- Japan's strategies for taking the lead in the Fourth … "Vision of New Industrial Structure" - Japan's strategies for taking the lead in the Fourth Industrial Revolution - Interim

METI

"Vision of New Industrial Structure"

- Japan's strategies for taking the lead in the Fourth Industrial Revolution -

Interim Report by New Industrial Structure Committee

April 27th, 2016

METI

Innovation in IoT, Big Data and AI has been advancing more rapidly and impactfully than ever.

It is crucial to have vision common to both the public and the private so that the private sector can make proper investment and as such the government can promptly take measures to make or modify rules that will facilitate such investment.

In this regard the study should focus on (ⅰ) how and when the reform should be performed for IoT/Big Data/AI (i.e. the reform of industrial structure, employment structure, and economic and social system), (ⅱ) potential business opportunity, (ⅲ) task that the public and the private should engage in (e.g. regulatory and institutional reform, R&D/equipment/investment in human resource), clarifying timeframes for each task.

The study has been so far implemented for the formulation of "Vision of New Industrial Structure" (in August 2015) by “New Industrial Structure Committee” (chaired by Motoshige Ito, professor of Tokyo University) set up within "Industrial Structure Council" in joint work with the relevant government ministries and agencies.

The interim report was issued on April 27th, 2016. Relevant government ministries and agencies The Cabinet Office; the Fair Trade Commission; the Financial Services Agency; the Ministry of Internal Affairs and Communications; the Ministry of Finance; the Ministry of Education, Culture, Sports, Science and Technology; the Ministry of Health, Labor and Welfare; the Ministry of Agriculture, Forestry and Fisheries; and the Ministry of Land, Infrastructure, Transport and Tourism.

"Japan Revitalization Strategy" Revised in 2015 (Decided at the Cabinet Meeting on June 30th, 2015)

1 METI

METI 2

Table of Contents １. What is happening now?

２. Japan's basic strategy

３. Changes in society and conversion of industrial structures through the revolution

４. Changes in employment structures through the revolution

５. Estimates involving industrial and employment structures

６. Japan's specific strategy i. Developing environments for promoting data utilization (establishing data platforms, creating data distribution markets, promoting utilization of personal data, developing security-related technology and ecosystems that produce skilled human resources, ideal approaches to intellectual property policies in the revolution and ideal approaches to competition policies that address the revolution) ii. Fostering and securing human resources, improving flexibility in employment systems (establishing an educational system that meets new needs, securing human resources with a global mindset, promoting increased participation of more various sources of labor, increasing the flexibility of labor markets and employment systems) iii. Accelerating innovation and technology development (“Society 5.0”) (establishing an open innovation system, developing innovation bases from which Japan will lead the rest of the world / establishing national projects therefor / accelerating social implementation thereof, e.g., AI, strategically promoting the management of intellectual property and international standardization) iv. Fortifying financial functions (Fortifying equity finance toward the supply of risk capital, encouraging investment in intangible assets to address the revolution, further enhancing the functions of finance and settlement, positioning FinTech at the core) v. Facilitating smooth conversion of industrial and employment structures (establishing a governance system in which business owners are able to swiftly and boldly make decisions, developing systems and environments in which business owners are able to revitalize and reorganize business in a swift and flexible manner) vi. Disseminating the outcomes of the revolution to SMEs and local economies (establishing platforms on which IoT and other new technologies are introduced to and utilized within SMEs and communities) vii. Further enhancing economic and social systems to address the revolution (ideal approaches to regulatory reform so as to address the revolution, improving administrative services through the utilization of data, enhancing the development of business overseas through strategic collaboration and cooperation between industries, ensuring the outcomes of the revolution permeate society)

METI

１． What is happening now?

3

METI 4

What is happening now? (ⅰ) - Technological breakthroughs -

All business and information available to society in the “real world” can be freely controlled through digitized networks.

(IoT)

Large volumes of data can be analyzed to create additional value. (Big Data)

Self-learning machines can analyze data and situations more rapidly and objectively than human

beings. (Artificial intelligence: AI)

Automation can be applied to more diversified and complicated tasks. (Robotics)

→ That which was previously impossible is now possible for society.

Hence the potential dramatic changes in industrial and employment structures.

Increased volume of data Improved processing capability Discontinuous progress of AI

Data volumes worldwide can be doubled every two years.

Exponential progress can be seen with performance

of hardware.

AI technology can enhance discontinuous progress with the support of deep

learning etc.

METI

What is happening now? (ⅱ) - Fourth Industrial Revolution -

5

First Industrial Revolution

Second Industrial Revolution

Third Industrial Revolution

Forth Industrial Revolution

Harness fossil fuel energy

(by steam engine)

Energy innovation (electricity, internal combustion engine)

Automation (Computer)

Autonomous optimization (AI thinks on its own, takes optimal action based on a large volumes of data.

These technological breakthroughs includes the changes below:

① Shift from mass production/uniform services to customized production/services based on individual needs (customized medical treatment, immediate custom-made clothing, educational service depending on individual understanding)

② Free matching of society’s unused potential assets with needs of individuals (Uber, Airbnb, etc.)

③ Support or replacement for human labor, recognition/learning capability (automated driving, manufacturing/management, delivery by drone)

④ Creation of new services、shift to after-market services for products and goods (from simple sales of equipment to added services of operation/security/insurance using sensor data), significant efficiency improvement throughout the entire supply chain with data sharing (integration of production equipment and logistics/delivery/payment systems)

⑤ Technology used in the revolution is common foundational technology for innovation across all industries, and allows for addressing new needs (genome editing technology × biodata=new drug discovery, new type of farm product, bioenergy, etc.)

METI Source: FY 2014 Measures to Promote Manufacturing Technology

Examples from manufacturing

sector

From Internet to the real world

From real world to Internet

6

Google Amazon Facebook

etc.

GE Siemens Bosch IBM Intel

etc.

