6%

Land use/construction
regulations

4.8%

27.6%

Consumer protection
regulations

6.8%

7.9%

Corporate law andrelated regulations

13.9%

24.8%

Occupational
licensing system

2.6%

11.8%

Note: Prepared from Survey of Corporate Management and Economic Policy (2019).

Detrimental effects on businesses caused byuncertainty in interpretation and execution ofregulations
Another problem of regulations lies in uncertainty ininterpretation and execution. Even when the scope and content ofregulations are clearly documented, there is room for discretionand uncertainty in interpretation and execution, because it is
impossible to foresee all possible eventualities. Many companies
report that uncertainty concerning labor regulations, consumer
protection regulations, environmental regulations, etc. affects
corporate management (Note 10). Many studies show that
uncertainty concerning macroeconomic and trade policies has
negative effects on real economic activities such as investment,
hiring of employees, and export (Note 11). Empirical studies on
the effects exerted by uncertainty concerning domestic regulations
and their execution have been limited, but regulatory uncertainty islikely to cause companies to act too cautiously.
This raises serious problems especially for new technology andbusiness development. Uncertainty in interpretation and executionof regulations makes active risk-taking difficult. It may discouragecompanies from taking action as the public and the media arepaying increased attention to legal and regulatory violations.
Against this background, the government has established the
System to Eliminate Regulatory Gray Zones (2014), which isFootnote(s)1. Calculated from Financial Statements Statistics of Corporations byIndustry (Ministry of Finance). Figures of the finance and insurance
industries are excluded. This statistical survey started in FY1960.
2. “Satisfied (%) – Dissatisfied (%)” in Public Opinion Survey
Concerning People's Lifestyles (Cabinet Office). The figure slightly
decreased in 2019, but it is still at a historically high level.
3. See Aisen and Veiga (2013) and Jens (2017) for empirical researchon negative effects of political uncertainty on real economy.
4. According to Japan Political Uncertainty Index, which has been
calculated and published monthly by RIETI Fellow Arata Ito (https://www.rieti.go.jp/jp/database/policyuncertainty/index.html), politicaluncertainty in Japan has remained low since 2013.
5. See Morikawa (2019b).
6. See Morikawa (2019a) for details on Japan's international
competitiveness.
7. Survey of Corporate Management and Economic Policy (2019)
targeted at about 2,500 companies with 50 or more employees.
8. For example, see Dawson and Seater (2013), Herkenhoff et al.
(2018), Cette et al. (2019).
9. Ishizaki (2019) will help understand ongoing efforts to reduce costs
for administrative procedures.
10. See Morikawa (2018).

11. Bloom (2014) is a representative survey on this topic. Morikawa(2016, 2019c) presents empirical evidence on the Japanese
economy.
References• Aisen, Ari and Francisco José Veiga (2013), “How Does Political
Instability Affect Economic Growth?” European Journal of Political
Economy, 29, 151–167.
• Bloom, Nicholas (2014), “Fluctuations in Uncertainty,” Journal of
Economic Perspectives, 28(2), 153–176.
• Cette, Gilbert, Jimmy Lopez, and Jacques Mairesse (2019), “Rent
Creation and Rent Sharing: New Measures and Impacts on Total
Factor Productivity,” Economic Inquiry, 57(4), 1915–1938.
• Dawson, John W. and John J. Seater (2013), “Federal Regulation
and Aggregate Economic Growth,” Journal of Economic Growth,18(2), 137–177.
• Herkenhoff, Kyle F., Lee E. Ohanian, and Edward C. Prescott (2018),“Tarnishing the Golden and Empire States: Land-Use Restrictions
and the U.S. Economic Slowdown,” Journal of Monetary
Economics, 93, 89–109.
• Ishizaki, Takashi (2019), “Jigyosha mesen deno gyosei tetsuzuki
kosuto sakugen ni tsuite” (Reducing Administrative Costs from theStandpoint of Business), RIETI Policy Discussion Paper, 19-P-033,
RIETI.
• Jens, Candace E. (2017), “Political Uncertainty and Investment:
Causal Evidence from U.S. Gubernatorial Elections,” Journal of
Financial Economics, 124(3), 563–579.
• Morikawa, Masayuki (2016), “Business Uncertainty andInvestment: Evidence from Japanese Companies,” Journal of
Macroeconomics, 49, 224–236.
• Morikawa, Masayuki (2018), Seisansei—gokai to shinjitsu(Productivity: Misconceptions and Realities), Nikkei Publishing Inc.
• Morikawa, Masayuki (2019a), “Nihon no sangyo kyosoryoku kojo
no kadai: seisansei to koeki joken” (Challenges for improving
Japan’s industrial competitiveness: Productivity and Terms ofTrade), World Economic Review, 705, 6–13.
• Morikawa, Masayuki (2019b), “Nihon no chingin wa agatte inai?”(Aren’t Wages Rising in Japan?), Statistics Monthly, December
issue, 15–20.
• Morikawa, Masayuki (2019c), “Uncertainty over Production
Forecasts: An Empirical Analysis Using Monthly Quantitative
Survey Data,” Journal of Macroeconomics, 60, 163–179.

COLUMNintended to facilitate entry into new fields when the coverageof laws and regulations is unclear, and the Regulatory Sandbox
System (2018), which allows for experimentation of newtechnologies regardless of existing regulations. But using thesesystems requires considerable input of labor.
The government’s interest in regulatory reform seems to be
weakening. To increase productivity and potential growth rates,
it is hoped that the government will once again place regulatory
reform at the center of its growth strategy. It also needs to conduct
empirical evaluations of not only financial support programs,
including subsidies and special tax credits, but also of laws andregulations, and to develop cost-effective and evidence-based
regulatory mechanisms.

COLUMNWhy Japan Lost Its Comparative
Advantage in Producing Electronic
Parts and Components
Willem Thorbecke Senior Fellow, RIETI
Japanese exports in electronic parts and components
dramatically fell in value after the Global Crisis and havestill not recovered today. This column investigates why
Japan lost this comparative advantage. It argues that capital

RIETI Highlight 2020 Special Edition31

inflows seeking safe havens during the crisis led to a sharp
appreciation of the yen and caused yen export prices totumble relative to production costs. Plummeting profits thenhindered Japanese firms from investing enough in capital andinnovation to compete with rivals.
Japanese researchers began studying transistors three months
after they were invented at America's Bell Labs in 1947. Japanesecompanies then used transistors and other electronic parts andcomponents to produce radios, television sets, Sony Walkmans,
video cassette recorders, and computers. As the yen appreciated by
60% following the 1985 Plaza Accord, Japanese companies lostcompetitiveness in final electronics goods and moved upstream
in electronics value chains. They focused on exporting electronicparts and components and capital goods to producers of final
electronics goods abroad.

