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July 2000

Japan and the IT Revolution

Takashi IMAI (Chairman, Keidanren - Japan Federation of Economic Organizations)

The soon-to-be-launched second cabinet of Prime Minister Yoshiro Mori is faced with two major goals it must achieve. These are bringing the economy around to full-fledged recovery on the domestic front and, on the international stage, holding a successful Kyushu-Okinawa Summit in July. Both of these goals share a fundamental point in common: The information-technology revolution holds the key to their successful achievement.

Structural reform of the Japanese economy is a must if it is to regain its vigor. This reform will be accelerated by the IT Revolution through, for instance, the creation of new enterprises. The latent growth potential of Japan's economy is far from negligible. Keidanren estimates that if economic structural reforms go forward Japan's economy can grow by some 2.7% annually until 2025. The IT Revolution will provide the "digital opportunity" backing Japan's development in the twenty-first century.

The Kyushu-Okinawa Summit of the Group of Eight nations is already being called the "IT Summit," and the adoption of an "IT Charter" is under consideration. As the chair nation for this year's summit, Japan must exercise its leadership for the success of the meeting. Japan's performance in hosting the G8 summit will be judged in terms of how the international community views the country's approach to the IT Revolution. In short, Japan itself must clearly display an attitude becoming the G8 chair nation toward the active application of information technologies.

First, as part of the necessary groundwork for the Internet age Japan must move to introduce and expand inexpensive, fixed-price telecommunications services and to increase the transmission speed of digital communications. To this end it is vital that free, fair competition be promoted among telecommunications carriers; the legal framework now regulating business in the field of information and communications must be revised and reformulated as a framework promoting competition. Next, as growth is foreseen in services unifying telecommunications and broadcasting and other services that will prove difficult to fit in existing classifications, the nation must do away with the barriers that have traditionally existed between those two areas and create a system allowing for the convergence of these fields. Japan must also focus on revising its systems and regulations that are predicated on face-to-face and paper-based commerce and the existence of physical places of business. These systems do not provide for commercial activities carried out in cyberspace, and they must be updated to be able to handle the special requirements of e-commerce. Nations around the world are now working to revise their systems to take better advantage of IT, and Japan, too, must show political leadership able to move quickly to direct the progress of the IT Revolution.

Prime Minister Mori has shown his understanding of this thinking, and is clearly displaying a progressive stance on systemic reforms aimed at advancing the IT Revolution. In order to overcome the barriers inherent in Japan's vertically divided administration and take an all-encompassing, strategic approach unifying the organs of government, the post of IT minister is expected to be established within the cabinet.

After experiencing a lengthy period of sluggish growth in the 1980s, the United States has made a remarkable turnaround and achieved historical economic growth without inflation. This continuing growth is thanks to that country's world-leading ability to take active advantage of the digital opportunity afforded by the IT Revolution. We cannot deny that Japan has been slow in responding to that revolution. If the government works to provide the kind of systems that will allow the IT Revolution to accelerate it will lead to conditions in which companies can give full play to their creative talents to take advantage of digital opportunity. We believe that this drive, when combined with the fundamental technical development being carried out jointly in the industrial, academic, and governmental spheres toward creating a "Super Internet" (a high-speed Internet to be freely available for use by all), can make Japan a global center driving the IT Revolution forward.

The year 1995 has been defined as the dividing line between the B.I. (before Internet) and A.I. (after Internet) eras; we have only seen the first five years of the A.I. age. The digital opportunity that will open before us in the years to come has much greater potential, and will even make it possible to boost economic growth in developing countries and thereby lessen the North-South economic divide. In the twenty-first century, a time in which relationships of economic interdependence are going to deepen, the IT Revolution and the competition it engenders will certainly contribute greatly to the growth of the global economy as a whole.

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