Japan’s digital society rests on Kishida’s leadership

Author: Naohiro Yashiro, Showa Women’s University

Japan’s most recent regulatory reform plan is digitalisation — a crucial part of Prime Minister Fumio Kishida’s ‘New Capitalism’ agenda that seeks to prevent excessive profit-seeking activities. Better utilisation of the digital economy is necessary to overcome labour force shortages brought about by a rapidly declining working-age population. Fortunately, the momentum for digital reform has survived the recent leadership transition.

Initiated by former prime minister Yoshihide Suga, the government’s Digital Agency was established in September 2021. Its primary task is to revise over 40,000 existing laws and legal procedures relating to online services — an undertaking that will take at least three years to complete in order to overcome the compartmentalised jurisdictions of various ministries of state.

There are three fundamental steps to realising digital administration in Japan.

The first step is to establish agile governance. Unlike existing rigid regulations, agile governance requires flexible rules that can quickly adapt to rapidly changing technologies and economic circumstances. Automatic monitoring systems should, for example, replace the current schemes based on human supervision. Drones and sensors could quickly replace human observation for regular safety checks on bridges and tunnels. Better regulation using recent technology would vastly reduce the costs of maintaining security for both government and the private sector.

The second step is establishing one-stop digital services to replace mandatory paperwork or in-person reporting. Although most residents in Japan are identified by a ‘My Number’ digital ID, many administrative procedures — such as a change of address — require in-person appointments and physical paperwork.

Most administrative procedures could be done online, as in many other OECD countries. When an individual reports their data to a government agency by using a service, the data should automatically be shared with other institutions — reducing administrative costs by an estimated 20 per cent of the total 1.3 trillion yen currently spent on book keeping.

The third step is establishing a public–private sector partnership for digitalisation. Tokyo should make use of private-sector innovation and technologies, especially since the Information and Communication Industry accounted for 9.4 per cent of GDP in 2019. Digitalisation would allow national and local governments to share identical digital IDs and individual information with the private sector in real-time, while income taxes, social security contributions and transfer payments could be managed more efficiently when responding to natural disasters or pandemics.

Japan’s costly and time-consuming digital reforms will not be effective without accompanying initiatives in the private sector. The measure of success will be the extent to which firms or individuals adapt to government-initiated digitalisation — but the Japanese public is not yet convinced of the need for a digital society.

Although digitalisation increases the state’s official responsibility for securing individual privacy and information, the rules governing how the government can use citizens’ data without consent are not straightforward. Authorities only use personal digital numbers as supplemental information because the scheme for assisting the digitally challenged or older Japanese citizens is similarly rudimentary.

The uptake of ‘My Number’ IDs has been slow because digital IDs are not mandatory for the vast majority of transactions conducted by Japanese residents. The share of people using their ‘My Number’ ID is just 44 per cent six years after the scheme was introduced in 2016. Residents may need further incentive to use their ‘My Number’ ID for all financial transactions — much like Social Security Numbers in the United States.

The digital infrastructure of institutions that underpin disaster relief, education and healthcare is also underdeveloped. In 2019 only 19 per cent of hospitals, clinics and drug stores registered the ‘My Number’ IDs of patients. Despite the COVID-19 pandemic and remote learning, Japan’s classrooms are still underprepared for digital education. The lack of digital infrastructure adoption is likely due to the cost of transitioning — the government only offers minor compensation for digital investment.

Japan’s successful digitalisation rests on Kishida’s strong leadership in persuading Japanese people to construct a digital society. Yet compared with his predecessor Suga or his rival and former minister of defence Taro Kono, he is far from the determined prime ministerial type.

Kishida claims he is a politician who listens to a wide variety of voices, but this is not necessarily a virtue for a prime minister facing structural obstacles on his path towards digitalisation.

Naohiro Yashiro is Specially-appointed Professor at Showa Women’s University.

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