Global strategy by leading overseas players

Range of cloud services expanding, including information not only on the Internet but also from real life (From Internet to real world)

(i) Collecting data related to factories and products around the world

(iii) Giving optimum instructions to factories

Ensuring the protection of their manufacturing industry know-how in which they specialize, and globally developing business using technology to their advantage (From real world to Internet)

Standardizing manufacturing systems established in Germany and exporting them overseas (ii) Accumulating data in cloud servers, processed with artificial intelligence

Equipment for factories is shifting toward affordable devices that receive instructions from the cloud and execute them.

(i) Sharing data related to factories and products around the world between companies, factories, and even machines

(ii) Accumulating and processing data with the high-performance manufacturing facilities at hand

(iii) Optimally controlling factories

Maintaining value of high-performance equipment in factories, which is Germany’s strength

METI

Aerosense, ALSOK, SECOM

Use of drones in construction management of buildings, etc.

Drone photography of construction sites from above increase safety by allowing work on high-rise building sites to be checked with designs kept on Cloud services.

<taking photograph of building materials from above>

Eliminate risky work

Changes taking place for human roles and work

Companies aiming to create new society with data (ⅰ)

exMedio

Use of AI for dermatological diagnosis support system

They developed free support service for diagnosis of dermatological disease called "Hifumiru" which operates with the help of photographs of afflicted body parts and medical patient interviews with affiliated dermatologists over smartphones.

AI to assist with doctor's diagnosis

・Upgrade performance of diagnosis support system using AI.

・Disseminate guidance prepared through review of diagnosis aid software.

○ Challenge ○ Challenge

Robot Taxi

Realization of unmanned taxi service

Aiming to realize a futuristic, unmanned taxi service using automated driving system technology which detects vehicle surroundings and more. Services are expected to be available within specific section between the airport and Tokyo. Also it is expected that this technology will contribute to retention of public transport networks including buses where there is a problematic lack of drivers.

Change how people move and live

・Provide statutory measures for Road Traffic Law, Road Transport Vehicle Law and international conventions for automatic guided driving.

○ Challenge ・Provide statutory measures for issues such as flying beyond line-of-sight, long-distance communication and collision prevention, encouraging usage. Source: Materials submitted by Mr.Tomiyama at the

second Public-Private Dialogue 7

METI

Companies aiming to create new society with data (ⅱ)

build-to-order manufacturing individual manufacturing individual order manufacturer consumer

Seiren Realization of rapid, custom production in response to consumer needs They developed a unique system called "Viscotecs" generating final product from instant printout based on combined data of customer's favorite fabric and design. Applicable to such materials as aluminum, wood and ceramics.

・Align price of made-to-order product with price of mass produced item

To the world of discontinuous customization

・Ensure optimal product liability. ○ Challenge

Terumo Prevention of lifestyle-related disease using medical prescription/medical examination/health-related data

medical prescription medical examination records

Amount of activity Number of steps Vital data

・Prolong healthy life expectancy with customized health service

○ Challenge ・Provide medical care/health information and implement optimal utilization of those services according to revised Personal Information Protection Law.

With the permission of employees, combine their daily exercise data with medical records focusing on obesity and to analyze health improvement effects of walking, contributing to the furtherance of good health/the prevention of lifestyle-related diseases.

Recruit Delivery of adaptive learning, depending on student understanding

・Ensure effective learning with individual/optimal learning aid service

They have developed learning platforms such as "Juken Sapuri” (Exam-taking course), "Benkyo Sapuri” (Learning course) which provide various web-based, self-directed learning opportunities. Additionally, a study is under way to deliver optimal recommendations on learning based on their actual learning level and less favorite subjects, using AI.

・Pursue partnership with schools and other education organizations and develop infrastructure for use of adaptive learning at schools.

Source: Materials submitted by Mr/Ms Tomiyama at 2nd Public-Private Dialogue

8

○ Challenge

individual order

build-to-order manufacturing

individual manufacturing manufacturer consumer

METI

Technology (Common Platform Technology × Industry Core Technology )× Relevant Data

9

Common platform technology (AI, IoT, Robotics)

Financial technology

Drug discovery technology

Bioinformatics

Energy load device control technology

Data on trade/distribution Data on financial markets

Health and medical data

Biological data

Customer data

Credit by data on trade/settlement, Robo-Adviser (asset management), etc.

Personalized medicines, Personalized cosmetic and beauty services, etc.

New drug discovery, new type of farm product, advanced materials manufacturing, bioenergy, etc.

Energy demand response, monitoring services, etc.

Technology Relevant data Various goods and services

Genome editing

Production control technology

Accidents and near-miss data

Enhancement of safety/productivity with early detection of failure/fault sign, improved insurance/rating, etc.

METI 10

Envisioned reform of leading sectors (illustrative) (1)

Autonomous driving and mobility ○ Directions of change ・ Improved efficiency in logistics with realization of longitudinal column travel.

・ Increased utilization of full automatic guided vehicle system in various sectors. Start-up of advertising business and services to utilize time spent while driving.

・ Resolution of issues regarding people vulnerable to traffic, traffic accidents, congestion and environmental impact.

Manufacturing innovation, industrial security, supply chain and retail ○ Directions of change ・Enabling instant response, made-to-order production with mass production factory.

・Realizing zero waste and lead time by data linkage through production, logistics and sales.

・ Full scale use of drone for logistics. ・ Constantly monitoring the plant equipment to detect failure/fault sign early and issue warnings appropriately.

[PM’s statement at the second meeting of the Public-

Private Dialogue] • Develop system, infrastructure and verification by 2017 for

autonomous driving service and transportation on expressways which will be in use at 2020 Olympic & Paralympic Games.


Private Dialogue] • Aim to realize parcel delivery service using drone within 3

years from now if possible. • To this end set up the Public-Private Council to discuss how

it specifically should be treated between users and the relevant government offices. A policy to establish it should be formulated at such council by summer this year.

METI 11


Health, medical, and nursing care

○ Directions of change ・ Realization of customized services of health and prevention through utilization of health/medical data.

・ Mitigation of local burden of medical care/nursing care through implementing medical care robots with advance recognition/control assisted by AI.

