Commentary / Japan

The 'black ships' from Asia

by Yoichi Funabashi

The American “black ships” that arrived in Tokyo Bay in 1853 put an end to Japan’s more than 200 years of self-imposed isolation and set in motion the events that would lead to the Meiji Restoration.

Although the ships threatened the survival of Japan as a nation, they also stimulated the country to undertake reform and open up to the rest of the world. The black ships represented the ultimate form of foreign pressure by prompting a realization that Japan would not be able to sustain its growth or maintain its independence if it refused to learn from other countries and undertake reforms on its own.

Now, nearly 170 years later, another fleet of black ships is rushing toward Japan. This time the ships are coming from Asia.

Japan is being leapfrogged by innovations from all quarters across Asia. Ultramodern products and services are born out of cutting-edge technology, while newly emerging markets and opportunities are being identified. From communities of eager entrepreneurs, social innovations that anticipate the Fourth Industrial Revolution and its disruptive consequences are arising. Firms make use of the vast possibilities created by social media and its dominance in day-to-day life. The synergy between these wide-ranging areas risks leaving Japan behind.

A symbolic example of this are Chinese-style innovations and platform-based operations that have provided the driving force behind everything from mobile payments to bicycle-sharing.

As of the end of 2017, 65 percent of China’s 753 million smartphone owners were using either Alipay or WeChat mobile payment services. In the same year, Chinese mobile payment transactions exceeded $17 trillion — a sum even larger than China’s gross domestic product. Meanwhile, since 2015, China has experienced an explosive growth in bike-sharing. The advent of mobile payments made such a business model possible, and bike-sharing initiatives are increasingly connected to businesses across the spectrum.

The greatest weapon of platform companies like Baidu, Alibaba and Tencent are the massive amount of data they are able to accumulate from all quarters. The means for data collection is rapidly diversifying beyond smartphones to stores, smart speakers and automobiles.

The role of the Chinese state in promoting social implementation of technology is clear in areas such as artificial intelligence, drones, robots and the automobile industry. The Chinese government is doing this by supporting industrial ecosystems like Shenzhen. Its strategy to “leapfrog” other countries by going straight to more advanced technologies such as electric vehicles and autonomous driving is apparent from its policies.

The silhouettes of black ships from India are also visible on the horizon. India’s GDP is roughly half that of Japan’s, yet it has 10 times as much total venture capital as Japan. Its potential is enormous.

India is already a full-fledged information technology superpower, but it is well on its way to becoming a superpower in biotechnology as well. The Bangalore-based biotech platform C-CAMP (Centre for Cellular and Molecular Platforms) has already provided support for more than 500 biotech startups.

One of these startups is Tricog Health Services, a medical service that seeks to prevent heart attacks by using AI analysis of electro-cardiograms to directly link patients with physicians for immediate treatment.

In India, it takes an average of six hours between the time a patient suffers a heart attack and the time he or she undergoes surgery (in Japan, by contrast, the average is 90 minutes), largely because the number of physicians qualified to read electrocardiograms is small.

Although it is widely known that large numbers of Indians hold management and engineering positions at American pharmaceutical companies, many also now set up their own businesses back in India. The data from electrocardiograms — such as those obtained through Tricog — can be transformed into big data by cooperating with physicians, and are useful in the development of health care policies.

Black ships from Southeast Asia are also approaching. Indonesia’s Go-Jek began as a bike ride-hailing service but has moved into online payments and meal delivery in an attempt to become a “total lifestyle” platform for the 600 million people of the ASEAN region. Southeast Asia boasts more than 10 other “unicorn” enterprises, including Lazada, Tokopedia and Grab.

However, innovation in ASEAN has been largely driven by Chinese companies such as Alibaba and Tencent. These companies are seeking to change the rules of the game in every industry by “total data acquisition,” and have identified Southeast Asia as the ideal testing ground for social implementation. They plan to introduce the “Chinese standard” to the region through their control over operating systems and data. When it comes to mobile payments and bike-sharing services, they have already succeeded.

Japanese companies first advanced into Asia in search of cheap labor and later in search of huge new markets. Today, we are entering a new era of innovation. The black ships of Asia are approaching.

In one sense, these black ships threaten Japan with their goal of leapfrogging existing technologies. But like the black ships of Commodore Perry, by placing external pressure on the Japanese economy, financial and industrial sectors, the black ships of Asia offer an opportunity to foster innovation. By drawing on its past experiences, Japan can contribute its own technologies, best practices and the qualities — “authenticity” and “high-quality” — it is renowned for through its products and ideas. In doing so, Japan can contribute to the development of a “global standard” of Asian origin by working closely with its Asian neighbors.

Yoichi Funabashi is chairman of the Asia Pacific Initiative and a former editor-in-chief of the Asahi Shimbun. This is a translation of his column in the monthly Bungei Shunju.