In July each year, the government makes two important economic policy decisions. One is the basic policy for economic and fiscal management related to the macroeconomy. The other is the growth strategy for concrete measures on economic vitalization.
In the past, a whole range of economic policy was discussed in one policy board. Since 2013, under Shinzo Abe's second stint as prime minister, the two issues have been discussed in separate government councils — although they can still be deemed an integrated policy agenda since the two councils are both presided over by Prime Minister Abe himself.
Japan’s economy is expected to suffer a fairly steep decline for the time being. The average forecast of leading economists tallied by the Japan Center for Economic Research is that the GDP will plunge by about 21 percent in the second quarter of the year. The government needs to take bold steps in its economic and fiscal policy to support the livelihood of individuals and financing of companies under the severe conditions.
At the same time, the government needs to prepare for the post-pandemic "new normal" by carefully examining the shape it will take. What will be tested in particular is its information technology policy to deal with the digital transformation that is likely to accelerate going forward.
Naokazu Takemoto, the minister in charge of IT policy, has set up a private advisory body to discuss the post-pandemic IT issues from a variety of perspectives. I took part in this discussion, and the key parts of what's talked about at the council is reflected in the latest growth strategy.
The council's proposals have three major points. First, it calls for significantly expanding and upgrading the concept of internet infrastructure. The pandemic crisis has given rise to new lifestyles assisted by digital means, ranging from teleworking to online education and remote medical services.
These digitalization moves are taking place in tandem with the technological advance in the communication network to 5G (and even further to the next-generation 6G). When 4G was the most advanced telecommunication network, it was assumed that the internet connects people. In the 5G era, everything must be connected via the internet. In short, internet connections must be made available everywhere, even in the middle of a farm field or woods, so the data gathered there can make various controls possible.
Today, the internet is accessible for nearly 100 percent of the people living in Japan. However, the internet still covers only 60 percent of the nation. What is required is to expand the coverage to 100 percent?
The second point concerns the prospect that digitalization, while enhancing convenience in various aspects of daily life and business activities, will give rise to new forms of disparity. In the case of remote education, its benefit will vary greatly depending on whether there is a good wi-fi environment and whether the user has high-quality equipment. A gap will also arise between families who can afford to follow up on the children's education and those who cannot.
In view of these problems, a system must be developed to ensure nobody is left behind the wave of digitalization. Many societies have accepted the concept of “civil minimum” — the necessary minimum level of living environment to be guaranteed for every member of society. Now there is a need to introduce the concept of “digital minimum." The government must take policy steps to guarantee the necessary minimum level of digital environment.
Third, the council has proposed amending the basic IT law to introduce these reforms. In 2000, the government set up its IT strategy conference to work out a national strategy for promoting information technology. That led to enactment of the IT basic law, but 20 years have now passed.
It's time to review the law given that the COVID-19 pandemic has accelerated digitalization and a major transformation called the Fourth Industrial Revolution is taking place that increases the use of big data and artificial intelligence. What's important to pursue in the review are to expand the concept of internet infrastructure and to realize a society that guarantees the digital minimum for its members.
All these policy proposals are timely and appropriate. The question is how to put them in action, and the process of implementation matters.
It isn't too much of an exaggeration to liken the big transformation that's taking place now — or the transition to the so-called new normal — to the systematic transformation from socialist economy to market economy in Eastern Europe 30 years ago.
Back then whether to proceed with reforms gradually or radically was the subject of great discussion. Ultimately it was agreed that reforms would not move forward unless they were pursued radically because otherwise the old guard would come back to thwart the changes. At that time, such a way of thinking was called shock therapy. It still holds true for today's digital transformation.
Due to the COVID-19 outbreak, the government approved the use of remote medical care for the initial examination of patients. But an organization of doctors is seeking to reinstate the old regulations once the pandemic is over, insisting that the deregulation was only meant as an extraordinary measure during the coronavirus crisis. The moves toward digitalization also prompted an idea of changing the start of school year from April to September, as is the norm in many other countries. But discussion for the change was ended halfway upon strong objections from the old guard involved in school education.
What's needed to push forward the digital transformation is a "shock therapy" policy that identifies clear targets and timelines, and implements reforms in a single go.
Heizo Takenaka, a professor emeritus at Keio University, served as economic and fiscal policy minister in the Cabinet of Prime Minister Junichiro Koizumi from 2001 to 2005. He is a member of the government's Industrial Competitiveness Council.