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Innovation in Japan
A brief introduction to Japan’s history in innovation starts with the diffusion process of
military technology. Immediately after the war, Japanese engineering and precision engineering
research for optical warfare production, which is military technology, will lead to the development
of steppers for camera production and integrated circuit production of semiconductors. Also, the
technology of the aircraft industry has resulted in the production of cars and scooters. At this time,
GHQ provided quality control guidelines, which led to the formation of a quality control system
in Japan.
During the postwar Japan's technological innovation, investments were made in the steel
and chemical materials sector and the energy supply sector, focusing on domestic resources. As a
result, the conversion of raw materials from coal to oil is carried out, the production process is
converted, and the production scale of the durable consumer goods sector is expanded.
In 1950-1955, the development of large-scale power sources and hydroelectric power
progressed. Technology collaborations with Toshiba-GE, Fuji Electric-Siemens, etc. were being
used to exploit European and US technologies.
In terms of technological innovation, the introduction of Stop-mil by the steel industry, the
block method in the shipbuilding industry, etc. can be mentioned. Production of nylon and silicon
started in the chemical sector.
In 1956-61, the energy revolution from coal to oil developed synthetic fibers and plastics,
and petrochemicals became a new industrial technology.
In 1962-66, the liberalization of trade caused problems such as labor shortages, rising
prices, overcapacity, and a decline in corporate profits. As a response to these problems, steel
integrated steelworks, petroleum complexes and passenger car specialized industries have been
promoted.
In 1966-73, Toyota started mass production in the automobile sector, and nuclear power
generators became operational due to the expansion of the power demand. At the same time, the
suburbs have become social problems due to air pollution, water pollution, soil pollution, and
noise.
From the 1970s, due to the oil crisis, it has been transformed into a "processing and
assembly-type industry" that aims to save energy. Also, the industry which applied the technology
by the computer which is the center of the information revolution developed in this era.
In the late 1990s, since the bubble burst, digital information appliances such as recording
and reproducing machines and blue light emitting diodes were created as a new industry.
Smartphones are one of the modern innovations, and the spread of smartphones has made
it possible to collect various information. This has replaced the use of smartphones with digital
cameras and personal computers.
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There are many problems regarding innovations of Japan during the 21th century. Firstly,
the limited R & D resources spent on new products and new novelties. Since the collapse of the
bubble economy in the 1990s, growth in R&D investment has been stagnant ever since. Two
decades of recession instilled a fear of innovation into Japanese firms. In fact, a recent survey
demonstrated that both executive and managers in Japan has a very negative view of the economy
and believe there are no likelihood of breakthroughs in the Japanese market. As a result, new ideas
and products faced biased resistance and doubt by firms, policy makers and the government. This
results in the decision to spend a large portion of R & D budget on relatively conservative ideas,
such as minor improvements to existing and successful product lines. Innovation is about novelty
and the fact of firms clinging to already profitable products and fear the risk of new products means
that there is a serious problem with innovation of Japan. There is very little in the R & D budget
for the creation of new products. Even if budget is available they are usually needed to help big,
established companies as an article from the Medium wrote that Japan has a problem with their
venture capitalist system as opposed to the one used in U.S is that they have something called
“keiretsu” where interwoven companies within the economy that can exchange and supply workers
during hard times. However, only big and established firms are benefiting from this as they have
the necessary resources and manpower to do so, as such big companies continues to thrive while
smaller companies struggle to expand. This practice is even supported by the government by giving
tax incentives as the government see it as a good bet to keep the big companies alive (Giunta, A.
2018). Therefore, the prospect of revolutionizing Japan is not coming too soon in the upcoming
decade and if Japanese firms and industries do not promptly go through another revolution, they
will be surpassed by China and South Korea as top markets in the East Asian sphere.
