### 2. The role of ICT in economic growth

## (1) Boosting the productivity of enterprises with ICT (supply side (1))

ICT can be used to make enterprises' production activities and distribution activities more efficient, thereby boosting productivity. In the past, enterprises in all industries have largely focused their efforts to boost productivity with ICT on making business operations more efficient. For example, beginning with the construction of business operation systems with mainframes, then moving through the widespread adoption of client-server systems to today, when cloud computing is utilized. As this shows, ICT is the most common tool for raising efficiencies in business activities (process innovation) and it is the driving force behind economic growth as seen from the supply side. Further efficiency improvements are expected in production and distribution processes through, for example, the analysis of big data.

## (2) Expanding labor participation and improving labor quality with ICT (supply side (2))

Telework and other working arrangements made possible with ICT are expected to give diverse, flexible work options to women raising children, seniors, people with disabilities, and others and, thereby, increase labor participation rates. At the same time, ICT progress has greatly changed the skills required for employment and the in-demand skills are anticipated to change even more in the future. Therefore, it is imperative, in the interest of improving labor quality, to foster a labor force that can cope with these future skill changes through early ICT education and other measures.

## (3) Creating new markets with ICT (demand side (1))

ICT is the source of new market creation. In the ICT field, innovative products—such as mobile phones, computers, flat-panel televisions, smartphones, and tablets—and innovative services—such as online shopping, content delivery, online games, social media, and smartphone apps—have been developed and marketed one after another, creating new markets. During Japan's period of rapid economic growth, economic growth was sustained on the demand side by the popularization of three essential status symbols (B&W televisions, washing machines, and refrigerators) and later by three new essential status symbols (color televisions, air-conditioner units, and cars). But since the 1990s, Japan's economic growth has been sustained on the demand side by ICT-related products and services.

Like other products and services, ICT products and services, viewed individually, start with an early-adaptor stage, pass through a growth stage, and finally reach a stage of demand saturation. ICT products and services, however, are distinguished by the creation of new derivative products and services, after an original product or service spreads extensively through the market for a time, that use the original product or service as a platform. Repeating this process forms new markets at multiple tiers. Repeating this process forms new markets at multiple tiers. For example, the rapid growth of the smartphone has led to the development and popularization of all kinds of apps, and the dissemination of these apps has led to the growth of content markets within apps (for example, the stamp market for the Line app). Another example is the emergence of a new transaction arrangement called the sharing economy, in which individuals share goods and services backed by social media's proliferation that makes trust relations visible. The continuation of such product innovation in the ICT field may be able to sustain our economic growth from the demand side.

## (4) Global expansion of the ICT industry (demand side (2))

In contrast to Japan, where there are fears the declining population will trigger a contraction in domestic demand, rapid increases in demand are forecast for emerging countries, fueled by population growth and rising incomes. It is essential to aggressively tap into this overseas demand for our mid-to-long-term economic growth. Consequently, global expansion of the ICT industry, one of Japan's leading industries, is thought to hold major significance from this viewpoint. Figure 5-1-2-1 below summarizes the points made above about ICT's contribution to sustained economic growth.

Figure 5-1-2-1 ICT's contribution to sustained economic growth