Japan's declining comparative advantage inelectronic parts

COLUMN32

In every year since 1994, electronic parts and components has
been Japan's second leading export category at the International
Standard Industrial Classification 4-digit level. However, Japan's
comparative advantage in this category, as measured by Baldwin
and Okubo's (2019) method, tumbled after the Global Crisis, while
South Korea's and Taiwan's soared. Japan was the world's largest
exporter of electronic parts and components before the crisis,but by 2017 Taiwan and South Korea each exported more than
twice the value that Japan did (Figure 1). Why did Japan lose its
comparative advantage in producing microprocessors, flat-panel
displays, integrated circuits, and other parts and components?
Katz (2012) observed that integrated circuits and similar goods
have become commoditized and that Japanese firms compete inthese products based on price. Facing fierce competition fromSouth Korea and Taiwan, Japanese firms may lack pricing power

and thus suffer compressed profit margins when confronting
adverse shocks. Japanese companies faced a negative shock in theform of an appreciating yen beginning in June 2007. The Global
Crisis generated safe haven capital inflows that caused the yen to
appreciate by 45% against the U.S. dollar between June 2007 and
September 2012. Figure 2 shows that the yen price of electronicparts and components exports over this period fell by 35% relative
to yen production costs, where production costs are measured
using the Japanese producer price index for electronic parts andcomponents.

Why Japan lost its comparative advantage inproducing electronic parts and components
In recent work I investigated why Japan lost its comparativeadvantage in producing electronic parts and components(Thorbecke 2019). Results from estimating pass-through equations
indicate that yen appreciations lead to one-for-one decreases inyen export prices. This implies that exporters keep the foreign
currency prices of their exports constant in the face of exchange
rate changes. These findings also indicate that the lion's share of
the fall in yen export prices between June 2007 and September
2012 was due to the appreciation of the yen.
Results from estimating export elasticities, using a panel ofJapan's exports to major importing countries, indicate that a
10% appreciation would reduce electronic parts and components
exports by between 2.1 and 2.7%. Exchange rates thus exert onlya small effect on export volumes. This is what one would expect,
given that Japanese firms keep foreign currency prices constant in
the face of yen appreciations. An implication of these findings isthat Japan's loss of comparative advantage in electronic parts andcomponents exports cannot be attributed to the impact of the yen
on export volumes.
Since an appreciation causes yen export prices to fall relative
to yen production costs, exchange rates should affect the

Figure 1: The Value of Electronic Parts and Components
Exports from Japan, South Korea, and Taiwan

Figure 2: The Yen/Dollar Exchange Rate, Yen Producer
Price Index and Yen Export Price Index for JapaneseElectronic Components and Devices

Note: Electronic parts and components correspond to the International Standard Industrial
Classification code 3210.
Source: CEPII-CHELEM database.

Source: Bank of Japan and CEIC Database.

RIETI Highlight 2017 Special Edition

High-end Japanese electronic parts producers andthe yenJapanese electronic parts and components companies that do
not produce commoditized products, such as semiconductors,
have fared better. An example is Murata Manufacturing, which
produces ceramic components such as multi-layer ceramic
capacitors. It left the low end of the market to Taiwanese firms
to focus on high-end multi-layer ceramic capacitors (Electronic
Components News 2018). It also dominates the market in certain
parts and sensors. The value of the yen does not affect the return

Figure 3: The Semiconductor Stock Prices in Japan,
South Korea, and Taiwan

Source: Datastream database.

on Murata stocks. Since Murata produces high-end products
and dominates the market share in several product categories, it
faces less pressure to reduce yen prices to keep U.S. dollar prices
constant in response to yen appreciations. Thus, yen appreciations
do less to damage its profitability. The New Taiwan dollar also
does not affect Murata stocks. For products such as multi-layer
ceramic capacitors, Murata produces the higher-end items andTaiwanese firms produce the lower-end items. Thus, there is lessprice competition between Murata and Taiwanese firms.
Interestingly, a depreciation of the Korean won increases thereturn on Murata's stock. This could reflect the phenomenon
that Patel and Wei (2019) highlighted. They noted that there canbe a complementary relationship between Japanese parts andcomponents makers and downstream producers. A depreciationof the won that increases the demand for South Korean final
goods exports can increase the demand for Japanese parts andcomponents that go into these goods.

COLUMN

profitability of electronic parts and components producers. To
examine this issue, I estimate exchange rate exposure equations
for Japanese semiconductor producer stocks. Theory implies thatstock prices equal the expected present value of future net cash
flows, and hence provide information about future profitability.
The results indicate that yen appreciations lead to large decreases
in semiconductor stock prices, and that New Taiwan dollar
depreciations also lead to large decreases in semiconductor stock
prices. With the advent of the Global Crisis, not only did the yen
appreciate but the New Taiwan dollar depreciated. Both of thesecurrency movements acted as negative shocks that lowered the
profitability of Japanese semiconductor producers.
The appreciating yen and weakening New Taiwan dollar after
the Global Crisis thus harmed Japanese parts and components
makers. While the yen subsequently depreciated and the New
Taiwan dollar appreciated, however, Japanese electronic parts andcomponents makers never regained their competitiveness relative
to South Korean and Taiwanese producers. This is clear from
Figure 1 which shows that Japan's electronic parts and components
exports have fallen since the Global Crisis while South Korea's
and Taiwan's have soared.
Why did Japan's electronic parts exports not recover after theyen depreciated in 2012? Maintaining competitiveness in thisindustry requires massive investment in physical capital and inresearch and development (e.g. Rastogi et al. 2011). Following the
profitability shock, Japanese firms could not sustain investment
at pre-crisis levels. Rather, investment in tangible fixed assets by
Japanese electronic parts and components firms tumbled and neverrecovered. The ‘endaka’ shock, where the yen's value is higher
than that of other currencies, thus triggered hysteresis effects that
contributed to a long-term decline in the industry.
By contrast, Taiwanese and South Korean electronic parts andcomponents firms have seen their profitability increase. Figure
3 shows that stock prices for Taiwanese and South Korean
semiconductor producers have soared, while prices for Japanese
producers in 2019 remain below their values from 2005. Risingprofits at firms in Taiwan and South Korea have enabled themto invest heavily and maintain their comparative advantage inproducing electronic parts and components.

Lessons for Japanese firms
Japan's experience with electronic parts and components
offers a couple of lessons. First, unexpected shocks can cause
an industry's outlook to turn on a dime. Companies should saveduring good times to be prepared for downturns. During the badtimes, they should focus on maintaining long-term viability andresisting hysteresis effects. Second, competing based on price incommoditized industries is onerous. Japanese companies should
specialize in products where craftsmanship is valued and profit
margins are large. Examples of these are the ceramic filters that
Murata produces or the image sensors that Sony makes. By
finding niches where they have market power, firms can reduce
their exposure to safe haven capital inflows and volatile exchange
rates.
This article first appeared on www.VoxEU.org. Reproducedwith permission.

RIETI Highlight 2020 Special Edition33

References• Baldwin, R and T Okubo (2019), “GVC journeys: Industrialisationand deindustrialisation in the age of the second unbundling,”
Journal of the Japanese and International Economies 52(June): 5367.
• Electronic Components News (2018), “Taiwan makers to gain from
Murata move to drop lower-end MLCC production,” 18 April.
• Katz, R (2012), “Elpida: Tip of the iceberg,” The Oriental Economist
80(3): 1-3.

