AS A BUDDHIST priest performed last rites at a temple in Tokyo, Naganuma Fumihiro, an entrepreneur, beamed. It was in fact a celebration: he and two colleagues had gathered to send scores of hanko, the personal seals that epitomise Japan’s analogue business practices, to the afterlife. “It’s not quite the Meiji restoration, but it’s a big turning-point, a paradigm shift for working culture,” Mr Naganuma said.
Covid-19 has turbocharged digitisation around the world. But for all its technophile reputation, Japan has more ground to make up than other big economies in its embrace of information technology (IT). “Japan is a developing country in terms of IT,” Mr Naganuma laments, exaggerating only slightly.
Business culture displays a stubborn attachment to face-to-face contact. Bosses put a premium on staff’s presence at their desks. Firms invest little in IT compared with rivals in many countries, and only reluctantly adopt new technology to sell and promote products. Offices are stacked with paper and schedules packed with meetings. According to Morgan Stanley, an investment bank, “inefficiencies abound in numerous commercial practices.”
The pandemic provoked a reckoning. In the race to lead the ruling Liberal Democratic Party last year the traditional economic battleground of monetary policy faded into the background, notes Yamaoka Hiromi, a former senior central banker who now sits on the board of Future Corporation, a technology consultancy. Instead, he says, “the conversation has shifted to enhancing the efficiency of business practices.” All three candidates played up their digitisation plans. The winner, Suga Yoshihide, has made a priority of digitising government services to reduce the administrative burden on individuals and firms. “We need to develop a non-face-to-face model,” explains Nishimura Yasutoshi, the minister in charge of economic revitalisation. This week parliament began debating a bill to create a new digital agency.
One pre-pandemic government study found that firms which allowed teleworking were 60% more productive than those that did not. The direction of causation is unclear. The result could be a sign that hyper-efficient firms on the cutting edge are simply more likely to adopt whizzy technology. But such findings help persuade more companies to test the hypothesis that digitisation boosts productivity.
Firms that sell computer programs for things like secure electronic signatures, transcribing paper documents into digital formats or setting up online stores have seen their share prices boom. Sansan, a database-software firm, has high hopes for its electronic business-card service, which digitises the ritual most emblematic of the face-to-face business culture. “Trading business cards is something that everyone does,” says Kawamura Ryota, a product manager at Sansan. “Online business cards will gain traction as long as there are online meetings.” Mizuho, a big financial group, has eliminated paper documents at its bank branches.
Digitisation is also infecting industries that peddle in bits and bobs, not bytes. A hulking excavator fills the lobby of the Tokyo headquarters of Komatsu, one of the world’s biggest producers of construction equipment. But in the offices upstairs employees are digging through data to build the company’s smart-construction business, which digitises workflows at building sites. Covid-19 brought “a rapid decline in resistance” to such innovations, reports Chikashi Shike, head of the smart-construction division. Japan’s other champions of heavier industry are similarly keen. East Japan Railway Company wants to turn its popular digital transit cards into a payments platform.
A presence in the office is less vital, too. After having teleworking foisted on them, some of Japan’s largest firms, including Fujitsu and Hitachi, two industrial conglomerates, have announced that they will make flexible schedules permanent. Nomura, Japan’s biggest broker, recently announced a plan to allow employees to spend up to 60% of their time working remotely after the pandemic. Dentsu, Japan’s advertising giant, is said to want to sell its Tokyo headquarters.
The sentiment is not universal. Whereas some bosses have embraced more flexible working arrangements, others still want employees to be back at their desks, fearing that the productivity improvements of remote work are uncertain at best. Small and medium-sized businesses are often technological laggards. They account for over 99% of all firms and around 70% of jobs, but just 5% of spending on research and development, compared with an average of 30% in the OECD, a club of mostly rich countries. “You have some of the best services in the world, but they are wildly inefficient,” says Jordan Fisher, the American co-founder of Zehitomo, a Japanese startup that offers an online marketplace for offline household services from piano lessons to plumbing. At least, he adds, “because Japan is so far behind, it can actually leapfrog.” ■
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This article appeared in the Business section of the print edition under the headline “Japan Inc goes digital”