Secondly is the tendency to be on the safe side of Japanese firms. According to Japan's
Research & Development figures, it is still clear that Japan has a full capability to conduct more
innovation policies based on its R&D and number of patents. However, innovation has been
greatly hampered due to the rigidness of Japanese firms. On the macro level, Japan is no longer
one of the world’s pioneers in the creation of innovative products because the internal system is
so heavily regulated that Japan becomes less attractive as an environment for entrepreneurs and
venture capitalists. On the micro level, how firms are organized is riddled with people’s bias,
obsessiveness and loyalties, which pose as a burden to many potentials for creative individuals.
Seniority system (Nenkou Joretsu) is one of these examples. This system encourages Japanese
employees to devote their life to a single organization, as a payback to the expenses and efforts of
the firm to train those employees when they were hired. While it allows older employees to achieve
a higher salary and ensures the management part consists of experienced workers, the seniority
system seriously hampers new talents and those with specialized skills cannot be assigned to their
most appropriate position. This explains for the reason why the labor turnover rate in Japan is
much lower as compared to other OECD countries.
Moreover, Japanese managers and employees alike are often stuck in the mindset of
unchangeable current situation. Top managers, without conducting enough research, are
unfortunately unanimous with what is possible and what is not to the firm based on merely current
circumstances. This robs the company the ability listens and carry out any unplanned changes or
new ideas. Decision-makers are extremely inefficient, often taking months just to decide on a
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normal event that would only take a few days to be addressed would it be in the U.S. What is worse
is that when new employees were hired, they were implicitly forced to go along with the already
existing lines of the current organization paradigm. Either they want to bring innovation or
contribute their creativity to more efficient operation, these employees would not be that welcomed
by the executives and top managers who fear changes. Briefly, innovation is stifled in Japan due
to its heavy regulation and attachment to conventional business conduct.
According to the problem mentioned above the Japanese working environment issues, the
innovation problem of Japan also includes the decreased population of worker and aging society.
There are less and less young workers in Japan for decades, which is known as the important factor
for innovation industries. And the paragraph below will explain how Japanese government dual
with those problems in detail through the policies.

The immigration control law revise act coming up at the end of 2018, it opens the
approximately 340 thousand jobs slots for foreign workers to cope with the decline Barth rate and
the low younger labor for several and rural area around Japan. Low birth rate is the serious problem
in Japan in recently, the vacancy of job is even more than the population who are seeking for job.
Also, the younger people are inclined to select the job such as service industry instead of
agricultural or heavy industry and so on; those industries are lack of labor for working. Before the
law was loosen, there are few chances to get a job in Japan for foreigner. Even they got the job in
Japan, the working environment and condition were not well, and they only have permission to
stay in Japan for a short period. Therefore, some foreign come to Japan as the foreign student
through language school. According to the Ministry of Justice of Japan there are over 320 thousand
foreign students who are studying in Japan at the time of 2018. Comparing to 130 thousand in
2012, there are over 2 times in 6 years. However, with the revise of the immigration law the
transparency was increasing, and foreign worker are possible stay in Japan longer for renewing
their working visas. The revising act could be a signal of Japanese government started opening its
job for Skillful foreign worker. Further, there are a new act of encourage foreigner starting business
in Japan. The foreigner who have intention of establishing business in Japan would have a chance
getting a one-year visa. () There is already a problem that Japan had suffering from the old society
structure since long times ago from the Saibatsu to the Shosha in nowadays, young people are
incline to looking for job slot in the big companies instead of running business by themselves for
the opportunity costs of gaining profit and stable life. Thus, the innovation of younger people is
being restricted by the society and quantity are decreased with society become rigid. More, people
in the companies are limited by the leveled of companies which is judged by time people worked
for the companies but not the experience or talent, this issue had been discussed and criticized in
Japan since a long period before. Therefore, the ministry of education of Japan started a project
since 2016 to promoting opening business from elementary school to high school students they
hold the workshop-like event for example having discussion with funder of some young companies
or experience of running a business by themselves.

From the above, it can be observed that Japanese government tried to dual with the issues
on the innovation from the fundamental education and the low working population inside state by
opening more foreign high skilled workers and educated.