• Patel, N and S Wei (2019), “Getting exchange rates right,” Webblog post, www.project-syndicate.org , 17 April.
• Rastogi, A P, J Fowler, W M Carlyle, O Araz and B Büke
(2011), “Supply network capacity planning for semiconductor
manufacturing with uncertain demand and correlation indemand considerations,” International Journal of Production
Economics 134(2): 322-332.
• Thorbecke, W (2019), “Why Japan lost its comparative advantage
in producing electronic parts and components,” RIETI Discussion
Paper No. 19-E-035.

COLUMN
Hiring Challenges for JapaneseCompanies
Hideo Owan Faculty Fellow, RIETICOLUMN

Many Japanese companies complain about a shortage of
qualified workers. This column argues that the difficulty ispartly driven by flawed recruitment practices and suggests
improvements to the hiring process. For example, customized
aptitude tests and team-based structured interviews could
help remedy the situation.

Figure 1: Two Types of Business with Different
Characteristics‘Guardian’-type business
Frequency

Rapidly changing business characteristics
With the advance of the digital economy, an increasing numberof companies are facing changing business characteristics. As
the uncertainty and complexity surrounding technological trends
and the global situation grow, risks are increasing for businessstrategies that depend entirely on traditional business models. As aresult, companies in infrastructure and smokestack industries havealso started to invest in new businesses which were previously
unfamiliar to them, and are eagerly engaging in open innovation
and business partnerships.
Changes in business characteristics alter the optimal personnel
management system. For example, let us define two simple
different business categories which we call ‘guardian’ and‘star’ businesses (Barron and Kreps 1999). Figure 1 shows the
distribution of corporate profit for the two. We define businesses
whose upside potential is limited, but downside risk is significant, as‘guardian’-type businesses. Typical examples include infrastructure

34

RIETI Highlight 2017 Special Edition‘Star’-type business
Frequency

ProfitProfitTable 1: Business Category and the Optimal Personnel
Management System
Optimal personnel
management system‘Star’-type business‘Guardian’-typebusiness

Organization

Flat

Multi-layered

Pay system

Bonus system

Penalty system

Hiring focus

Risky workers

Safe workers

companies, including power generation, communication andtransportation companies. On the other hand, for ‘star’-typecompanies, downside risks are limited, while their corporate
value may rise much higher than expected if their business proves
successful. Platform companies as represented by Google, Amazon,
Facebook, Apple (GAFA) and other companies that have thepotential to create new markets belong to the ‘star’-type.

Tendency to overvalue safe workers
Although the advance of digitization may be increasing theshare of stars in the economy as a whole, it appears that many
companies have largely maintained the same hiring policies andpractices, and still refrain from hiring workers with diverse anduncertain profiles.
In my many years of experience teaching at Japanese and U.S.
business schools, I have noticed that MBA students' attitudes
toward hiring differ significantly between Japan and the U.S.
For example, when given the hypothetical choice of hiring job
applicant A who has a 100% chance of generating financial value
equivalent to 10 million yen (safe worker) or job applicant B who
has an even chance of generating value equivalent to 20 million or
zero yen (risky worker), around 80% of U.S. MBA students would
choose applicant B, the riskier choice. However, around 80% ofJapanese students would choose applicant A, a safer choice. Whatis the reason for this difference?
Let us look at Table 2 in order to systematically examine
the difference. The decision-making matrix contains two rightdecision possibilities and two wrong decision possibilities.
In the case of deciding whether or not to hire a job applicant,the applicant may be either able or unable to make positive
contributions to the prospective employer's business performance,
and the prospective employer cannot know for sure which of thetwo possibilities is right. In this case, the right decision is (1) tohire the applicant if he/she is able to make positive contributionsand (2) not to hire the applicant if he/she is unable to do so. The
wrong decision is (1) to hire the applicant if he/she is unable to
make positive contributions (a Type 1, or ‘false positive’, error)and (2) not to hire the applicant if he/she is able to do so (a Type 2,

Table 2: Two Wrong Decision Possibilities Regarding
HiringDecision
Hire

Not hire

Reality

Applicant A
contributes to thecompany

Applicant A does
not contribute to thecompany

Right decision

Type 1 error
False positive error

Type 2 error
False negative error

Right decisionor ‘false negative’, error).
Japanese companies prefer safe workers because they want tominimize the risk of making a false positive error. Underlying
this tendency is the lifetime employment arrangement, which ispervasive in Japan and makes it difficult to fire workers once they
have been employed, even if the worker makes no contribution to
the company. In short, the cost of making a false positive error ishigh. In contrast, in the U.S., workers who do not contribute to thecompany can be fired more easily, so there is a tendency to place
more emphasis on applicants' potential rather than on qualities
like stability. Another reason is that, unlike U.S. companies,
where front-office managers typically have the authority inhiring decisions, Japanese companies give the human resources
department centralized authority over hiring. When front-officemanagers have found hired workers to be useless, they blame
the human resources department for making the wrong hiring
decision. To avoid the blame, the human resources department
makes conservative hiring decisions.
However, the cost of making a false negative error is steadilyrising, amid the growing perception that there is a shortage ofcapable young workers due to the low birthrate and because thevalue of ‘risky workers’ is increasing due to changing businesscharacteristics.

COLUMNThe personnel management systems that are optimally suited tothese two types of businesses are entirely different. As shown in
Table 1, whereas a flat organization that enables prompt decision
making is desirable for ‘star’-type businesses, a multi-layeredorganization that reduces the risk of making mistakes is necessaryfor ‘guardian’-type businesses. For ‘stars’, a bonus system thatencourages risk-taking―namely, a system that rewards employee
contributions to profits but does not penalize them for failures―is desirable, because risk-taking raises the option value of thebusiness. For ‘guardians’, the best pay system is a penalty system
which punishes mistakes in order to discourage risk-taking. The
two types of businesses also need individuals of different talents.
‘Stars’ need workers who have high growth potential but maylack track records and workers with diverse backgrounds (‘risky
workers’). In contrast, ‘guardians’ need workers with qualities
such as stability and reliability (‘safe workers’) and shun diversity,
which is considered to hamper smooth coordination (Lazear
1998).

Factors aggravating the problem
Even if companies plan to hire workers with diverse profiles
or workers with higher potential for innovation, it is difficult toimplement hiring according to the plan in many cases. One of
the reasons is the use of the multi-stage interview system usedin Japan, typically consisting of three to four stages for large
corporations. In order to narrow down the long list of applicants,
companies use this system, under which only applicants who havesuccessfully passed several interviews are hired. The problem
is that, typically, one or at most two interviewers handle eachapplicant in each stage, and thus a single person could prevent a
particular candidate from being hired. Therefore, personal biasesof the interviewers can have significant consequences on thetypes of workers who receive job offers (Sah and Stiglitz 1986).
There is a psychological tendency for humans to be biased orlack objectivity in evaluating other people (Hoffman et al. 2018).