Finance (FinTech)

○ Directions of change ・ Realization of more convenient settlement, remittance and funding etc. through a small amount settlement, remittance and swift data-based credit review which will be all executed online.

・ Realization of efficient corporate back office and household finance through real-time visualization of corporate management, accounting and household finance.


Private Dialogue] • Publish new guidelines applicable commonly

to review of diagnosis aid software by this spring so that diagnosis aid system using AI can be utilized at local medical institutions.

METI 12


Smart housing, smart communities,

and energy

○ Directions of change ・ Realization of smart communities where supply and demand for energy are comprehensively managed including demand side as per characteristic of each region.

・ Deployment of diversified services by acquiring and utilizing various data within household and communities. let alone data on energy.

Education ○ Directions of change ・ Realization of customized learning according to a leaner's degree of proficiency and favorite subjects by expanding adaptive learning etc.

・Provision of easy access to knowledge or skills needed for each occupational activities at any time as per individual needs while making learning materials used openly and utilizing online classes.

[PM’s statement at the third meeting of the Public-

Private Dialogue] • Strengthen drastically incentive to conserve electricity.

Create "Negawatt trade market" by 2017 where one trades electricity conserved by utilizing residential photovoltaic power and IoT.

• To this end formulate trade rules for providers and establish telecommunications standard to remotely control energy equipment within current fiscal year.

METI 13


Agriculture ○ Directions of change ・ More improved productivity by labor saving through introduction of robot and automatic guided driving system etc. and by formation of tacit knowledge on production lines

・Realization of improved quality control through ensuring traceability etc. by enabling partnership among production, process, logistics and distribution based on ICT.

・ Provision of farm products in response to different consumers' needs through utilization of data on sales performance etc.

Tourism

○ Directions of change ・Provision of customized tourist experience to meet individual interests and preferences through collection and utilization of behavioral data of tourists.

・Increase of options in accommodations and transportation for tourists by expanding sharing and matching services, and entry of individual in tourist services as providers.

[PM’s statement at the fourth meeting of the Public-

Private Dialogue] • Introduce cutting-edge technology into agricultural

sector. Commercialize automatic guided riding system for agricultural equipment on cultivated land by 2018, and create system necessary for enabling unmanned system through remote monitoring by 2020.

METI

4.6

0.2

0.6

0.9

0.9

1.0

1.3

2.3

3.9

公共サービス（含む行政）

農業

メディア・コンテンツ

教育サービス

スマートハウス、スマートコミュニティエネルギーインフラ

医療・健康

金融

流通・小売・物流

ものづくり革新

(Reference) Economic value by leading sectors

Chief think tanks project significant impact of IoT on such sectors as manufacturing, distribution/retail/logistics, finance, medical/health, public service.

* Mobility (automatic driving system etc.) 0.9

(Economic value of IoT as of 2025)

( Source：METI's document on categorization and integration based on Cisco, McKinsey report)

[Economic value generated by IoT by sectors (global base)] (Aggregate economic value generated by IoT from 2013 - 2022)

(trillions of dollars)

[*Economic value] Value on the whole including increased sales by suppliers as well as increased value on the part of users such as companies which introduce IoT to pursue cost reduction through higher operating efficiency and increase sales through advanced marketing practices.

14

Distribution/retail/logistics

Finance

Medical/health

Smart house/smart community/ energy infrastructure

Educational service

Agriculture

Public services (including administrative services)

Media content

Manufacturing innovation

METI

２. Japan's basic strategy

15

METI 16

Two scenarios of Forth Industrial Revolution -Japan now at “turning point"-

4th Industrial Revolution

Leaving walls between companies, keiretsu and industries as well as retention of self-sufficiency

Relying on overseas data platforms Retaining immobile labor market Preserving exiting industries Continuing traditional education/training of

human resource

Discovering and acquiring new demand by taking advantage of AI technologies and data

→creating innovative services and products Creating data platforms that have no boundaries among companies and keiretsu. Utilizing flexible labor market and foreigners Ensuring industrial metabolism Switching over to human resource education through use of data Becoming the core of international network

(human resource, technology, funding, data)

Added value taken by overseas data platform providers

Japanese industries becoming sort of subcontractors or poor players due to such platforms

Collapse/bipolarization of middle class workers (loss of employment opportunities due to mechanization or digitization, decrease of wages)

Subject to gradual innovation focusing on only hardware

Resolving social issues by creating new services/products, acquiring global markets and added value

Increasing productivity and wage to compensate decline of population

Spreading profit among SMEs and regional economy Concurrently reorganizing industries and

mobilizing employment Realizing disruptive innovation for software etc.

[As-is scenario] - Retaining industrial/employment structure -

[Reform scenario] - Shift and mobility of industrial/employment structure -

Reform with burden or current stable situation with declining economy

It is speed with which reform is deployed.

METI

1. (ⅰ) Understand directions of global technology and industries and strategies of leading companies around the world.

(ⅱ) Analyze Japan's "strengths/weaknesses," and clarify sectors of "sectors with the greatest opportunity for improvement".

2. Share this approach with companies all over Japan and then create various strategies for the government, private sectors and research institutes. (ⅰ) Share long-term visions for the future (society, technology, industry, employment) with public and private sectors. (ⅱ) Determine specific goals, setting interim deadlines. (ⅲ) Develop a roadmap which defines all elements required for achieving goals and implement specific,

short-term reform (regulatory reform, business promotion, private business activities, etc.)

3. Based on these strategies, (ⅰ) Take the lead in driving reform for specific obstacles once their prospects are identified. (ⅱ) With respect to obstacles whose prospects are uncertain due to the possibility of different scenarios, make attempts to implement new ideas without waiting for the consensus.

Basic approaches for dominant sectors

17

METI 18 18

Importance of utilizing real data

Utilization of "data" is the source of added value in respect of the Forth Industrial Revolution.

Virtual data Data generated from websites (search etc.) and online activities such as SNS. →These platforms are controlled by overseas IT companies (Google, Amazon, Apple, etc.)

