Two decades after Japan rolled out an ambitious plan to go digital, the COVID-19 crisis has exposed the government’s deeply rooted technological shortcomings as ministries remain stuck in a paper-driven culture that experts say is hurting productivity.

While Tokyo has made “digital transformation” its main policy plank this year, the switch may not prove so easy as bureaucrats from different ministries still aren’t able to hold teleconferences together and little of their administrative work can be done online.

Analysts say the lack of government digitalization could reduce the incentive for the private sector to go digital in a blow to the country’s efforts to boost productivity.

“Lack of digital investment by the government has hampered productivity and efficiency at the private sector,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute.

In its mid-year policy strategy, the government vowed to accelerate digitalization of its outdated administration, which has delayed delivery of cash payouts to help citizens weather the pandemic.

Much of the problem stems from Japan’s preference for paper documents and seals for approval at government offices.

“Paper documents and seals are still prevalent. Politicians whom I deal with also prefer face-to-face meetings,” a government official said on condition of anonymity.

Adding to its digital woes is the vertically structured bureaucracy: Each ministry as well as local governments, for instance, have developed their own computer systems that aren’t compatible with each other.

Currently, each ministry has developed its own local area network with various vendors, making it difficult to hold teleconferences with each other because of differences in their online security policy, said a Cabinet Office official in charge of information technology strategy who declined to be named.

Less than 12 percent of administrative work in the country is conducted online, according to Japan Research Institute.

Overall, it could cost the government 323 million working hours per year if it doesn’t go digital, translating into personnel costs of nearly $8 billion (¥849 billion), a government regulatory reform panel estimated in a report released in July last year.

The digital drawbacks give the lie to Japan’s image as one of the world’s leading high-tech nations. In fact, the world’s third-biggest economy ranked 23rd among 63 countries, lagging behind Asian nations like Singapore, South Korea and China, in a survey by Swiss think tank IMD on digital competitiveness.

The last OECD Digital Economy Outlook put Japan at the lowest rank among 31 countries in online procedures, with just 5.4 percent of citizens using digital applications at public offices, way below Denmark, Estonia and Iceland at around 70 percent each.

Seiji Kihara, a former Finance Ministry official who now serves as ruling party’s deputy policy chief, said young bureaucrats were running around with a pile of documents seeking bosses’ seals for approval when he was there twenty years ago.

“They are doing pretty much the same now.”

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