RIETI Highlight 2020 Special Edition

35

COLUMN36

Let us assume that a company interviews an applicant with uniquecharacteristics. In Japan, workers who stand out tend to be thesource of personality conflicts that distract other workers fromthe main mission of the office. The multi-stage interview system
is highly likely to eliminate applicants with unique profiles andto favor reliable applicants, who are viewed favorably by many
interviewers but are typical of the company.
To change this status quo, it is essential to reorganize theinterview stage into a process whereby a team of interviewers
screens applicants based on a structured interview. This approachshould increase the involvement of front-office personnel as wellas the diversity in recruitment channels and screening criteria.
Another problem is the use of aptitude tests. As it has become
possible for employers to utilize online aptitude tests at low
cost, many companies use these tests to narrow down the poolof applicants. However, when many companies use ready-madeaptitude tests from a limited number of vendors in order tonarrow down the pool of applicants, undesirable consequences
could follow. For example, applicants tend to be divided into
two groups: people who consistently succeed in advancing to theinterview stage and people who are consistently eliminated before
the interview stage. This presents a new statistical discrimination
problem, in which applicants whose predicted achievement levels
are low are not allowed to move on to the interview stage.
This might still be a necessary evil if aptitude tests wereeffective predictors of future performance. This may not be thecase, however. In the data science workshop for human resource
managers the author organizes, we asked the participants toanalyze which applicants actually received job offers (including
those who decline the offer) at the end of the interview process.
They calculated how much of the difference in the probabilityof receiving a job offer between successful and unsuccessful
applicants, including those that failed in the initial test screening,can be explained by the differences in test scores on the aptitude
tests. According to the analyses, no economically significant
difference was explained by the aptitude tests. Not only is theaccuracy of aptitude tests not very high in predicting which
candidates will receive final job offers, but online tests also poseother risks, such as the possibility that applicants may ask otherpeople to take the test on their behalf or that they may not answer
questions truthfully.
The presence of these problems does not necessarily mean thatcompanies should not use aptitude tests. For large companies
which handle a huge pool of applicants, it is inevitable to narrow
down the pool somewhat through paper-screening. Nevertheless,
it is important to customize screening test measures to account for
the kind of skills and qualities required from workers, instead of
only using ready-made indicators prepared by vendors. Ideally,
companies should design multiple such measures to attract diverse
skills.

RIETI Highlight 2017 Special Edition

Conclusion
As has been made clear above, many companies appear to be
adopting flawed recruiting methods while complaining abouta shortage of workers. It is essential to take necessary steps
including ensuring that the hiring policy is understood andfollowed by the recruiting team, making selections based on ateam approach and through structured interviews, and developing
unique measures for initial screening based on aptitude tests andother information on the application form.
This article first appeared on www.VoxEU.org. Reproducedwith permission.
References• Baron, J N and D M Kreps (1999), Strategic human resources:
Frameworks for general managers, New York: Wiley.
• Hoffman, M, L Kahn and D Li (2018), “Discretion in Hiring,”
Quarterly Journal of Economics 133(2): 701-764.
• Lazear, E P (1998), “Hiring risky workers,” in Ohashi, I and
T Tachibanaki (eds), Internal labour markets, incentives andemployment, London: Palgrave Macmillan.
• Sah, R K and J E Stiglitz (1986), “The architecture of economic
systems: Hierarchies and polyarchies,” American Economic
Review 76(4): 716-727.

NON TECHNICAL SUMMARY

Takatoshi Ito

Junko Shimizu

Columbia University /National Graduate Institutefor Policy Studies

Gakushuin University

Satoshi Koibuchi

Taiyo Yoshimi

Chuo University

Chuo University

NON TECHNICAL SUMMARY

Choice of Invoice Currency andExchange Rate Risk Management:2018 Questionnaire Survey ofJapanese Overseas Subsidiaries

Kiyotaka Sato
Yokohama National
University

Ito, et al. (2008, 2009, 2010, 2011, 2015, 2016) (Note 1)
have analyzed Japanese firms’ choice of invoice currency
for transactions using interviews and questionnaire surveys.
These studies pointed out that the high share of the U.S. dollar
in Japanese firms’ exports to Asia was caused by a scheme
where Japanese firms operating in Asia export key parts fromJapan to their Asian production subsidiaries, which assemble
them into products, and then export them to third countries(especially in the Americas and Europe). Under the centralized

RIETI Highlight 2020 Special Edition

37

NON TECHNICAL SUMMARY
38

management of exchange rate risks by their headquarters
finance department, many Japanese major firms minimize
exchange rate risks at the whole group level by using the
U.S. dollar in all transactions with their overseas subsidiaries(intra-firm trade). In the early 1990s, the fact that many Asian
countries were using the dollar peg system was another reason
why they chose the U.S. dollar. Subsequently, Asian countries
experienced the currency crisis, shifted to the managed float
regime, saw China’s yuan reform in 2005, and shifted to amore flexible exchange rate system from 2010 onward. As aresult, the choice of the U.S. dollar is likely to cause exchange
rate risks both at the headquarters in Japan and at overseas
subsidiaries. The degree to which Japanese firms can avoid
risks of significant exchange rate fluctuations depends on theiroverseas subsidiaries’ choice of invoice currency.
The two questionnaire surveys we conducted in 2010 and2014 revealed the characteristics of the choice of invoicecurrency in different locations: Japanese overseas subsidiaries
located in North America and Europe most frequently used
the U.S. dollar and the euro respectively, while in Asia, theU.S. dollar and the Japanese yen had equally large shares.
At “production” sites in Asia, the U.S. dollar is used more
frequently in both exports and imports with Japan, and the2014 survey confirmed the advancement of this trend, showingthat the share of the yen decreased slightly while that of the
U.S. dollar increased. The reason that overseas subsidiaries
in Asia do not use local Asian currencies is, firstly, that Asiancurrencies tend to largely fluctuate vis-à-vis the Japaneseyen. Our past two surveys were conducted after experiencing
the yen as it appreciated to historically high values below 80
yen per U.S. dollar and then the sharp depreciation to above
120 yen in response to Abenomics. The second reason is theregulations on capital and exchange transactions imposedby the monetary authorities of Asian countries. Many Asiancurrencies cannot be freely used by non-residents. These
regulations have been gradually eased in recent years,
but transaction costs are still relatively high and hedging
transactions have limited effectiveness.
The purpose of this third survey was to clarify problems
associated with the choice of invoice currency and the
management of exchange risks by overseas subsidiaries in thecurrent circumstances where overseas production networks
are expanding and deepening while the U.S.-China trade
conflict is emerging. We conducted a questionnaire survey
targeting 21,801 overseas subsidiaries in January and February
2019. One of the most notable changes we have found fromthe survey is that the use of local Asian currencies, including
the yuan, by overseas subsidiaries in Asia, has increased.
The tables below summarize the results of our three surveys
on how production sites in Asia choose invoice currency inimports and procurement as well as in exports and sales. It