Real data Data obtained from sensors etc. detecting activities in the real world of individuals and companies, such as data on health information, travel and operation at factories and etc. →Japan has possibility of acquiring platforms for such data if Japanese companies successfully approach these data.

Real data consists of confidential data due to corporate competition and huge volume of data which should be

shared to compose big data with great advantage arising from corporate cooperation.

It is crucial to identify "cooperative domains" and "competitive domains", and to build "platforms"

which shares and utilizes data coming borderlessly from offices/companies/keiretsu

1st stage

2nd stage

METI 19

(Reference) Basic cycle for data utilization

Establish business model which offers the entire basic cycle.

Obtain data

Exchange/transmit data

Practical application

Analyze by AI, etc.

Societal implementation/ Industrialization

1

2 4

5

3 6 (big data, etc.)

METI

METI 20

Japan's strength/weakness for data utilization Strength：Hardware (1) (5) Weakness: Software (2) (3) (4), concepts and systems to enable connection hardware and software that integrate hardware and software

Establish business model which offers the entire basic cycle.

☆Global market share of robots, sensors, etc. ☆Data on quality school teachers (tacit knowledge on the local level) ★Global market share of mobile OS, device, etc.

☆World's cutting-edge high speed data network ★Maintenance cost of data center

☆Local big data (medical care, transportation, etc.) ★data sharing, data exchange

☆Super computer technology ★Development and utilization of AI technologies ★Development of software products ★Basic research of mathematics and medical

fields, etc. ★Data scientists, security specialists, etc.

☆The most advanced low birth rate and aging population ☆Global market share of automobile etc. ☆Consumers able to recognize and assess quality products ★Technology of 3D printing and its limited utilization

Obtain data

Exchange/transmit data

Analyze with AI, etc.

Societal implementation/ Industrialization

1

2 4

5

3

6 ★Regulation systems to facilitate new business ★Scale and speed of industrial reorganization ★Legacy cost of IT systems elaborated for each individual company

Data cycle (evaluation) ☆Strength ★Weakness

(big data, etc.) Practical application

METI 21 21

Japan's strategies (1) - 7 policies - (Redesign of socio-economic system for the future)

(1) Develop environment for promoting data utilization • Building data platform, creating data distribution market • Facilitating utilization of personal data • Building ecosystem that produces security technology /human resource • Formulating strategies on intellectual property in the Fourth Industrial Revolution • Formulating strategies on competition policy in line with the Fourth Industrial Revolution

(2) Enhance flexibility in the development/recruitment of human resource and employment system • Building educational system in response to new needs • Acquiring talents globally • Promoting diverse types of employment, • Enhancing flexibility in labor market/employment system

(3) Accelerate innovation and technological development ("Society 5.0") • Building an open innovation system • Develop innovation bases that lead the world/Establishing national projects/accelerating societal

implementation (e.g. AI), • Promoting strategically intellectual property management and international standardization

METI 22 22

(4) Strengthen financial capabilities • Fortifying equity finance for the supply of risk capital

• Encouraging investment in intangible assets in line with the Fourth Industrial Revolution

• Improving capabilities of finance and settlement focusing on FinTech

(5) Facilitate shift of industrial /employment structure • Building a governance system to enable swift and positive decision-making

• Developing systems and environments to enable swift and flexible business revitalization/reorganization, etc.

• Enhancing flexibility in labor market/employment system (stated again)

(6) Spread effect of the Fourth Industrial Revolution into SMEs and regional economy • Introducing IoT etc. into SMEs and regional economy, and building base for utilizing them

(7) Ensure sophisticated system of economy and society for the Fourth Industrial Revolution • Ensuring optimal regulatory reform in line with the Fourth Industrial Revolution

• Improving administrative services using data

• Performing enhanced global deployment through strategic partnership etc.

• Spreading advantage of the Fourth Industrial Revolution into the society in general

Japan's strategies (2) - 7 policies - (Redesign of socio-economic system for the future)

METI

3. Changes in society and conversion of industrial structures

through the revolution

23 METI

METI 24

Societal needs to be realized by the Fourth Industrial Revolution

Keep healthy, support the elderly

Share efficiently Learn effectively

Enjoy entertainment

Easily borrow fund and manage asset

Live "smartly"

Live safely and securely

Societal and structural issues facing Japan and the world Low birthrate and aging population Decline of regional economies and

communities Limited energy and environmental

constrain Food issues Water issues Other

Use convenient infrastructure

Get "smartly"

Move safely Make effective use of travel time

"Societal and structural issues (e.g. customer's true needs) which go beyond our capabilities can be addressed by utilizing innovative technology/data such as AI.

Competition will be conducted as to who will discover or acquire this new frontier expected to be spread globally.

METI 24

METI

(1) Expansion of mobility industries impacting employment

Opportunities are constantly arising for new value chains / industries by responding to societal needs. For example progress in automatic guided driving/drone technology is giving rise to new services and products,

affecting a variety of industries.

...

...

(1) Platooning

(7) 24/7 autonomous logistics (including

public roads)

(8)Unmanned transportation

service

(10)Fully autonomous cars for private use Newly

created role and value

(1) Platooning

(4)24/7 Autonomous

driving by industries

(5) Service using time in the car

(Culture/entertainment)

(3) Advertising

(2)Drone delivery

(1) Platooning

(8)24/7 autonomous use

by industries

(5)Service using time in the car

(Culture/ entertainment)

(3) Advertising

Relevant industries

(e.g.)

(2) Unmanned drone logistics

(partial) (2) Drone delivery

(expanded)

(9)Expansion of sharing service

Level 2/3：Combined Function Automation/Limited Self-Driving Automation (requires driver's support*)

Level 4：Full Autonomous driving**(Limited to expressways)

Level 4：Full Autonomous driving (Level 4) (ordinary road/expressway etc.)

Manufacturing (Automobiles /accessories, drones,)、Automobile maintenance, passenger road transportation, freight road transportation, retail, information

communications,・・・etc.

Information service, advertisement 、casualty insurance,・・・etc.

Agriculture/fishery, food, wholesale ・・・etc. * (3) Advertising, or (5) entertainment or business services are available utilizing former driving time (now freed due to autonomous driving systems).

