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Firms vie for lead as connected Japan becomes reality

by Noriyuki Suzuki

Kyodo

For trend-conscious corporate executives in Japan, a connected world is not a distant future in the making but a reality.

A growing number of Japanese companies are waking up to the need to sharpen their business strategies and boost investment as the hunt for the next big thing intensifies.

The prospect of an aging Japan and a shrinking domestic market is also giving them the opportunity of pondering how they can help solve social and business issues as the country gravitates toward connecting everything from home appliances to cars and factories to the internet.

The government of Prime Minister Shinzo Abe, for its part, is pinning hopes on the benefits of the so-called internet of things and artificial intelligence, hoping that they will become a growth driver rather than a stumbling block at a time when the world’s third-largest economy continues to struggle.

“I’ve wanted to do something that will make an industrial change, now that we have IoT, big data, and AI,” said Yosuke Okada, the 27-year-old chief executive officer of startup ABEJA Inc.

“Japan has many researchers in the field of AI … but there seems to be little interest in solving the kinds of challenges we face in society by monetizing AI-based businesses,” Okada said in a recent interview.

Okada started ABEJA in 2012 following his return from Silicon Valley where he became convinced about the potential of AI. The startup offers a cloud-based service that gives store operators an idea of why shoppers are not buying.

Deep learning, a burgeoning field in recent years, plays an integral part in processing images taken by in-store cameras and sensors to detect age, gender and other attributes and to analyze consumers’ behaviors such as how long they stay in a certain section.

Combined with sales and other available data, the service is designed to help retailers fine-tune their business plans to improve profitability. So far, more than 100 shops have been using the service since its launch in 2015, including major department store operator Isetan Mitsukoshi Holdings Ltd., according to ABEJA.

The Tokyo-based firm is now planning to introduce its service in Southeast Asia in the current business year through August, starting in Singapore and Malaysia.

An AI-based system works better and its predictions get more accurate when a larger number of people use it and data is collected. Okada hopes his company’s platform will become an accumulation of know-how on Japan’s retail operations.

Bigger companies with financial and human resources are also eager to capitalize on the trend and get ahead of their rivals.

SoftBank Group Corp. has acquired Britain’s ARM Holdings PLC., a key player whose chip designs are used in a wide variety of devices, as Chief Executive Officer Masayoshi Son expects a “paradigm shift” in the internet of things.

The telecom giant, which also markets the humanoid robot Pepper, has agreed with Mizuho Bank to set up a joint venture to extend consumer loans by using AI.

For electronics makers like Panasonic Corp., how connected devices can help people address challenges symbolic of Japan appears to hold the key. Japan is one of the fastest-graying countries, with some 27 percent of people aged 65 or older.

In a smart town being developed outside of Tokyo, all 70 rooms prepared for elderly people have cloud-based air conditioners and sensors that can check not only room temperatures and humidity but also breathing and sleeping. The service enables staff members at the facility to respond swiftly when abnormalities are detected.

The Osaka-based firm is also promoting wider use of connected devices by enabling people with smartphones to remotely check on elderly family members and pets staying at home via connected cameras and sensors. “We are targeting overseas markets in North America and Europe as well,” a Panasonic official said.

Driven by growing hopes for advances in information and communications technology, the government expects an approximately ¥33.1 trillion ($326.5 billion) boost to real gross domestic product in fiscal 2020 when Tokyo hosts the Olympics and Paralympics.

The size of the domestic internet of things market, currently led by the manufacturing sector, is projected to more than double to ¥715.9 billion in fiscal 2019 from ¥293.0 billion in fiscal 2015, according to the MM Research Institute, a private research firm.

Still, internet of things experts believe work has just begun to win public acceptance. Security and privacy concerns have also been raised as a cyberattack, for instance, could have a wide-ranging impact in a connected world.

In addition, Japan Inc. has yet to be fully convinced about how exactly the internet of things will benefit them and their industries in the future, with the government’s recent white paper showing companies in countries like the United States, Germany and China have higher expectations.

Yasuyuki Nishioka, professor at Hosei University, said what the internet of things would mean in society is still vague, adding there are many conservative companies unwilling to adopt it despite the global and borderless nature of the ongoing competition.

“We may need a decade or so for a big change to come in Japan’s internet of things market,” said Nishioka, an engineering expert.

“Companies that can take risks will be at an advantage in the world of internet of things and it depends on whether top leaders have the ability to go ahead.”