RIETI Highlight 2017 Special Editionshows an increase in transactions using the yuan and local
Asian currencies. Especially in transactions between overseas
subsidiaries in Asia and foreign countries, the use of Asiancurrencies increased remarkably from 2014 to 2018, while theuse of the U.S. dollar and the yen decreased. Focusing on theuse of the yen, it has increased slightly in transactions withforeign countries (except Japan) although it has decreased intransactions (both imports and exports) with Japan.
Why has the use of the yuan and local Asian currencies
increased in transactions with Japanese overseas subsidiaries
in Asia? Japanese export firms often adopt the strategy ofcentralizing exchange risk management in their headquarters(Japan) to avoid exposing their overseas subsidiaries toexchange risks, and have tended to choose the dollar as theinvoice currency in transactions in Asia. In recent years,
however, Chinese and other Asian markets have become
more important as final demand destinations. Sales sites
prefer trading in local currencies. And Asian production sites
engaging in manufacturing not only import intermediary
goods from Japan but have also started local procurement.
This is probably why the use of local currencies has increased
in both sales and procurement. The use of local Asiancurrencies has become more advantageous than the U.S. dollar
in terms of overseas subsidiaries’ exchange risk management.
This trend has also been enhanced by institutional movements:
regulations on exchange transactions in the yuan and otherlocal Asian currencies were eased; and the exchange systemshifted from the U.S dollar peg system to a flexible managed
float regime which focuses more on markets. Furthermore,
the stability of exchange rates of Asian currencies against the
dollar and yen has helped.
This survey has confirmed that, as seen in the FY2017
survey targeting head offices, yen-denominated transactions
have decreased in volume. This may suggest a slowdown in
the “yen internationalization” advocated in the 1980s. In otherwords, yen internationalization is not supported by corporate
behavior. It also needs to be noted that, even within Asia,
situations are different between China and other ASEAN
countries. Transactions using the yuan are increasing in China,
Hong Kong, and Taiwan, while the use of ASEAN currencies
such as the Thai baht and the Singapore dollar is increasing intransactions between local subsidiaries in ASEAN countries.
The focus in the future will be placed on whether the yuanzone will expand in Asia, whether transactions of ASEAN
currencies will increase, and whether emphasis will be put on
rates against the dollar or against the yen. In order to lower
transaction costs of Asian currencies against the yen, we needto take policy steps to increase the use of Asian currencies,
including the establishment of direct transaction markets
between pairs of countries.

Production sites located in Asia: Invoice currency for imports and procurement
1. Share of each transaction quote currency out of the total amounts of local procurement of intermediary goods by overseas subsidiaries in Asia (%)
Transaction quote currency out of the total
amounts of local procurement

Number of firmsthat responded

Yen

U.S. dollar

Euro

Yuan

Local
currency

Other

2018

363

10.8

15.2

0.3

25.3

49.9

3.5

2014

319

11.8

28.9

0.3

20.3

36.9

1.8

2010

456

13.3

25.9

0.5

17.4

41.3

1.6

2. Share of each invoice currency out of the total amounts of imports of intermediary goods from Japan by overseas subsidiaries in Asia (%)
Invoice currency out of the total amountsof imports from Japan

Number of firmsthat responded

Yen

U.S. dollar

Euro

Yuan

Local
currency

Other

2018

391

45.6

36.8

0.3

8.4

13.1

1.2

2014

288

48.2

43.7

0.4

3.0

4.4

0.4

2010

422

54.0

40.3

0.4

1.0

3.9

0.4

Invoice currency out of the total amountsof imports from foreign countries

Number of firmsthat responded

Yen

U.S. dollar

Euro

Yuan

Local
currency

Other

2018

307

15.3

63.0

1.3

8.5

11.0

4.5

2014

205

6.8

80.4

4.2

0.7

4.5

3.4

2010

282

6.1

79.0

5.6

1.0

4.9

3.5

Production sites located in Asia: Invoice currency for exports and sales
1. Share of each transaction quote currency out of the total amounts of local sales by overseas subsidiaries in Asia (%)
Transaction quote currency out of the total
amounts of local sales

Number of firmsthat responded

Yen

U.S. dollar

Euro

Yuan

Local
currency

Other

2018

328

3.9

18.0

0.1

26.9

53.8

1.3

2014

299

3.2

23.2

0.6

23.8

47.2

2.0

2010

414

4.9

21.5

0.2

21.9

50.6

0.9

NON TECHNICAL SUMMARY

3. Share of each invoice currency out of the total amounts of imports of intermediary goods from foreign countries by overseas subsidiaries in Asia (%)

2. Share of each invoice currency out of the total amounts of exports to Japan by overseas subsidiaries in Asia (%)
Invoice currency out of the total amountsof exports to Japan

Number of firmsthat responded

Yen

U.S. dollar

Euro

Yuan

Local
currency

Other

2018

307

31.2

43.9

0.2

11.2

15.8

2.5

2014

209

37.8

52.2

0.0

4.7

4.8

0.4

2010

313

46.0

48.0

0.2

0.2

5.6

0.0

3. Share of each invoice currency out of the total amounts of exports to foreign countries by overseas subsidiaries in Asia (%)
Invoice currency out of the total amountsof exports to foreign countries

Number of firmsthat responded

Yen

U.S. dollar

Euro

Yuan

Local
currency

Other

2018

272

9.9

68.3

1.3

4.8

15.9

2.6

2014

220

6.0

80.7

2.9

1.7

5.4

3.3

2010

323

8.6

77.5

3.2

0.7

6.6

3.4

Source: RIETI’s 2010 Questionnaire Survey with Japanese Overseas Subsidiaries and 2014 Questionnaire Survey with Japanese Overseas Subsidiaries. The 2010 Survey shows data from FY2009, andthe 2014 Survey shows data from FY2013. The share is calculated as a simple average of figures provided by respondent firms.

RIETI Highlight 2020 Special Edition

39

Footnotes
1. Reference documents are all published as RIETI Discussion Papers.
References• Ito, T, S Koibuchi, Y Sasaki, K Sato, J Shimizu, K Hayakawa, andT Yoshimi (2008), “Currency Invoicing and Foreign Exchange Risk
Management: A Case Study of Japanese Firms,” RIETI Discussion
Paper No.08-J-009 (in Japanese).
• Ito, T, S Koibuchi, K Sato, and J Shimizu (2009), “Determinantsof Currency Invoicing in Japanese Exports: A firm-level analysis,”
RIETI Discussion Paper No. 09-J-013 (in Japanese).
• Ito, T, S Koibuchi, K Sato, and J Shimizu (2010), “2009 RIETI
Survey on Currency Invoicing and Exchange Rate Risk

NON TECHNICAL SUMMARYNON TECHNICAL SUMMARYDo Trade Fairs Promote Export?

