The Japanese economy has recovered brightness thanks to Prime Minister Shinzo Abe’s initiative known as “Abenomics.” And now the nation should not only gear up its “third arrow” growth strategy but also address more fundamental issues in order to pave the way for sustainable economic expansion.

Over a long period of time — in the process of building a modern state through Meiji Restoration, in the postwar period of high economic growth and in the age of globalization after the Cold War — Japan has always trailed other advanced nations by adopting a passive way of response.

In other words, it has lacked the ability to make decisions on its own. The challenges it is now facing are very difficult to overcome and have no relevant models available among other countries. Hence it is indispensable that Japan make creative decisions on its own.

Japan is now faced with so many formidable problems that it is often referred to as a “problems-bound advanced country.” These problems include a low birthrate and an aging population, slowing economic growth due to waning industrial power and a weak state financial structure that ranks the worst among the world’s advanced countries.

These problems are coupled with growing costs for social welfare, a fragile energy base, an inward-looking society with low social awareness and a lukewarm way of dealing with global environmental problems.

These are the kinds of challenges that not only other advanced countries are bound to encounter in varying degrees in the future, but also emerging economies such as China and the ASEAN members. Any models that Japan can provide for solving these issues would have value.

Japan would be able to open up a new avenue for the future if it promotes innovations in the following four fields by making use of its social traits.

First, innovations should be promoted to help people in their everyday lives. The central part of this issue is how to deal with the problems of a declining and aging population.

It is necessary to raise the birthrate, encourage more elderly people and women to work and participate in society, raise productivity through technological innovations and accept foreign workers up to a certain level.

To help raise the birthrate, it is necessary to improve child-care facilities. To make it easier for women to join the labor force, it is necessary to improve conditions and the environment at the workplace to help realize an appropriate work-life balance and to reform the consciousness of family members.

To help lengthen the healthy life span of the elderly, comprehensive health measures including better medical care, nourishment and exercise are necessary. An inflow of foreigners is expected to help enhance people’s intellectual creativity. To make this happen, reform of the life environment and social awareness is indispensable.

Second, aggressive attempts should be made to achieve technological innovations. Since the collapse of the economic bubble in the 1990s, Japanese industry’s potential for technological innovations has been declining. Technological innovations are an important part of efforts to cope with the nation’s declining population. Technological innovations are a major factor in determining Japanese industry’s international competitive power and are a source of economic growth. This consideration was incorporated in the “third arrow” of the Abenomics initiative, showing that the government has at last started to be serious about the issue.

The frontiers of this field are broad. It covers various sectors such as information and communications, ultra micro-fabrication, development of new materials, life science, brain science and development of new energy sources.

In view of recent market trends, it necessary for Japan to shift its priority regarding the mode of research and development from the “product-out” stance (producing products from the viewpoint of developers who do not pay much attention to consumers’ needs) to the “market-in” stance (producing products from the viewpoint of consumers), and to place primary stress on hybrid development incorporating technologies from different sectors.

Third, innovations should be stepped up in the field of culture. Cultural activities enliven people’s spiritual side, enhance a sense of trust among people and strengthen the unifying force of society. The growth of high-level cultural activities will surely attract people’s interest around the world and win more respect from them. These days, people of other countries are becoming more interested in Japan’s traditional culture. Japanese food is now so popular among them that it was recently put on the World Heritage List.

Also, Japanese cultural content such as animation, comics and games are adored by young people worldwide.

The trend of synergic development is expected to increase between industry and culture, as well as between technology and art. As markets become advanced, consumers tend to seek not only better performance and function of products but also sensation from the beauty and sensibility of designs. The progress of culture needs advanced technology, and technological innovation in turn upgrades culture. Culture and industry have now entered a stage of synergetic development. Japanese people’s sensibility nurtured in their centuries-long symbiosis with nature will be able to exert advantage.

Fourth, green innovations should be enhanced. The worsening of the global environment is a serious problem that could endanger the existence of Earth and mankind if we err in handling it.

Traditional Japanese values as indicated in such expressions as Mottainai! (What a waste!) and Taru wo shiru (He who has few wants is rich) have helped Japan greatly contribute to reducing environmental pollution and improving energy efficiency, and would become an influential tool for making green innovations take firm root in the world.

It’s possible for Japan to solve its problems and regain the capacity for growth if it pushes innovations in these four fields effectively. It would be the way for the nation to transform itself from a problems-bound country to a problem-solving country.

The question is whether officials in the Abe administration concerned with political and administrative affairs would be able to devise a practical vision to implement the projected innovations, make decisions on related concrete measures and carry them out.

It’s no exaggeration to say that the Abe administration’s capacity for making decision on its own is now being tested.

Shinji Fukukawa, formerly vice minister of the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) and president of Dentsu Research Institute, is currently senior adviser of the Global Industrial and Social Progress Research Institute.

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