** Unmanned operations make progress across industries as increasing range of non-manual operations become possible.

(6)Reduction of car insurance

premiums (6)Reduction of car insurance premium

Impact on employment (example)

• (1)(2) Improvement of labor market with logistics etc. [About 40,000 surplus of job offers for truck drivers]

• (4) Improvement of labor market in a variety of industries including logistics and agriculture.

• (3)(5)(6) Creation of employment by creating new services.

• (7)(8)(9) Significant change in employment structure for professional drivers.

• (3)(5)(9) Creation of additional employment by creating new services.

...

2018- around 2030

25 METI

METI

Spread of vision “move" and its impact on society (pros and cons)

26

Source: Accenture Mr Hodo's presentation materials at 3rd New Industrial Structure Committee, "For abundant automobile society" by Japan Automobile Manufacturers Association, "Status of traffic accidents and traffic safety policy" by Cabinet Office, "Report on the weak for shopping" by Ministry of Economy, Trade and Industry, "CO2 emission for transportation sector" by Ministry of Land, Infrastructure and Transport, "Report on result of research of basic traffic situation" by Ministry of Land, Infrastructure and Transport, "Status of remote islands" by Ministry of Land, Infrastructure and Transport

Dom

estic O

verseas

Individuals Society ○ Resolution of issues on people having difficulties in moving

[7 million "the weak for shopping", about 40 million people without driver's licenses]

○ Improvement in distribution of daily necessities for remote islanders [Total population of all remote islands: 319,000]

○ Safer traffic due to decrease of traffic accidents [Traffic fatalities: 4,117(2015)] [Economic loss due to accidents: 6.3trillion yen(2009)]

○ Freer work style with effective use of commuting time [About 20 minute (one-way) average commuting time by car]

●Necessity of acquiring new work skills or more needs of transition of labor force with change in employment structure

○Decrease of environmental burden (CO2 etc.) by realization of uncongested traffic on ordinary roads or expressways [Annual economic loss: 3.3 billion people/hours,10 trillion yen] [CO2emission by domestic transportation sector: 220 million tons (17% of total emission]

○Faster emergency response for freight etc. in case of disaster

●Integrated control system of traffic and drone by connecting respective data results in significant increase of risk in case of failure

●Changes in labor market, employment system, social security system etc.

○ [People without driver's licenses: about 6 billion ]

○ [Traffic fatalities:1.25million] [Economic loss due to accidents: over 100 billion USD (especially 1-2% loss of GNP in emerging countries)]

○[Energy consumption worldwide for transportation sector: 103 trillion Btu (20% of total)]

Spread of impact from industry/employment occurs, and concurrently impact on different societies may arise in/out of Japan.

METI

METI

Restructuring axis in the Fourth Industrial Revolution

Multiple ways for meeting various needs of “move" Possible shift from traditional types of industries to industries responding to changes in social needs (e.g. from automobile manufacturing industry to mobility smart service industry) This shift will bring about shift from reorganization within same industry to reorganization among

totally different industries. As a result major changes of industrial structure will occur.

"Move" automati

cally, safely, freely and

inexpensively

Alternative

Human mobility

Mobility of goods

○ Automobile manufacturer

○Transportation business

(bus/taxi etc.)

○ Sharing service provider

○ Logistics provider

(truck/railway/ drone etc.)

Ride sharing

Unmanned transportation service

Full automatic guided vehicle/drone

Expansion of sharing service

Current around 2030

Platooning

Full unmanned logistics

Drone for last one mile delivery

Drone for main network

Unmanned truck

Unmanned transportation

service in limited areas

Mobility Providers

Business entities 2018-

(1) Gradual approach for upgrading automatic guided

driving

(2)Disruptive approach for realizing automatic guided

driving

Traditional axis of reorganization

27 ※ Trial is expected for late 2020's according to Public-Private ITS Vision/Roadmap 2015.

○ Information service

METI

○ Drone manufacture

Complimentary

METI 28

(2) Industries flock to market related to “smart life“, impacting employment.

Manufacturing (electrical appliances, housing, household appliances), electricity/gas/water (retail), ・・・etc.

Newly created role and value

Relevant industries

(e.g.)

Phase4 (Reciprocal data use)

Electricity/gas (retail), electric equipment maker, construction/real estate leasing (housing), ・・・etc.

Manufacturing (storage battery, EV), information service (aggregator business, negawatt trade)・・・etc. Retail, advertising, security, freight road transportation and medical/nursing care…etc.

Expanded effect to general housing / real estate related industries

Prior application of home security services and automatic ordering fulfillment etc. Prior application of electricity storage use and electricity points

Prior application of data from smart meters (installed in all houses by 2024)

(1)Wide area control of supply/ demand of electricity (1) Wide area control of supply /

demand of electricity

(4) Systematic use of EV (electricity storage)

(3) Incentive for electricity saving

(1) Control of supply/demand of wide-area electricity

(3) Incentive for electricity saving

(4) Systematic use of EV (electricity storage)

(5)

(9)

(8) Monitor/security of equipment

(7)

(6) Electricity interchange with home to home (by fulfillment of parity) (1) Display device utilization

(7) Shift to mass customization

(4) Partnering health service and medical care

(1)

(2)Display energy

use

(2) Sophisticated watch

Phase3 (Expanded linkage of devices) Phase1/2 (Current status)

• (1)/(2) Fewer meter readers

• (1) Less manpower for repair, maintenance and recall etc.

• (3)/(4) Creation of new services (aggregator etc.), increase of employment due to increase of demand on products (EV etc.)

• (3) Improvement of logistics labor market due to decrease of failed deliveries to empty homes

• (5)(6)(7)(8)(9)/(7)(8) Creation of additional employment by creating new services.

Energy

Smart house

(6) Optimal advertisement based on personal behavior

(2) Visualization

(8) Various services delivered through data platform

(2) Watch

(3) More efficient home delivery (use of information delivery times)

(4) Health information service

(1) (2) Visualization

(5) Autonomous efficiency of retail (shopping)

(3) Further efficient regional logistics (enhancement of predicative capability)

Current About middle of 2020's

Utilization of real housing data produces various new services and products, affecting various industries.