Ryo Makioka
Fellow, RIETI

Export promotion policies are used in many countries aroundthe world. In Japan, organizations such as the Japan External Trade
Organization (JETRO), Japan International Cooperation Agency(JICA), and New Energy and Industrial Technology Development
Organization (NEDO) carry out such activities by providing
support for attending trade fairs, among other services. Because
support for attending trade fairs is common, it is important toanalyze the effectiveness of the service.
This paper analyzes the impact of support for attending trade

40

Management of Japanese Firms,” RIETI Discussion Paper No. 10J-032 (in Japanese).
• Ito, T, S Koibuchi, K Sato, and J Shimizu (2011), “Invoice Currency
Choice and Exchange Rate Risk Management in Japanese Firms'
Trade Network: RIETI Survey on Japanese Overseas Subsidiaries
2010,” RIETI Discussion Paper No. 11-J-070 (in Japanese).
• Ito, T, S Koibuchi, K Sato, and J Shimizu (2015), “Exchange
Risk Management and the Choice of Invoice Currency: 2014
Questionnaire Survey of Japanese Overseas Subsidiaries,” RIETI
Discussion Paper No. 15-J-054 (in Japanese).
• Ito, T, S Koibuchi, K Sato, and J Shimizu (2016), “Exchange
Risk Management and the Choice of Invoice Currency: 2013questionnaire survey of Japanese exporting firms,” RIETI
Discussion Paper No. 16-J-035 (in Japanese).

RIETI Highlight 2017 Special Edition

fairs on a firm’s export behavior, foreign direct investment(FDI), and service outsourcing. Specifically, we apply matchingdifference-in-differences (DID) estimation and fixed effectestimation techniques to firm-level data of export, FDI, and service
outsourcing, combined with a list of firms that participated in trade
fairs provided by JETRO.
An obvious concern with analyzing causal effects is
endogeneity. For example, a positive correlation between a firm’s
participation in trade fairs with its export status may reflect thecausal effect of attending trade fairs on its exports. On the other
hand, the correlation may simply show reverse causality, i.e., firmsthat are willing to export are likely to attend trade fairs.
Therefore, our DID approach is augmented by including richobservable variables (e.g., sales in the previous year, numberof employees in the previous year, export/import status in theprevious year, etc.) in the 1st stage estimation of propensity scores(similar results are confirmed when we use Mahalanobis distancematching and Coarsened Exact matching methods). Amongthem, a unique variable is the share of labor employed in theinternational business unit of each company, which is thoughtFigure 1: Result of Matching DID Estimation
0.7
0.6

0.655
0.579

0.579

Export Probability

0.5

0.542

The result in Figure 1 is the average effect across all export
destination areas. However, the effects of attending trade fairs
may vary with locations. For example, Asian markets are
geographically close and culturally similar to Japan, and so export
barriers should not be large. On the other hand, Western markets
are geographically and culturally distant, and so it may be more
effective to participate in trade fairs to match the buyers. In orderto take the difference into account, we augment our fixed effectestimation by adding interaction terms of treatment with a dummy
variable related to the area where trade fairs are held. The results
show that attending trade fairs in European and American markets
increases the probability of exporting by 12.5 percentage points at
the 10% statistical significance level, while there is no statisticallysignificant effect observed when participating in trade fairs in
Asian markets. This result should be interpreted with caution,
because other explanations cannot be eliminated, such as the factthat trade fairs in European and American markets have beencultivated through long histories and therefore may provide more
effective services.
Finally, we analyze the effects of attending trade fairs on FDI
and service outsourcing. Although attending trade fairs has no
statistically significant effect on FDI and logistics outsourcing,
there is a 4 percentage-point increase in the probability of using
market-research outsourcing at the 10% statistically significant
level.

0.4
0.3

NON TECHNICAL SUMMARY

to approximate the willingness of companies to export, andtherefore mitigate the issue of endogeneity. This matching method
enables us to balance the observable attributes of the treatment
and control firms. Conversely, with the fixed estimation method,
the issue of endogeneity is addressed through the fixed effects ofcompany-year, host area-year, and company-host area pairs using
information on export destinations and trade-fair host countries.
Figure 1 presents the results of the matching DID estimation. Itshows that before participating in trade fairs, there is no differencein the export probability between firms that eventually attend trade
fairs and those that do not attend (balancing their export status
in the year previous to the trade fairs allows for this finding).
However, after the trade fair, the export probability of attending
firms becomes 65.5%, while that for non-attending firms is
54.2%; this 11.3 percentage-point difference can be considered
the treatment effect of attending trade fairs on the firm’s export
probability. This estimate is statistically significant at the 1%
level. Similar results are obtained with the fixed effect estimation
approach at statistically significant levels.

0.2
0.1
0.0
A Year Before

A Year After

Time Period from Trade Fair
■ Attending ﬁrms

■ Non‒attending ﬁrms

These Non Technical Summaries are not sections of Discussion Papers, but have been created separately to provide a bold outline of thepapers, based on their findings and focusing primarily on their implications for policy. For full details of the analysis, refer to the Discussion
Papers below. Views expressed in Non Technical Summaries are solely those of the individual author(s), and do not necessarily represent
the views of RIETI.
• Ito, T, S Koibuchi, K Sato, J Shimizu, T Yoshimi (2019) “Choice of Invoice Currency and Exchange Rate Risk Management: 2018
Questionnaire Survey of Japanese Overseas Subsidiaries,” RIETI Discussion Paper No. 19-J-042 (in Japanese).
https://www.rieti.go.jp/jp/publications/dp/19j042.pdf• Makioka, R (2020), “Do Trade Fairs Promote Export?” RIETI Discussion Paper No.20-E-007.
https://www.rieti.go.jp/jp/publications/dp/20e007.pdf

RIETI Highlight 2020 Special Edition

41

RIETI’s Fourth Medium-term PlanFY 2016 to FY 2019
In the Fourth Medium-term Plan, RIETI has been promoting research activities under three new medium- to long-term
perspectives on economic and industrial policies with consideration for related government policies such as the “Japan
Revitalization Strategy” and the “mid/long-term and structural issues and policy directions relevant to the formulationof economic and industrial policies” (April 2015, Industrial Structure Council).
Research themes under the Fourth Medium-term Plan invariably set these perspectives as basic principles, and wehave put in place nine programs covering policy research areas consisting of similar individual research topics. Leading
experts in respective fields serve as program directors and supervise multiple projects conducted by fellows under the
program. If necessary, these programs will be changed or added to respond to needs for new research depending on the
progress and the changes in economic situations.

Lineup of Research Programs

Research Programs

I

II

III

Ⅳ

Ⅴ

Ⅵ

Ⅶ

Ⅷ

Ⅸ

Macroeconomy
and Low
Birthrate/
Aging Population

International
Trade andInvestment

Regional
Economies

Innovation

Industry
Frontiers

Raising Industrial
and Firm
Productivity

Human Capital

Law and
EconomyPolicy History
and Policy
Assessment

Three Medium- to Long-term Perspectives on
Economic and Industrial Policies

01 02 03

Cultivating Japan’s
strength in the world
economyMaking Japan into an
innovative nation

Overcoming
population decline

Research Process
To further improve the quality of research, RIETI ensures that discussions are organized for each research project throughbrainstorming workshops and discussion paper (DP) / policy discussion paper (PDP) seminars, in which Japanese and foreign experts
and policymakers participate to deepen the research.

