# Utilizing "Smart ICT" Advancement to Create New Values

Part 1

# Section 1 New ICT Trend: “Smart ICT” to Produce Japan’s Vigor and Growth

# 1. “Smart ICT” to produce Japan’s vigor and growth — General —

(1) ICT and economic growth — A basic framework —

a. Factor decomposition from the macroeconomic viewpoint

From the macroeconomic viewpoint, economic growth is decomposed into labor input, capital input and total factor productivity. Labor input represents the quantitative expansion and qualitative improvement of labor. TFP indicates productivity improvements that cannot be explained by labor or capital input growth.

### b. ICT as growth engine — ICT-using industries' growth combined with ICT industry's growth

First, ICT has served as a growth engine. In ICT-using industries or sectors, TFP growth through labor productivity growth induced by information capital investment and through production method improvements has been combined with the integration of various products and services with Big Data and smartphone use to boost value added to products and services. On the other hand, growing demand for ICT services and equipment in the ICT-using sectors has encouraged the ICT industry's technological innovation and development and produced the ICT industry's growth, leading to a virtuous circle. The entire ICT industry, including the software, services and hardware sectors, has served as a growth engine to drive Japan's economy.

### c. ICT as versatile tool -- Using ICT for solving global social challenges and expanding such solutions globally

Another role of ICT in economic growth, which has attracted attention over recent years, is to serve as a versatile tool. Social challenges that have become constraints on growth in Japan are or will become common to other countries. Japan may use ICT-based innovations for solving these challenges and expand the solutions and relevant know-how globally. Such global expansion is expected to come through efforts to use ICT for various social challenges facing Japan.

## (2) Using new ICT trend to drive growth — Smart ICT —

Cloud, Big Data, mobile, social and other new ICT technology and service innovations are producing a new ICT growth base. The new ICT trend is expected to greatly improve growth potential in various areas not only for the ICT industry but also for ICT-using industries or sectors.

As Big Data technologies have been used more widely, for example, systems that had been used mainly for production lines at large companies and sales management at large distributors are now available for easy use for street shop management and public areas including education and healthcare.

The use of social media for various analyses has expanded from advertisement to a wide variety of other areas. It has been pointed out that as goods have growingly been commoditized, every industry or sector has grown more service-oriented, with how to maximize values for continuous use rather than exchange being important for competition. ICT has traditionally accelerated this trend toward a stage where ICT users are co-creating values.

As for solving social challenges, meanwhile, Big Data and M2M (machine to machine) sensor networks can be used for efficiently controlling various social infrastructures. They can also be expected to contribute to solving resource problems facing Japan. Furthermore, open data may be used for creating various user-friendly public services at the initiative of the private sector.

In this way, the new ICT trend or “smart ICT” has gone beyond traditional ICT systems used mainly for improving operations and productivity and has the potential to produce a new growth engine.

## (3) Using smart ICT for accelerating Japan's vigor and growth

How have Smart ICT components including mobile (smartphone and M2M), cloud computing, Big Data and social media technologies diffused in Japan? Figures 1-1-1-1 and 1-1-1-2 show the results of an Internet survey on the diffusion of smartphones and social media in Japan, the United States, the United Kingdom, France, South Korea and Singapore. They indicate that Japan has not necessarily achieved the world's top position in diffusing smartphones or social media.

The survey’s results regarding various Internet services show that users of e-commerce online purchases of and trade in goods and services in Japan accounted for 78.3% of respondents in the survey. Although the percentage share is the highest among the six countries, the share for users of electronic central and local government services (electronic applications, declarations and reports) in Japan is limited to 16.2%, far lower than in the other countries.

A comparison of cloud network technology use rates among Japanese and U.S. enterprises (in March 2013) shows that the rate in the United States reached 70.6% against 42.4% in Japan (Figure 1-1-1-3). There is a wide