Even as the novel coronavirus pandemic throws the global economy into turmoil and as commercial activities are paralyzed in Japan under the state of emergency declared by the government, at least one sector is seeing an expansion in demand — “virtual” business models and online transactions that do not involve face-to-face meetings.
Hiroshi Mikitani, chairman and CEO of Rakuten Inc., the massive operator of online shopping malls, says the group is doing brisk business — except for its travel unit. Government “stay-home” requests have sharply reduced demand for travel, but the growing thirst for internet-based services is making up for the losses. E-commerce by consumers buying daily necessities, web-based securities trade, viewership for videos and sports events, and videoconferences on social media are on the rise.
In line with the government’s push for more cashless transactions, Rakuten is beefing up its smartphone electronic payment services. Smartphone-based payments are becoming popular among people who do not want to touch cash because of the pandemic, says Mikitani.
While the 225-issue Nikkei average on the Tokyo Stock Exchange has tumbled under the weight of the global pandemic, stock prices of IT companies that offer these digital platforms are rising. Shares of Rakuten, which had been falling due to the effects of its entry in the cellphone network business, turned around in mid-March. Companies like V-Cube Inc. and Cybozu Inc. that offer tools to support teleworking such as videoconference software have seen their shares rise by nearly twofold since before the coronavirus outbreak. Shares of NTT Docomo and KDDI, which provide telecommunications infrastructure, have increased by more than 10 percent since mid-March.
These developments indicate that companies, confronted with the COVID-19 crisis, are trying to radically change their business models and the ways their employees work. My think tank is encouraging its staff to work remotely from home using such tools as the U.S.-developed Zoom videoconferencing system. Larger companies are pushing even more aggressively for telecommuting by their employees. Seminars and lecture sessions are increasingly held online.
The United States, which has logged far more COVID-19 infections than Japan, is moving even more rapidly toward greater use of these digital tools.
Box Inc., which supplies cloud-based corporate information management services, quickly moved to get all of its employees to work from home. Co-founder and CEO Aaron Levie canceled a scheduled visit to Japan and a meeting with a Japanese sales partner, and talked online instead.
In a remote interview with this author via a videoconference system, Levie said the COVID-19 pandemic and the Tokyo Olympic Games provide a big opportunity to revolutionalize Japan’s conventional business models.
One reason why employees of many large Japanese companies have been able to start telecommuting quickly to cope with the coronavirus crisis was that they were already prepared for the Tokyo Games, which had been scheduled to take place this summer.
Starting three years ago, the government has been urging businesses to get their employees to work from home during the Olympics to ease the anticipated traffic jam, designating July 24 — when the opening ceremony for the games was to be held — as a “telework day.” Many companies had been exploring ways to build a system that wouldn’t bind their workers to the office and instead enable them to work remotely via the latest digital tools. The COVID-19 outbreak has indeed given them a chance to put their teleworking plans into practice.
Assuming that the domestic COVID-19 outbreak will continue to grow for some time — and given that the Tokyo Olympics will be held in summer 2021 — the trend for teleworking will likely continue for a while.
That might indeed become the norm, particularly in Tokyo, where the concentration of urban functions has caused social problems such as overcrowded commuter trains. Promoting remote work by company employees with the aid of digital technology will not only prevent overconcentration in urban centers but contribute to increased security in times of large-scale disasters and more efficient use of energy.
From the viewpoint of workers, improvement in the work-life balance will increase the quality of life, possibly leading to higher productivity. Employers can also enhance their competitiveness by employing talented people who otherwise may not have joined the labor market, including women raising small children or people with disabilities.
Online services need to be expanded not just in business practices but in public areas such as health care, education and administrative services — which were previously deemed to necessitate face-to-face interactions. It is a big step forward that, due to concern over mass COVID-19 infections at hospitals, doctors are now allowed to see first-time patients online.
Universities have so far rigorously required their students to physically attend classes, but they need to start introducing online classes more flexibly.
In fact, such a digitization strategy was spelled out in Japan 14 years ago in the form of a national policy called New IT Reform Strategy announced in the closing days of the administration of Prime Minister Junichiro Koizumi.
The strategy aimed to promote structural reform of Japan’s economy by making greater use of digital technology such as e-government, telecommuting, remote education and digitization of medical payments at hospitals. But the strategy faltered in the hands of subsequent administrations, including Shinzo Abe’s first short-lived stint as prime minister.
Although this spring’s launch of the latest 5G communications network in Japan has been overshadowed by the COVID-19 pandemic, the new-generation technology has huge potential to promote digitization. It features communications speed 10 times faster than the prevalent LTE standard and delays will be reduced to one-tenth.
That will enable the remote operation of machines and devices on a real-time basis, as well as rapid transmission of ultrahigh-resolution images. The new communications network will enhance and improve videoconferencing, remote education and remote medical services.
The Abe administration has come under fire for acting too slow and too late to combat the COVID-19 outbreak. It is a pressing task to contain the rate of infections, but equally important will be taking bold steps to promptly lift the regulations that hamper digitization of various sectors, including education and medical services, and enable greater and wider use of the latest digital technology such as videoconferences and online transactions. Now is the time for Japan to implement a strategy that will turn the crisis into opportunities.
Waichi Sekiguchi is president of MMRI, a Japanese research and consulting firm on information technology. He was formerly an editorial writer and a Washington correspondent for the Nikkei financial newspaper.
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