Positive Signs from Japan  
Mr. Risaburo Nezu, Senior Executive Fellow, Economic Research Center, Fujitsu Research Institute

A few months ago we attended a Japan Society panel discussion entitled “Digital Networks in Asia: Trends and Opportunities”. One panelist we found particularly interesting was Mr. Risaburo Nezu, Senior Executive Fellow, Economic Research Center, Fujitsu Research Institute who gave a presentation entitled “Is the Japanese IT industry recovering at long last ? Lessons from the 90s and prospects for the 00s”. Like many economists with a theory on Japan’s economy, Mr. Nezu uses data to support his suggestion that Japan’s economy may be on its way to recovery. But where Mr. Nezu is unique is in his willingness to offer a strategy for the future competitiveness of Japanese businesses. Before joining Fujitsu Research Institute as a Senior Executive Fellow in 2001, Mr. Nezu spent 11 years in Paris as the Japanese delegate to the OECD. In 2002, Mr. Nezu published a book entitled “IT Warring States” that analyzes IT within the context of global competition. In addition to his role at Fujitsu, Nr. Nezu is a Director at METI’s Research Institute of Economy Trade and Industry. This month’s Bridge Builder features key highlights from Mr. Nezu’s presentation.

Mr. Nezu first introduced the audience to the famous semiconductor market share chart that demonstrates how Japan went from being a dominant market force in the 80’s to being consistently #2 in the 90s. Yet he emphasized the slight uptick in market share seen since 2002. Mr. Nezu then went on the highlight some of the important lessons Japanese companies should learn from the 90’s:

- In the 90’s all Japanese firms adopted the same strategy, trying to do everything at once. Resources were spread too thinly over a wide range of products so no Japanese company could reach a level of control over the global market. Japanese companies need to develop their own strategy, concentrate their resources, and become a market leader

- During the last decade, Japanese businesses were naive about the leakage of digital technology, thereby allowing Asian competitors to mimic Japanese technology. Japanese firms need to prevent such leakage by bringing home key operations.

- At the same time, these companies clung to an integral production method at home and did not take advantage of cheap Asian resources. These companies should move to Asia for some part of their operations through outsourcing.

- As a result, Japan was driven into a vicious circle of low investment and poor competitiveness. Japanese companies today must be determined not to repeat the same mistakes with digital entertainment equipment.

Perhaps the most encouraging part of Mr. Nezu’s discussion was of the “good signs” coming out of the Japanese economy to suggest that some lessons are truly being learned. For example, in the semiconductor industry, there is consolidation in the area of DRAM and system LSI to increase competitiveness. Japanese companies are increasing production in Asia, through outsourcing and alliances with Asian companies. One truly promising area is digital audio and video equipment such as the mobile 3G phone, the DVD, the Digital Camera, and the Flat TV (plasma TV, LCD). There is also rapid uptake of broadband in Japan which arguably has the fastest and cheapest services anywhere: Not to mention the increasing exports to China of steel, cement, plastic, and other materials.

A key slide towards the end of Mr. Nezu’s presentation was a table showing the evolution of the IT industry. Mr. Nezu posits that while 1994 was still within the era of the Mainframe, 1995 was the beginning of the PC/Internet era led by the US. 2000 was arguably the start of the mobile phone era led by Europe. But this year, according to Mr. Nezu, could be the year of Digital Electronics possibly led by Japan.

For more information on the Japan Society, please visit them on the web at www.usajapan.org  .

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