Society 5.0 driving innovation in Japan

December 12, 2018 / By  

The Japanese economy is growing above potential, with real GDP expected to grow by 1.0% in 2018 (Oxford Economics), supported by continuing external demand and in the face of recent natural disasters. However, many view the GDP growth may not sustain in the long term due to demographic transition as the country faces an ageing society and a shrinking workplace population.

Japan is viewing this challenge as an opportunity. Demographic change is a social challenge that will soon be shared by other countries in the world, and Japan is keen to set standards by establishing a new social model based on digital innovation.

Society 5.0, a data-driven society

Society 5.0, otherwise referred to as the data-driven society, is Japan’s vision as the next step in human evolution, following hunter-gather (Society 1.0), agrarian (Society 2.0), industrial (Society 3.0) and information (Society 4.0) stages. A cutting edge system with a fusion of cyber (virtual) and physical (real), Society 5.0 enables economic growth and provides a solution for social issues at the same time.

To realize Society 5.0, innovations from the Fourth Industrial Revolution (robots, IoT, big data and artificial intelligence) and their application to various economic sectors is critical. Japan’s advantage here lies in the ample resources of advanced technology held by corporations, R&D investment, a professional workforce, and real data collected in industries such as medicine.

The declining and ageing population combined with a tight labour market has brought unemployment rate to a 2% levels for 17 consecutive months up to October. Environmental constraints such as decarbonisation wherein efforts to reduce carbon emission to 26% by 2030 and 80% by 2050 further makes the case for technology to be implemented easily across the country with minimum resistance from the markets.

However, there are obstacles to realizing Society 5.0. According to Japan’s Cabinet Office’s Council for Science, Technology and Innovation, the lack of skilled IT professionals and R&D start-ups, coupled with a rigid socioeconomic structure and lack of globalization are the main concerns.

As such, human resources development is amongst the highest priority, with ongoing reforms in higher education curriculum and, various smart regulatory reforms are underway, aiming to improve efficiency and innovation in the energy, agriculture, medicine, and telecommunications industries. One such regulatory reform is the Regulatory Sandbox, a system to promote new technology demonstration which took effect in June 2018 and, the national strategic special zones, wherein 10 areas were selected and 300 reforms undertaken up till October 2018. Another reform includes the draft amendment of the Immigration Control and Refugee Recognition Act which has recently been passed by the House of Representatives for argument at the House of Councilor in end November.

The world’s most globalized cities attract more than 20% of total direct real estate investment volumes, according to JLL Research, and investors are most interested in innovative cities with the strongest potential to future-proof itself and its assets.

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