(5) Partial autonomous efficiency of retail (shopping)

(6) Integration of devices and advertisement

METI

Impact on employment

(e.g.)

METI 29

Spread of vision “smart life" and its impact on society (pros and cons)

Dom

estic O

verseas

Individuals Society

○ Realization of “smart life” friendly to environment [Electricity generated by residential photovoltaic power (aggregate): 8.65 million kW]

○ Easier working by married couples through reduction of household workload - clothes washing/cleaning etc. [Post marriage female employment rate: 65.3%, Post child delivery female employment rate: 23.1%]

○ Resolution of issues of live-alone elderly under monitoring [Number of deaths at home of over 65 years live-alone elderlies in 23 wards in Tokyo: 2,869]

○ Decrease in deaths at home (heat shock etc.) [Number of unexpected deaths at home: 14,000]

●Risk of using housing data for criminal activities

○ Realization of 3E+S (Energy security, Economic efficiency, Environment, Safety)

○ Improvement of efficiency of energy use at home [Energy use percentage at home: 14.4％]

○Realization of efficient distribution in response to needs for sufficient food [Food loss rate: 3.7％]

○ Increase of recall recovery rate and recovery rate of waste household electric appliance by identifying product locations [Number of serious product accidents due to non-response to recalled products: 100 cases per year]

○ Further enhancement of disaster-response capabilities

● Risk of cyber terrorism due to expanded networks

○ Upgrade of living standard through community-distributed power sources in areas with inadequate infrastructure in emerging countries [Number of people living where there is no electric power : about 1.2 billion- 17%of world population(2013)]

○ Contribution to achievement of goal for controlling global warming by improving efficiency of energy consumption [Goal: "Limit temperature increase to 2 degrees Celsius by 2050"]

○ Reduction of food loss worldwide [Number of people with insufficient food: about 800 million]

Source: "Statistics on food loss/household research 2014" by Ministry of Agriculture、Forestry and Fisheries, "White paper on energy usage 2015" by Agency of Natural Resources and Energy, "Walls blocking female continuous employment" by Cabinet Office, "White paper on aging society 2015 (full version)" by Cabinet Office, "Demographic survey 2014" by Ministry of Health、Labor and Welfare, "Renewable global status report 2015" by REN21, "World Food Programme “ by Hunger Statistics, "Tasks for product safety policy 2014" by Ministry of Economy、Trade and Industry METI

METI 30

Multiple ways of meeting the various needs of “smart life" Create new value by comprehensively utilizing integrated data inside home and in community.

New businesses may emerge that acquire most of their value by securing a competitive advantage through providing platform of such data integration.

Phase1 (area optimal)

Phase2 (wide area optimal)

Phase2’ (Use of user resources)

Phase3 (Flexible and efficient energy supply system)

Intensive on large scale

Distributed locally to area w

ith dem

and

→ Integration of data on energy and housing/ creation of added value diversified through

utilization of data

(1)Centralized approach

(2)Decentralized approach

From 2017 Current

Phase4 (Information collection by

Platform and reciprocal data use

Phase1 (enhanced functionality within

single device)

Phase2 (networking of devices:

visualization, remote control, etc.)

Energy

Phase1

e.g self-learning/optimization by EcoCute and air-conditioner, etc.

Phase2 e.g. visualization of electricity usage

by smart meter

Home energy

Phase3 e.g.control of multiple devices

via HEMS

Phase3 (upgrade in linkage with

other devices and services)

Obstacles exist for corporate partnership,

data use, platforming. ...

Retail Health/medical prevention

Logistics

In a smart house, various upgrades occur in each device/service, integrating them into the platform. ⇒ Further advancement and resolution of issues in each domain (retail, heath etc.)

Devices such as home electric appliances household appliances

Smart house

About middle of 2020's

Restructuring axis in the Fourth Industrial R

evolution

METI

METI 31

(3) (1) Industries flock to market related to “Keep healthy," impacting employment.

Manufacture (food, cosmetics, household appliance), Finance(insurance), ・・・

(4) medical examination

recommendations

(6) Insurance to cope with risk of life style diseases

Phase1：Grasp of basic needs, collection

of quality data

Phase2：Improvement of health and prevention based on relation

between health and symptoms

Phase3：Optimizing and platforming through AI, etc.

Medical institutions, entertainment (fitness), manufacturing (health equipment, wearable devices, apparel), communication ...

Information service/software...

Industries that develop more advanced data connection than data clusters (see description on the left) will be first players.

(3)Visualization of health

(7) Monitoring service

(9)Personalized medicines、

personalized cosmetic and

beauty services Newly created role and value

(8)Health minded

community building

(5)Personalized health service

• (4)(5) Decrease of needs for medical/nursing care due to rise of independent elderlies will mitigate tightened labor market (this will enable focusing work force towards people truly in need of medical/nursing care).

(1)Digitization of fitness

information

(2)Digitization of medical

information (4)

medical examination recommendations

(3)Visualization of health

condition and life style

during 2016- around 2030 Current

Clustering data by integrating health related data, medical prescription, medical examination, clinical data

(3)Visualization of health condition

• (6)(7)(8)(9)(10) Creation of employment due to new services including "prevention and early diagnosis/early care-" related personalized services.

(10)Personalized

guidance on nutrition

(1) Further improved fitness

service

(1)Fitness service in

linkage with prevention

(2)Digitization of medical

information (2) Digitization of

medical information

(5)Personalized health service

METI

Relevant industries (e.g.)


(e.g.)

METI 32

(3)(2) Industries flock to market related to “support he elderly" impacting employment.

monitoring service


Digitization of nursing care data

(1)Efficient administrative services

(2)Reduction of medical/care services workload

(3)Efficient medical/care services

Information communication, optical equipment, real estate, construction (housing) ...etc.

Manufacture (robots), medical equipment...etc.

