A health ministry panel on Thursday shared its vision for making Japan's health care startups more competitive overseas based on making more strategic investments.

The panel believes that Japan possesses the potential to be a global leader in health care innovation, but that there are challenges in commercializing these innovations and growing them into sustainable businesses.

“Health care, which is Japan's social infrastructure and treasure, must now be led by startups to innovate and contribute both in Japan and globally,” panel chair and management consultant Shuji Honjo said in a statement.

Since 2019, the number of health care startups established each year in Japan has declined to around 50. There are no unicorn companies — those with a valuation over $1 billion — in the health care sector, and the number of large-scale mergers and acquisitions as well as initial public offerings is also limited.

The number of Japanese startups in the health care sector, including medical, health and nursing care, is only about 2% of that in the United States.

The proposal, which identifies the structure and characteristics of each health care segment, outlines how Japan can make strategic investments that influence the success of health care startups. Science, people, finance, the development and regulatory environment for medical products, and the market should all be taken into consideration, it said.

The panel advocates for a "global direct approach" to investment under which areas with well-established markets and regulations would be targeted, for example those heavily influenced by the U.S. Food and Drug Administration, such as biotech. To do this, it says Japan must enable startups to integrate overseas expansion into their strategies from a relatively early stage.

A second approach of "gradual international expansion" should also be pursued, the panel said. This would see a focus on areas where Japan can be a pioneer and develop the market, for example on medical devices and software as well as some areas of regenerative medicine. Under this, startups would first complete pilot projects or market launches domestically, and then expand overseas.

A third, more domestically focused approach would concentrate on essential health care that is under pressure due to Japan's aging society, for example "care tech," which involves the use of robots and other technologies. The panel suggested that solutions aiming to enhance the quality and sustainability of Japan's health care system should be supported.

The health ministry is expected to request related expenses for the next fiscal year’s budget.