Report on Japan: technological capacities and key policy measures

Japan is the world’s third largest economy and a leading industrial and technology power, particularly in the automotive and consumer electronics industries. Since the 1990’s Japan has suffered from deflation and sluggish growth. Since 2012, the expansive economic policies sponsored by the prime minister Shinzo Abe (“Abenomics”) combining a bold monetary policy, flexible fiscal policy and structural reforms, helped Japan to return to moderate growth, but increased public debt (226% of GDP in 2018). In the last 2 years 2018-19 economic growth slowed down again due to slowing world trade and natural disasters such as earthquakes and typhoons.

Japan is a world leader for digital infrastructures, with a high level of adoption of advanced technologies. For example, Japan leads the OECD on mobile broadband connectivity (with 168 subscriptions per 100 inhabitants) and has the second highest share of fibre connections in fixed broadband (77%). Japan is second only to Korea in robot density in manufacturing and around 47% of firms use cloud computing. It invests over 6% of GDP in ICT equipment, computer software and databases, R&D and other intellectual property. However, technology-enabled growth is constrained by uneven innovation capability and digital transformation, due to an ageing population (already reducing the labour force), advanced technology skills gaps, and low business dynamism by traditional industries. SMEs suffer from low productivity and R&D investments: their share of R&D spending at 5% is very low, compared to the OECD average of 30%.