Somewhat overshadowed in recent years by China’s rise as a regional and global power, Japan still extends considerable influence as a world leader in various fields, including investment, policy management and trade, according to experts who gathered at a Tokyo conference earlier this week.
But at the same time, Japan lags behind other countries in incorporating technological innovations, such as artificial intelligence, into everyday life and financial technology to improve efficiency, they said.
“We want to talk about Japan as a role model — not Japan following, not Japan copying — but Japan actually and constructively led by the young generation,” said Jesper Koll, who heads Wisdom Tree Japan KK, a Tokyo-based exchange-traded fund sponsor, in the opening session of the annual G1 Global Conference organized at Globis University on Monday.
Experts shared their insights in a session titled “Can Japan be a Role Model for Global Economic Prosperity and Stability?”
Hiromichi Mizuno, chief investment officer at Government Pension Investment Fund, said the country can show leadership in the field of investment via education on responsible investment. The concept gained traction after the global financial crisis, triggered in 2008 by the fall of Lehman Brothers which exemplified the long-term failure of a capitalism driven by the single-minded pursuit of short-term corporate profits.
In July, GPIF, the world’s largest pension investment fund, started a ¥1 trillion program called ESG investment, which targets businesses that value three elements: environment, social and governance.
With the pension fund behemoth focusing on these concepts, the GPIF sends a message to other investors that they should seek out socially responsible assets, experts say.
“It’s all about sustainability, long-term, inclusiveness and multistakeholder model,” Mizuno said.
“This is also exactly … what the Japanese companies are good at,” he said.
Heizo Takenaka, professor emeritus at Keio University, said Japan’s macroeconomic policy changes over the past several years, led by Prime Minister Shinzo Abe with his economic plan known as Abenomics, had positive effects in shoring up growth.
“If the policy management changes, the economy can change. This is the most important point,” said Takenaka, adding that Japan has proven this by example.
Before Abe’s second stint, the benchmark Nikkei average stood at around 9,000, but it is more than double that level now, said Takenaka, who was economy and fiscal policy minister during the administration of Junichiro Koizumi.
Also, the unemployment rate in July was 2.8 percent, which is the lowest in about two decades, he said.
However, Takenaka also noted that the government and the Bank of Japan have failed to defeat persistent deflation, which has for years weighed on economic growth.
He also says that Japan remains slightly behind the times when it comes to the so-called fourth industrial revolution, an era in which unprecedented breakthroughs in digital and internet technologies have sent powerful ripples throughout society.
Takenaka points to Japan’s heavy dependence on cash as an example. The ratio of cash in circulation to nominal gross domestic product was 19.4 percent in 2015, which the BOJ describes as “notably high” compared with many other countries, according to a central bank report in February.
The fintech trend (a portmanteau of “finance” and “technology”) has made strides in countries such as China, where electronic payments through smartphones are becoming the norm.
In another session titled “Risks & Opportunities: AI, Autonomous Vehicles, and Cybersecurity,” David Malkin, an AI expert at Tokyo-based Cogent Labs that researches and develops AI products, said the Japanese government appears to be less committed to promoting artificial intelligence compared with efforts made by the Chinese government, although Japan has ample room to streamline business operating costs with AI.
“The biggest opportunity that we have seen … is really cost-cutting, which is great for Japan,” he said.
For example, his firm makes a handwriting-recognition AI system that can be used to reduce the cost of paper, Malkin said.
Since the paper culture is still deeply ingrained in Japan, “if you automate that, that’s huge,” he said.
In a session that focused on free trade and protectionism, experts said Japan’s leadership is being tested in a fight against emerging protectionism, especially under U.S. President Donald Trump’s administration.
The United States is aiming to renegotiate the North American Free Trade Agreement while Trump has withdrawn the U.S. from the Trans Pacific Partnership agreement.
“Many people in Washington rushed to the conclusion … that the TPP was dead,” Mireya Solis, a senior fellow at the Brookings Institution who is an expert on Japan’s economic and trade policies, said. “I think this reflects the fact that many people in the United States cannot think that an ambitious trade agenda can go forward without the United States.”
While the rest of the 11 TPP members are somehow seeking to proceed without the United States, some are also talking about trying to persuade the Trump administration to come back to the table.
“These would actually put Japan really in a leadership position,” Solis said.
The G1 Institute, a Tokyo-based organization, has held its G1 Global Conference every year since 2011 and invites noted experts from various fields of business, art, entertainment and politics to high-level discussions conducted in English. The institute also hosts other conferences including ones focused on startups.
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