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Economy

Japan brainstorming on 'Industrie 4.0'

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Japan's Prime Minister Shinzo Abe said on Sept. 24 the government would deploy three new arrows of "Abenomics", which are to bolster the economy, offer support to families raising children and promote social welfare reforms.   © Reuters

TOKYO -- Rallying Japanese businesses to bet on the future and charge at the so-called fourth industrial revolution must be the key focus of Prime Minister Shinzo Abe's rehashed Abenomics. Falling behind in the next industrial transformation could leave the Japanese economy at a serious disadvantage.

     Japan's government kicked off efforts to draw up its new industrial strategy on Sept. 17. This was a highly important step, since the strategy will serve as the so-called "first arrow" of the second stage of Abenomics. At the time, all eyes were on security reform.

     The Economic and Industrial Policy Bureau will lead efforts to draw up the new strategy. It is the core branch of the Ministry of Economy, Trade and Industry, which has supported the Abe administration's economic revitalization efforts. Discussions on the strategy will take place at a panel under the Industrial Structure Council. The panel is chaired by Motoshige Itoh, an economist at the University of Tokyo.

Vision of the future

Main topics of the discussions will be Internet of Things, big data and artificial intelligence -- key drivers of the fourth industrial revolution, or Industrie 4.0 as it is known in Germany.

     In the field of AI, technology is currently tackling image recognition of both still pictures and video. But experts believe that AI will advance within three to five years to a level where it will be able to detect abnormal situations and respond. According to experts, machines will also be able to develop hypotheses and carry out sophisticated simulations by then.

     In the area of big data, the volume of information in the world has been doubling every two years.

     The Japanese economy is still gripped by a sense of stagnation. Businesses are not actively investing despite sitting on huge cash reserves.

     METI decided to focus on the fourth industrial revolution as it presents a vision that businesses can get behind.

Tough reality

The idea is sound, but it is not particularly unique. Other countries also see the huge potential of the fourth industrial revolution. A number of big global corporations have already delved into the next wave of industrial development.

     Internet companies are hacking away at the fourth industrial revolution by moving into physical products. These companies, such as Google and Amazon.com, are expanding their operations to include robotics, automobiles and other real-world businesses. They use data from their search engines, online advertising and e-commerce platforms when doing so.

     Germany's Robert Bosch and Siemens are working toward developing Internet-connected production platforms by making the most of their expertise in manufacturing. Among U.S. companies, Intel and IBM are doing similar work.

     In Japan, both businesses and METI are anxious as industry here is failing to make the most of its strengths and drive the fourth industrial revolution forward. Their concerns were heightened further by the realization that this revolution could completely change the way value is added to products and services.

     As the fourth industrial revolution gets underway, the traditional boundaries between various industries will likely become blurred as innovative services and products appear. Business efficiency is also expected to improve dramatically. As more businesses from diverse fields join the revolution, powerful companies that control key business platforms will likely emerge.

     If Japan falls behind in the race to develop these key business platforms, its industries could end up practically toiling for foreign platform operators, handing a high portion of their revenue over to conduct business using new techniques.

Crunch time

Japanese companies thus face huge opportunity and risk.

     With this in mind, the government and businesses must hold discussions to identify in what areas the private sector should invest. This will enable the government to clarify what it should do to improve the country's economic environment.

     One challenge for the panel is to develop a strategy that takes into account the results of government discussions with the private sector.

     For the Japanese economy to create a positive feedback loop, it will be necessary for businesses to invest using the ample funds being pumped into the economy by the Bank of Japan. If businesses continue to shy away from investing for the future, Abenomics will fail sooner or later.

     Support for child rearing and social security, the second and third arrows of the rehashed Abenomics, will in the end require a strong economy. For this reason, the first arrow must succeed. It is a crunch time for both the government and Japan itself. And the key lies in getting businesses to look to the future.

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