TOKYO -- One of lessons the coronavirus pandemic has brought into sharp relief is the need for contingency plans. Whether it's relying too much on one country for crucial medical supplies, a sudden closure of borders and shipping routes or an impromptu trade war, businesses must being able to adapt quickly.
That has not been one of Japan's strong suits as it remained bogged down in the tradition of paperwork -- and lots of it, costing companies precious time and hundreds of billions of yen.
Now, Japan and six other Asia-Pacific economies are closing in on establishing a cross-border trade network that could eventually grant 5,000 businesses online access to suppliers across the region at a moment's notice and cut down on the headaches caused by supply chain disruptions.
In Japan, companies will connect to the network through TradeWaltz, a blockchain-based trade data sharing platform. There, businesses will be able to share digitized documents, and clerical work involving trade will be rendered paperless.
TradeWaltz will connect to counterpart systems established in the seven nations and territories. Trial operations have launched in Vietnam with companies in the Southeast Asian nation granted TradeWaltz tech.
The network is expected to later connect to public and private systems operated in Thailand, Singapore, Taiwan, Australia and New Zealand.
TradeWaltz started a test run last year with about 20 Japanese participants. The count is projected to climb to 450 Japanese companies by 2025. The entire seven-economy network would include 5,000 businesses by the middle of the decade.
Companies using the cross-border platform will register goods, distribution routes and records on import and export transactions. Other participants will be able to browse that data, streamlining the search for the right product.
If unforeseen supply disruptions occur, a participating company can quickly look for replacement sources. If imports of Chinese masks were to dry up, for example, a business can decide if there are alternative suppliers available in real time.
If a sea lane becomes blocked -- like this year's fiasco in the Suez Canal -- participating businesses can use the platform to easily explore alternative routes. Previously, companies would spend costly time approaching other suppliers individually.
The cross-border trading platform could potentially allow participants to procure automotive components that are currently dependent on China. The six other economies due to be connected to the network account for nearly 20% of Japanese trade. That share could rise with the full implementation of the platform.
The fact that the network digitizes trading paperwork is expected to promote revitalization of trade for Japanese companies.
Such transactions involve forms for ordering and receiving shipments, letters of credit from banks, and documents from insurance companies, logistics companies and customs offices.
Because Japan in particular had kept up the practice of using physical documents, the clerical work had turned into a complicated affair. It was only last year that new legislation allowed companies to store tax documents electronically.
Japanese corporations spend 300 billion yen ($2.7 billion) a year to process trade paperwork, according to one estimate. An online system can reduce these expenses.
It takes 36 times longer to complete paperwork in Japan than it does to perform the same tasks in France or Italy, a World Bank study shows. TradeWaltz aims to truncate that time by as much as 60%.
A joint venture by the same name will operate TradeWaltz. Seven Japanese companies invested in the outfit, including NTT Data, Mitsubishi Corp., MUFG Bank and Tokio Marine & Nichido Fire Insurance.
The joint venture will collect usage fees from participating companies. The company is considering a tie-up with a U.S. platform. China does not yet have an online trade system encompassing the entire mainland, according to Mitsubishi, but a collaboration will be on the table once a Chinese platform is developed.
It remains to be seen whether businesses will join up in the numbers anticipated. Use of the system requires disclosing transaction records and other internal data certain companies would rather keep confidential. Cybersecurity will also be imperative.