Information service...etc. Efficient indirect services

Reduction of direct services workload

Optimal individual planning monitoring

service


Optimal individual planning

Transfer support equipment(care

giver)

Transfer support

Equipment (care receiver)

Excretion support

equipment

Monitoring service


Optimal individual planning

Excretion support

equipment

Communication Robot

Transport support service

Food intake service

• Efficient nursing care is expected by ensuring utilization of patient monitoring and digitization of care record.

• Efficient nursing care is expected by introducing excretion support equipment.

• Reducing nursing-care worker turnover is expected through mitigating workload by introducing robots.

• With task of nursing care directly replaced by robots etc., drastic improvement of productivity with nursing care service is expected, allowing resources to be focused on people truly in need of human care.

→ Responding to the issues of shortage of nursing care workers, improving working conditions, and controlling taxpayer's burden.

-2030 Current

Transfer support Equipment (care

receiver)

Transfer support Equipment (caregiver)

Smart nursing-care facility

Employment support service

Relevant industries

(e.g.)

METI


(e.g.)

METI 33

Spread of vision “keep healthy, support the elderly" and impact on society (pros and cons)

Dom

estic O

verseas

Individuals Society ○ Average life expectancy and healthy life expectancy are

becoming longer, creating an ageless society.(living until the final days in his/her own way) [Percentage of population over 65years: 25％, Difference between average life expectancy and healthy life expectancy is about 10 years.]

○ Independence/self-control of people in need of nursing care, progress of social participation [Number of elderly with difficulties in daily lives: 209 of 1,000 people]

○ Living securely until final days with nursing care [Percentage of single elderly households in 2035: 37.7%]

○ Realization of optimal workload of medical/nursing care [National medical expense: 40 trillion yen, lifestyle diseases as percentage of medical expenses: about one third]

○ Reduction of fiscal burden of social security [32.7% of general account expenditure, medical expense: 11.4trillion yen, nursing care expense: 2.7trillion yen]

○ Resolution of supply-demand gap in nursing care workers [Gap of labor market estimated in 2025: 310,000 people, estimated in 2035: 680,000 people]

○ Improvement of working conditions of nursing care workers through higher productivity [Average salary of nursing care workers at welfare facilities: 218,900 yen compared to 324,000 yen average salary of all industries]

○ With prolonged healthy life expectancy, entry into labor market in the future may be on the rise despite projected population decrease.

●Possibility of increase of people unable to receive nursing care service unless industrial structure is reformed.

○ Increased average life expectancy, reduction of difference between average life expectancy and healthy life expectancy [Percentage of people over 65 years old worldwide : 12％ on the average, average life expectancy: 71years, difference between average life expectancy and healthy life expectancy: about 10years]

○ Optimal ratio of medical expenses [Percentage of medical expense compared to GDP: 9.3% (OECD member country average)]

○ Increasing need for nursing care services in Asian countries where aging populations are on the rise, and response to increasing need for preventive care in developed countries

Source: Materials for the Fourth Committee about healthy life expectancy/average life expectancy：WHO 2012 Comprehensive Survey of Living Conditions 1 in 2010, Report "Workshop for nursing care service responding to future needs in nursing care service," " Projection of the number of households for Japan (nationwide projection) compiled in January 2013" by National Institute of Population and Social Security Research METI

METI 34

Multiple ways to meet various needs of “support the elderly"

Current -2030

2． Enhanced productivity scenario

3． Sophisticated innovation scenario

1． Stagnant productivity scenario

○ Realization of drastic streamlining and workload reduction through progressive robot technology / innovation

○ Advanced equipment / services dominating Asian markets where aging population is on the rise.

○ Realization of ability to address increased needs, securing nursing care workers, control of national burden through enhanced quality/productivity based on IT / sensors / robots

○ Improved quality of nursing care service - realization of nursing care at home without burden to family members

○ Increase of national burden ○ Shortage of nursing care workers ○ Increase of nursing care worker turnover, etc.

Labor-intensive service model

・paper nursing care records

・Watch/patrol at night, etc.

Efficient indirect nursing care services ・Digitization of nursing care records ・Utilization of watch sensor ・PDCA, etc. on enhanced

quality/productivity based on data

Reduction of direct workload of nursing care ・ Utilization of excretion support equipment ・ Utilization of robot suits, etc.

Efficient direct services of nursing care ・Alternative nursing care with robots

METI

METI 35

(4) Industries flock to markets related to “smart procurement," impacting employment.

Medical care (Health), all types of industries or sectors including waste processing

Phase1/2: Optimization of supply

chain

Phase３：Provision of customized products by

understanding customer needs

Phase 4: Sophisticated projection through AI

Manufacturing, communication, information service...

Logistics, distribution ...

Commercialize products after estimating needs and creating trends


• Improve working conditions and labor market for factory workers

• Improvement of logistics labor market

• Change in necessary skills / type of work for factory workers

• Expected increase in demand of labor in many industries due to creation of new services and products

• Change in necessary skills / type of work for factory workers, logistics workers, back office workers, etc.

• Expected increase of demand of labor in many industries due to creation of new services and products

• Expected increase of demand of labor in domestic factory workers due to return of manufacturing sites to Japan, facilitated by reduction of lead time.

• Change in necessary skills / type of work required for factory workers, logistics workers, back office workers, etc.

(1) Reduction of

lead time

(1) Reduction of lead time

(6) Creation of new services and

products

(1) Further reduction of

lead time

(8) Creation of trend by

identifying potential

needs (6) Expansion of domains of newly created services

and products

(5) Prolonged product life

cycle (2) Reduction of waste (materials

inventory)

(2) Reduction of waste (merchandise

inventory) (2) Zero

waste, zero inventory

(5) Prolonged product life

cycle

(4) Mass customization

(3) Ensuring sophisticated

safety

(3) Ensuring sophisticated

safety

(3) Realization

of smart security

around 2020 Current

(4) Mass customization

(7) Maintenance of products /

zero downtime

Realization of mass customization that realizes fulfillment of individual needs

Relevant industries

(e.g.)

METI


(e.g.)

