> I suppose this simply all opens up the immigration question that's been pricking at them for some time now.

No, it's really not, at least not for "digital competitiveness". It's extremely easy to immigrate to Japan for any kind of software or IT job; the government really couldn't make it any easier if they tried.

(Yes, you could make the case that Japan should increase immigration for rural farm work jobs, but that's not the kind of immigration we're talking about here.
Bringing in masses of uneducated people with no skills isn't going to help with "digital competitiveness".)

There are several problems affecting digital competitiveness in Japan. A big one is the language itself. English is the most-spoken 2nd language in the world, by a huge margin, and is de-facto the language of tech. Basically, you can't be a competent tech worker and not know English. College-educated people all over the world learn English, especially if they want to work at a global scale (e.g., in the tech industry, but many others too). So Anglophone countries have a huge natural advantage here, because a college-educated tech worker from $country can move to the US or UK or Australia or Canada and start working right away, and start living there without any huge language issues. The same isn't true for places like Japan and Germany, or really any non-English-speaking country. Some places accommodate English extremely well, with Netherlands being the poster child here, and as a result, Netherlands has lots of tech-related immigrants working there. Japan has it even worse because, unlike Germany, the other college-educated people here have poor English skills (every college-educated German I've ever met spoke amazing English), a result of various cultural factors. And unlike most European languages. Japanese is completely alien and not at all related to English, except in its frequent use of loanwords (which are then hard to recognize because of the very different writing system and phonology that it tries to fit them into).

Other problems for tech workers here just come from company culture: traditional companies expect to hire people fresh out of college and train them; they're not very good at hiring experienced people and integrating them into the corporate culture. They typically don't pay well either, so they're not globally competitive.

There are a fair number of smaller companies, typically start-ups, that focus on hiring foreign professionals and have an English-speaking environment, and they do benefit from Japan's very, very easy immigration system for skilled professionals, but you can only employ so many people in a bunch of small companies that aren't even profitable yet, and may never be (i.e., the definition of a start-up).

The government and society do try to accommodate English speakers as best as they can, but it's still challenging because most people, while they learned some English in secondary school, are simply not conversational, and try to avoid using it due to discomfort and fear of failure. But it's getting better, slowly. I didn't have any trouble doing necessary tasks at the local government office when I've had to; they were able to find bilingual workers to help me.

Honestly, I think that, with the two major English-speaking countries shooting themselves in the foot lately, Japan is in a good place to build its tech industry more, perhaps from western companies opening branch offices here. Unlike America which seems to hate immigrants these days (including highly-skilled professionals; the H1B isn't exactly easy or cheap to get, nor is permanent residency), Japan basically rolls the red carpet out for you if you're a college-educated and experienced tech professional, at least as far as visa issues go.