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As Japan is ravaged by the need to continuously innovate, they may try to turn their heads
to one of their closest neighbors, South Korea, in search of policies that will help promote
innovation and technology development. Much like Japan, their economy also relies heavily on
oil and other commodity imports, and as such when the oil crises hit, South Korea also suffers
from year-on-year decline on their exports and GDP growth. To counter this predicament, the
South Korean government increases R & D budget to balance out the decline in corporate R & D
spending, through venture financing (government-backed venture funds and tax incentives to
investors), and research support ( e.g. tax waivers, tariff exemption for R & D equipment and
military exemptions for researchers), which according to an article published by organization for
economic co-operation and development (OECD) it resulted in South Korea having rapid
expansion in the number of R & D labs, which by the end of 1999 they have around 5000 firms
and by the end of 2001 they have 11000. Their growth didn’t stop there, however, as Korean firms
has the largest world market share in DRAM semiconductors, TFT-LCD and CDMA cellular
phones (OECD Reviews of Innovation Policy: Korea. 2009). Its policy of public-private
partnership through direct funding of R & D firms as well as mutual exchanges between new and
established firms could very well be implemented in Japan as both countries share almost the same
number of high-educated population size, strong dependency on raw materials, export-oriented
country and long-working hours culture, now more than ever, especially since there seems to be
a slight distrust between firms and Japanese government ever since the financial crisis on land
ended.
Another country that Japan can turn their heads toward to in regard to innovation, is their
distant ally in the western hemisphere of the world, Germany. In the figure shown below, Japan is
shown to be stagnant in their attitude towards entrepreneurial failure, while Germany is shown to
have a rapid development in their attitude towards entrepreneurial failure which could explain why
they are considered as the world’s top innovator.
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Figure 1 https://www.weforum.org/agenda/2018/10/germany-is-the-worlds-most-innovative-economy/

According to World Economic Forum website, German’s position as the world’s top
innovator is largely comes from the sheer number of ideas they came up with, mainly in the
automobile industries, causing a total of 128, 921 patents registered through the German patent
and Trade Mark Office (DPMA) making it the largest in Europe and 5th largest in the world
(Whiting K. 2018). This practice is in contrast to the Japanese practice of Ho-Ren-So, which means
“Houkoku” to report, “Renraku” to relate all facts to superior and “Soudan” to consult, as explained
in a Forbes article, such practice is in contrast to western idea of “working well independently”. It
is about not breaking things, and producing expected answers (Tyre, P. 2019), which in a world
where innovation is all about new ideas, makes it very difficult for students and workers alike to
come up with new and exciting ideas while at the same time getting reprimanded or even ridiculed
for deviating from the norm.
In conclusion, to help Japan climb out of their current innovation predicament, both private
and public sector needs to open their mind and work together to achieve a more innovative Japan.
The first step would be to increase the relationship between both sectors by increasing R & D
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funding through tax waivers and venture financing, while also providing important platforms for
mutual exchange between new and established firms in order to prevent “keiretsu”. After a policy
from government is implemented, the standard of procedure in Japanese companies should be next
to change and accept new ideas by implementing a horizontal chain of command instead of the
traditional top-down approach. As such, more ideas are developed and necessary input as well as
improvements are not lost in translation.
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REFERENCES
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innovation
Giunta, A., & Giunta, A. (2018, May 28). Japan's Current Innovation Problem. Retrieved May 29,
2019, from https://medium.com/@giuntaan/japans-current-innovation-problem-
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Motohashi, K. (2011). Innovation Policy Challenges for Japan: An Open and Global Strategy.
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OECD Reviews of Innovation Policy: Korea 2009 | READ online. (n.d.). Retrieved from
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Tyre, P. (2019, May 20). Teaching Innovation And Creativity In Japan: Is 'Spinach' The Problem?
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innovation-and-creativity-in-japan-is-spinach-the-problem/#775bb8411728
Whiting, K. (2018, October 18). Germany is the world's most innovative economy. Retrieved May
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