Prime Minister Yoshiro Mori has declared that he wants to build an “e-Japan.” He may find that his wish comes true sooner than he thinks. This week’s launch of Amazon.com’s Japanese Web site will push the electronic envelope as much as any government initiative. But the Amazon.com venture also highlights the obstacles this country faces in its attempts to move toward the digital frontier.
Amazon.com is the world’s most visible e-commerce venture. Since it was founded in 1995, the company has extended numerous tentacles into cyberspace, adding CDs, electronic equipment, videos and other goods to its warehouses of books. It has 25 million customers worldwide; in September, 14.3 million people visited its Web site. The company hopes to generate $1 billion in sales this Christmas.
Amazon.com is proof that the Internet is changing the face of commerce. Few Japanese are likely to visit Seattle, Washington, but since the company went into business, Japan has been its largest export market. It already has 193,000 Japanese customers, who generate annual sales of $34 million.
That is not enough for Mr. Jeff Bezos, Amazon’s ambitious CEO. He wants a bigger share of Japan’s book market, estimated at 1.2 trillion yen annually. Although a mere sliver — 5 billion yen to 6 billion yen — consists of online book sales, Mr. Bezos is courting the one-half of this country’s Internet users who say they want to buy books and magazines online.
The competition will be stiff. There are already a number of Internet book vendors here. Kinokuniya’s BookWeb service sells 360 million yen worth of books each month. Kinokuniya also announced this week that it would open an eBook store that would sell English versions of electronic books in Japan via the Internet early next year. It is revealing that Japanese versions of those e-books would follow only later in the year.
Amazon Japan differs from its U.S. operations in one important respect: Japanese books will not have the price discounts that are usual at the U.S. site. (Non-Japanese books will, however, be discounted.) The obstacle is the Japanese law against book discounting. Amazon officials say that is not a problem; they can compete on other grounds. Maybe so, but that law illustrates the barriers this country faces in trying to energize its digital economy.
Installing hardware, building infrastructure, subsidizing software development and training people how to use computers are all pointless without a legal and social framework that supports the utilization of information technology. An economic transformation by definition shifts power from established interests to new ones; protecting the old order will only hamper the development of an e-Japan. That is the simple truth behind the information-technology revolution and one that policymakers ignore at their peril. The proof of that proposition is evident in the eagerness — and ease — with which Japanese consumers can now shop in Seattle.
September’s unemployment figures, which marked a 0.1 percentage-point increase, are a sharp reminder of what it is at stake. But the claim that continued reform will only add to Japan’s 4.7 percent unemployment rate is just half the story. This country’s distribution networks are inefficient, and they do absorb large numbers of workers. But a deregulatory program that unleashes the power of new technologies will create more than enough jobs to offset the losses. By one estimate, deregulation in medical care, IT, distribution and new manufacturing technologies could create 7.4 million jobs. Other authoritative studies argue that extensive reform could boost gross domestic product by 6 percent.
The most powerful argument in favor of reform is that it is inevitable. Japan’s consumers have voted; that is why this country has been Amazon’s biggest overseas market since the company went into business. That is also why Bertelsmann, the German publishing giant, reached an agreement with Napster, the upstart Internet music service, this week.
Bertelsmann was one of the music-industry companies that was suing Napster over copyright violations. Napster allows users to share songs over the Net without going through industry middlemen. Like it or not, Napster — or some form of the file-sharing technology — is the future of the $40-billion music industry. Bertelsmann recognized as much, and has made a deal with the renegade company in an attempt to get on the right side of history. That is the sort of realism that Japan needs.
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