Brainstorming Workshops
Launching of a new research projectDiscussion Paper andPolicy Discussion Paper
Seminars
Deepening the analysis of individual papers

42

Symposiums, Workshops,
Seminars, Publication of
DPs and PDPs, Book
Publication
Dissemination of research findings

Introduction of the Nine Research Programs
Program I

Macroeconomy and Low Birthrate/Aging Population

Program Director: Keiichiro Kobayashi
Faculty Fellow, RIETI /Research Director, Canon Institute for Global Studies /Research Director, The Tokyo Foundation for Policy Research

Maintaining long-term growth has been a challenge for economies around the world, and Japanis facing a rapidly aging population ahead of that of other nations. We will conduct research that
contributes to policies to maintain Japan's economic vitality as well as to the development of the
global economy. Specifically, we will consider system infrastructure, such as the role of Asiancurrency baskets, and analyze trends in international finance and the global economy, and long-term
deflation mechanisms, etc. Furthermore, we will conduct multifaceted and integrated research on theanalysis of comprehensive panel data on the elderly, direction of the comprehensive reform of thesocial security and taxation systems, policy proposals for economic recovery, fiscal consolidation, etc.

Individuals’ Lifecycle Behavior and Macroeconomic
Analysis under Demographic Aging: Effects of fiscal andsocial security policies

Project Leader: Sagiri Kitao (Faculty Fellow)

Exchange Rates and International Currency

Project Leader: Eiji Ogawa (Faculty Fellow)

Robots, Labor and the Macroeconomy

Project Leader: Ippei Fujiwara (Faculty Fellow)

Program II

International Trade and Investment

Research Programs

Active Projects

Program Director: Eiichi Tomiura
Faculty Fellow, RIETI /Professor, Faculty of Economics, Hitotsubashi University

When considering Japan's economic policies in the midst of globalization, an understanding ofinternational trade and foreign direct investment is even more important now than in the past. This
program, focusing on the globalization of firm activities (i.e., exports and overseas production), will
study the international trading networks of firms from theoretical and empirical perspectives, while
also studying trade policies and international trade and investment rules from empirical and legal
perspectives.

Active Projects
Empirical Analysis of Corporate Global Activities in the
Digital Economy

Project Leader: Eiichi Tomiura (Faculty Fellow)

Studies on Foreign Direct Investment and Trade in
Relation to FDI

Project Leader: Naoto Jinji (Faculty Fellow)

Studies on the Impact of Uncertainty and Structural
Change in Overseas Markets on Japanese Firms

Project Leader: Hongyong Zhang (Fellow)

RIETI Highlight 2020 Special Edition

43

Program III

Regional Economies

Program Director: Nobuaki Hamaguchi
Faculty Fellow, RIETI /Professor, Research Institute for Economics and Business Administration (RIEB), Kobe University

This program will study the effect of international trade, movement of capital and labor, and changes
in technology on urban and rural areas and industries, while viewing the regions of Japan in thecontext of the global economy and using this to develop proposals, etc. on such important policy
issues as the aging population and regional revitalization. Specifically, we will consider policies
to promote the features of export industries in regional areas and regional economic circulation,
strengthen functions of regional financial institutions, create social institutions that utilize cuttingedge information technology and transport infrastructure, and utilize and strengthen international
production networks (value chains), as well as create statistical indicators that conform with thestructure of economic spaces, form policymaking frameworks, etc.

Active Projects

Research Programs

Dynamics of Inter-organizational Networks and Firm
Lifecycle

Project Leader: Yukiko Saito (Senior Fellow (Specially
Appointed))

Agglomeration-based Framework for Empirical and Policy
Analyses of Regional Economies

Project Leader: Tomoya Mori (Faculty Fellow)

Spatial Economic Analysis on Urban and Regional
Economic Activities

Project Leader: Takatoshi Tabuchi (Faculty Fellow)

Program IV

Innovation

Program Director: Sadao Nagaoka
Faculty Fellow, RIETI /Professor, Tokyo Keizai University

The creation of new knowledge and its exploitation to resolve problems which we face is the main
source of innovation. This program will develop original data to understand the innovation processes,
and will conduct research from an international perspective, so as to contribute to evidence-based
policy formation. Specifically, the program will analyze the innovation capabilities of industries, theeconomic impact of artificial intelligence, intellectual property systems, open innovation, knowledgetransfer and the mobility of human resources across organizations, university-industry cooperation,technical standards, and business and industrial organizations that promote innovation.

Active Projects

44

Study on system and management of global data & AI
utilization—toward the establishment of a global data
supply chain

Project Leader: Toshiya Watanabe (Faculty Fellow)

Digitalization and Innovation Ecosystem: A holistic
approach

Project Leader: Kazuyuki Motohashi (Faculty Fellow)

Program V

Industry Frontiers

Program Director: Hiroshi Ohashi
Faculty Fellow, RIETI /Professor, Faculty of Economics, The University of Tokyo

Through innovation in the key technological areas of sophistication of data processing and evolutionof telecommunication networks, signs of changes in the industrial structure have begun to be seen in
Japan as well as in other leading nations. Via the Internet of Things (IoT) using sensor technology,
large quantities of unstructured data have now become accessible, and artificial intelligence (AI)technology is being gradually put into practical use. In Japan, new industrial frontiers are opening. As
such, this program will venture on research as to how policies should be instituted to overcome thechallenges facing the Japanese economy, taking cross-industry policies into perspective, in addition toconventional policies intended for individual industries.

Dynamics of Economy and Finance from the Economic
Network Point of View

Project Leader: Hideaki Aoyama (Faculty Fellow)

Policy Issues on the Electricity Market Reform after 2020

Project Leader: Tatsuo Hatta (Faculty Fellow)

Economic Growth and Fluctuations under Population
DeclineProject Leader: Hiroshi Yoshikawa (Faculty Fellow)

Study Group on Corporate Finance and Firm Dynamics

Project Leader: Iichiro Uesugi (Faculty Fellow)

Program VI

Raising Industrial and Firm Productivity

Research Programs

Active Projects

Program Director: Kyoji Fukao
Faculty Fellow, RIETI /Professor, Institute of Economic Research, Hitotsubashi University

The aim of this program is to measure industry- and firm-level productivity and its determinants for Japanand other East Asian countries and to conduct research on policies aimed at raising productivity. At theindustry level, in addition to updating and expanding the Japan Industrial Productivity (JIP) and China
Industrial Productivity (CIP) databases in collaboration with Hitotsubashi University, we will construct anindustrial productivity database by prefecture for Japan and examine the total factor productivity (TFP)
disparity between regions and the factors behind it, etc. At the firm or establishment level, employing
micro-data from government statistics and corporate financial data in Japan and abroad, we will research
the following: determinants of productivity gaps among firms; the impact of globalization and changes indemand affecting corporate performance; policies for raising productivity in the service sector; productivity
gaps between firms in Japan, China, and South Korea; and international comparison of productivity
dynamics. We will also measure investment in intangible assets such as research and development,
software, in-house training, and organizational structure, all of which are important sources of innovationand productivity growth at both industry and firm levels, and examine the economic effects of suchinvestments.

