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Business

Japan's 'My Number' system offers IT boon, and risk

TOKYO -- Japan's information technology industry is abuzz with talk of national identification numbers as the country is set to implement them in January 2016.

     In October, municipalities will issue every registered resident a 12-digit ID number. Dubbed "My Number," it will be used to track taxation and government benefits. Beginning in January 2018, names and addresses will be linked to private information such as stockholdings and deposit data.

     Companies will be required to manage ID numbers for employees and their family members. Such a program is estimated to cost a large corporation 50 million yen ($408,000). The market for these programs alone is worth an estimated 3 trillion yen, Daiwa Securities Group said.

     It is a bonanza for the IT industry. Hitachi, NEC and other top Japanese IT companies are vying for orders for new information systems and related services.

ID theft and fraud

But the flip side of the ID numbers is the risk of an information leak, as seen in countries that have similar numbering systems.

     The U.S. has recorded 11.7 million cases of data breaches involving Social Security numbers since 2006. South Korea reportedly suffered the leaking of 40 million numbers, or 80% of the population, through 2014 as the network was compromised. Seoul faces pressure to rebuild the network at a cost of $650 million and issue new numbers.

     "Hackers attack a network in a way that is totally unimaginable for ordinary people and abuse ID numbers. You cannot let your guard down," said Kenichi Matsumori, a senior marketer with Digital Arts, a Tokyo-based company specializing in Internet filtering software.

     Identity thieves often steal pension or unemployment insurance payments or run up a victim's credit card debt. Victims have lost tens of billions of dollars in the U.S. alone.

     The IT industry's mandate is to protect the My Number system at all costs. IT companies' abilities to keep networks secure are tested. By some estimates, 20-30% of network-related investment is geared toward security development.

     Digital Arts will offer software that encrypts files containing these ID numbers and can delete them remotely in case of a leak. The company expects sales of 200 million yen for the year through March 2016.

     Nomura Research Institute has devised a comprehensive service for national ID numbers from collection to management to elimination. NEC and Fujitsu are offering a comparable service. Foreign companies, such as U.S. network security company FireEye, also are on the lookout for business opportunities.

Inadequate preparedness

Individuals and companies responsible for a My Number leak may be imprisoned for up to four years or fined up to 2 million yen.

     Yet Japanese companies are undoubtedly ill-prepared. In a survey of 2,376 companies conducted in October by Nomura Research Institute, 47% said they are not making progress on preparing for the My Number system.

     With the clock ticking, IT companies face a dual task: educating corporate clients as well as building secure infrastructure.

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