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Japan Unveils Strategy to Tackle US$33bn Digital Trade Deficit

Japan's digital trade deficit has reached US$33.7 billion. Dominant U.S. tech giants are draining money out of Japan. The plan focuses on improving productivity and creating new businesses.

Amazon, Apple, Meta and Google

The Priority Policy Programme for Realising Digital Society, published on Friday, emphasises Japan's growing "digital deficit." This shortfall has been fuelled by rising rates for software licencing, cloud storage, and online advertising, creating a major disparity in digital-related services.

According to Bank of Japan data, the digital services deficit has more than doubled since 2015, reaching a record 5.35 trillion yen (US$33.7 billion) last year. Despite an increase in international tourism, this imbalance has contributed to the deterioration of Japan's overall balance of payments for services.

The rapid usage of generative artificial intelligence has increased demand for digital services. However, much of this demand is being met by powerful US IT behemoths such as Google, Amazon, and Microsoft, resulting in a wealth drain from Japan.

Reducing reliance on these tech behemoths is a daunting task for Japan, as they are difficult to compete with. The country's challenge stems from a lack of development in developing its own creative products and services that create value, as well as the slow pace of organisational transformation within businesses.

The newly revealed policy programme highlights the importance of corporate Japan demonstrating demonstrable achievements in terms of productivity improvement and new business development.

Speaking to reporters, Digital Transformation Minister Taro Kono admitted that Japan's digital and IT companies still need to improve their competitiveness. He stressed the necessity of boosting the number of systems and programmes developed in Japan to improve the country's digital sector.

To set the groundwork for the expansion of the digital sector, the strategy calls for the creation of a framework to promote data integration and the training of competent workers needed for the digital shift.

Many Japanese businesses face considerable challenges in digitalising due to outdated systems. The government is facing a potential "2025 digital cliff" when experienced workers who are skilled at working with ageing systems retire. The industry ministry believes that increasing system failure risks could result in annual economic losses of up to 12 trillion yen.

The policy programme calls for the formation of a cross-agency team to identify and address these issues by June 2025. The government also wants to encourage the adoption of cloud technology, which is both affordable and adaptable to changing business situations.

Furthermore, the plan highlights the need of cybersecurity in the face of increasing cyber threats. Japan wants to have 50,000 nationally certified information security specialists by fiscal 2030, a huge increase from the present level of approximately 20,000 as of April 2023. The government intends to make basic cybersecurity knowledge and skills more accessible to regional suppliers and small-to-medium-sized organisations.

  • Japan's digital trade deficit has reached US$33.7 billion.

  • Dominant U.S. tech giants are draining money out of Japan.

  • The plan focuses on improving productivity and creating new businesses.


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