Active Projects

East Asian Industrial Productivity

Project Leader: Kyoji Fukao (Faculty Fellow)

Refinement and Analysis of the Regional-Level Japan
Industrial Productivity Database: Analysis of Regional
Industrial Linkages and Productivity

Project Leader: Joji Tokui (Faculty Fellow)

RIETI Highlight 2020 Special Edition

45

Program VII

Human Capital

Program Director: Kotaro Tsuru
Faculty Fellow, RIETI /Professor, Graduate School of Business & Commerce, Keio University

For Japan, a nation with scarce resources, to maintain and strengthen economic vitality and innovation andincrease its growth potential by using its advantages amid a declining population resulting from a rapidly
aging society and intensifying global competition among other factors, a significant key is how to utilize
its human resources. We will conduct multifaceted, comprehensive research on ideal labor market systems
to increase worker incentive and capability; reconstruction of employment institutions and systems froma full lifecycle perspective from early childhood education through higher education; human resources
development in employment years; and utilization of the elderly as human resources as well as from theperspective of promoting diversity including increased women's participation.

Active Projects

Research Programs

Reform of Labor Market Institutions

Project Leader: Kotaro Tsuru (Faculty Fellow)

Productivity Effect of HRM Policies and Changing
Employment System

Project Leader: Hideo Owan (Faculty Fellow)

Fundamental Research for Economic Growth andProductivity Improvement in Japan

Project Leader: Kazuo Nishimura (Faculty Fellow)

Research on working-style reform, health and productivity
management

Project Leader: Sachiko Kuroda (Faculty Fellow)

Program VIII

Law and Economy

Program Director: Makoto Yano
President and Chief Research Officer, RIETI /Project Professor, Institute of Economic Research, Kyoto University /Visiting Professor, Chubu University Academy of Emerging Sciences /Professor by Special Appointment, Sophia University

Technological innovation is expected to accelerate in many fields such as financial services, information/communications, and life sciences. In such an environment, what can a nation do to build an economy
that leads the world in innovation? Many cases have been observed that important innovation is born ina market in which free entry and free enterprise are guaranteed. In order to foster such a market, various
rules and institutional arrangements need to be built into the economy. From this viewpoint, in the present
program, the design of new types of economic and industrial policies is investigated.

Active Projects

46

Research on Political Behavior and Decision Making:Searching for evidence-based solutions to politicalchallenges in the economy and industry

Project Leader: Yoshikuni Ono (Faculty Fellow)

Frontiers in Corporate Governance Analysis

Project Leader: Hideaki Miyajima (Faculty Fellow)

Program IX

Policy History and Policy Assessment

Program Director: Haruhito Takeda
Faculty Fellow, RIETI /Professor Emeritus, The University of Tokyo

This program aims to review and assess policy shifts, chiefly during the period 1980-2000, as we look at
the roles played by Japan's economy and society as well as its trade and economic industrial policies at theend of the 20th century. While the final two decades of the 20th century were a time of significant changes
in Japan's economy and society, they also represent an important point of comparison when considering thedevelopment of policy after the creation of the Ministry of Economy, Trade and Industry from a historicalperspective. We will attempt to clarify how changes in trade and industrial policy at the turn of the century
were affected, based on the recognition of policy issues over the preceding quarter-century, choice of policy
responses, and evaluation of their results.

The Industrial Revitalization and the Role of Finance: The
history of Japanese economic policies in the 1990s-2000s

Project Leader: Haruhito Takeda (Faculty Fellow)

Historical Evaluation of Industrial Policy

Project Leader: Tetsuji Okazaki (Faculty Fellow)

Establishing Evidence-Based Policy Making in Japan

Project Leader: Kazuo Yamaguchi (Visiting Fellow)

The Future Direction of Corporate Taxation

Project Leader: Motohiro Sato (Faculty Fellow)

RIETI Highlight 2020 Special Edition

Research Programs

Active Projects

47

RIETI BOOKS

Gender Inequalities in the JapaneseWorkplace and Employment:
Theories and Empirical Evidence
Written by: Kazuo Yamaguchi,
Visiting Fellow, RIETI / Ralph Lewis Professor of Sociology, University of Chicago
Publisher: Springer, August 2019

This is a slight expansion and a translation by the author of a book originally published in Japanese in 2017. The
original book obtained two book awards in Japan. One of the awards is the Nikkei Book–Culture Award for Books on
Economy (Nikkei Keizai Tosho Bunka Sho), which has been given to a few books annually since 1958 and is considered
the most prestigious book award in the study of economy in Japan. Another award is Showa Women’s University’s
Research Book Award in Gender Studies, which is bestowed annually on a single research book that has made thegreatest contribution in the past year to the realization of gender equality in Japan. It was the first one written by a maleauthor to receive this award in the 10 years of the award’s history. The original book was also translated into Korean andpublished in South Korea in 2018.
The present book as well as the original one investigates social structural causes of gender inequality in Japan
while emphasizing micro-behavioral foundations regarding the production and reproduction of those social structuralcharacteristics. In this regard, although empirical research focuses on gender inequalities in Japan, theoreticalinvestigations, including reviews and evaluations of relevant theories developed in the United States, made in thebook for the mechanism of production and reproduction of gender inequalities in society transcend the analyses ofJapan’s unique situations and problems. It therefore will be relevant to many researchers who are interested in genderinequalities in the workplace and employment. The author thus hopes that the theoretical and empirical investigations
made in this book contribute to understanding the causes of gender inequalities above and beyond the understandingof the Japanese case.
Kazuo Yamaguchi

48

RIETI Highlight 2020 Special Edition

Abo u t R IET I
The Research Institute of Economy, Trade and Industry (RIETI) is a policy think tank established in 2001.
Our mission is to conduct theoretical and empirical research, to maximize synergies with those engaged
in policymaking, and to make policy proposals based on evidence derived from such research activities.
RIETI has developed an excellent reputation both in Japan and abroad for its work in these areas.

O r g a n i z ation C h ar t
AuditorChairmanVice Chairman

Office of Internal Audit

President and CRO

Vice President

Organizational Operationand Management
Administration Group
Research Group

Research Activities

Senior Fellow
Fellow
Faculty Fellow

International Coordination /Consulting Fellow

PR Strategy Group

Visiting Fellow

E d i t o r i al No t e:
While we edit this Special Edition of our Highlight magazine, the novel coronavirus epidemic is spreadingin Japan and also globally. In RIETI’s fifth medium-term plan which will start this April, we are resolved tostrengthen our research system which integrates the humanities and technology, combining technology
research for the Fourth Industrial Revolution (i.e. IoT, AI, big data, robotics, etc.), and social scientificapproaches (i.e. behavioral economics). We will further enhance our research on EBPM (evidence-based
policy making), and continue to make efforts to function as a knowledge platform that connects researchoutcomes with policy needs. Based on epidemiological evidence, we will proceed with our research on
minimizing the effects of the novel coronavirus and gaining social resilience by integrating humanities andtechnology to combat this threat. We appreciate your continued support for RIETI.
(RIETI Editorial Team)RIETI Highlight 2020 Special Edition49

Research Institute of Economy,Trade & Industry,IAA
https://www.rieti.go.jp/en/@en.RIETI@RIETIenglish