METI 36

Spread of “smart procurement " vision and its impact on society (pros and cons)

Dom

estic O

verseas

Individuals Society ○ People may be able to purchase whatever they want,

whenever necessary and at fair prices. ○ Consistent level / expansion of job openings due to

development of new demand, increased competitiveness thanks to acquisition of domestic production sites [Active opening ratio: (jobs on production line) 1.23 (February 2016)]

●Need for change in worker skillsets, concerns about reducing job openings due to decline in international competitiveness (e.g. ：machine → IT)

○ Realization of zero waste during production process (strengthen international competitiveness, reduce environmental impact) [Emission of CO2 from industrial sector(factory etc.): about 430 million tons (32.8% of total)]

○ Further construction of manufacturing facilities for sophisticated products in Japan (creation of new jobs, ripple effects for regional economies) [Overseas production rate for manufacture: 24.3％(2014)]

○ Control of illegal dumping of waste household electric appliances with increased networking of goods [Number of collected waste household electric appliances illegally dumped: (estimated record) 74,600]

○ People may be able to purchase whatever they want whenever necessary and at fair prices.

○ Reduction of waste worldwide [2.1billion ton]

○ Overseas deployment of smart factory system that realizes international contribution and market deployment by Japanese companies [GDP ratio for manufacturing: approx. 16%]

○ Recovery of waste material value with up-cycling, recycling and parts collection etc. [1.3 trillion USD market potential (Accenture's projection for 2030)]

Source: "Statistical data on general waste and industrial waste" by Resource Recycling Promotion Center, "Status of venous industry and challenges" by Ministry of Economy, Trade and Industry, "Statistical research on food loss and household research 2014" by Ministry of Agriculture、Forestry and Fisheries "Status of illegal dumping etc. of waste household electric appliance 2014" by Ministry of the Environment, "Status of general job reference February 2016" by Planet Aid, Accenture Mr Hodo's presentation at 3rd New Industrial Structure Committee, Ministry of Health,Labor and Welfare,"Emission amount of greenhouse effect gas 2013 (preliminary)" by Ministry of the Environment, "Survey of Overseas Business Activities" by Ministry of Economy, Trade and Industry, McKinsey"Manufacturing the future: The next era of global growth and innovation" METI

METI 37

Multiple ways of meeting various needs of “smart procurement”

Creation of new value by comprehensively utilizing integrated data on manufacturing / distribution / retail etc.

Emergence of new business entities that secure a competitive advantage by utilizing technological innovation including AI is possible.

Current -2030

Efficient supply chain through collaboration

Commercialize products by estimating needs and

creating trends with big data

and AI

Mass customization (instant customization of mass production, optimal control of robots with AI)

Players with

manufacturing facilities

Players without

manufacturing facilities

Preventive maintenance /

insurance service using sensor data

around 2020

More efficient sales activities

using distribution data (POS,EDI data etc.)

Preventive maintenance /

insurance service using AI Optimization of

production by "visualization" and

"data use" at factories Component /

material provider

Manufacturer

IT service provider

Consumer

Distributor (Retail/Wholesale)

Monozukuri (manufacturing)

Venture

37

Provision of services utilizing big data on customers

Consumers to participate in production process

(prosumer)

METI

4. Changes in employment structures with the revolution

38 METI

METI

Progress of labor saving in non-routine tasks besides routine tasks with emergence of robots etc. It is highly probable that middle-skill white-collar jobs, a major portion of the workforce in Japan, will decrease significantly while such progress leads to filling the overall manpower shortage.

Changes in business processes in line with the Fourth Industrial Revolution will bring about new employment needs including middle-skill workers. Therefore it is necessary to develop human resources to respond to changes in the employment structure and to shift the labor force to growth areas.

39

＜Upstream jobs (management / planning / product planning / marketing, R&D)＞ • Increase of high-skilled jobs due to expansion of business / markets in various industries (Occupations such as) management / strategy staff, M&A staff, data scientist, product planner for mass business, marketer / R&D staff, IT engineer to allow R&D findings to materialize) • Also increase of middle-skilled jobs to help with high-skilled workers such as data scientist etc. *This varies

depending on how fast technological innovation progresses. (Occupations such as) operation staff to implement business creation process • Also increase of jobs for middle-skilled workers due to mass customization (Occupations such as) product planner / marketer who develop niche business, IT engineer to allow R&D findings to materialize ＜Manufacturing / Procurement＞ • Decrease in manufacturing jobs due to labor saving / unmanned factories with use of IoT and robots etc.

(Occupations such as) production line workers, product / delivery inspectors • Decrease in procurement jobs due to automated, efficient supply chain management utilizing IoT. (Occupations such as) corporate procurement employees, shipment/delivery employees

Change of jobs in line with the Fourth Industrial Revolution

Focal point of change in employment structure (1)

METI

METI 40

＜Sales＞ • Decrease low-value-added sales jobs due to efficient, automated functionality of new technologies such as

analyzing customer data and matching products /services with such data through AI and big data (Occupations such as) salespeople for low priced/regular insurance, cashiers for supermarkets • Increase in jobs for sales etc. of products/services which people buy chiefly for their safety (Occupations such as) salespeople for customized, high-value insurance, corporate salespeople with sophisticated consulting skills which will become a competitive advantage. ＜Services＞ • Decrease in jobs for simple, low-value-added services due to AI and robot replacement (jobs which robots can

handle through imitation because AI can easily complete tasks based on past data or where the nature of the job is repetitive)

(Occupations such as) waiter/waitress at normal restaurant, room clerk at low/middle grade hotel, call center staff, bank clerks, warehouse workers • Increase in jobs for high-value-added services for which direct human involvement enhances the quality/value

of the services (Occupations such as) staff at exclusive restaurants, caregivers for expensive nursing care services, artist ＜IT＞ • Increase of jobs for not only high-skilled work that produces new business but also middle-skilled work due to

mass customization (Occupations such as) manufacturing sector IoT business software developer, IT security staff

＜Back office＞ • Decrease back office jobs due to AI and global outsourcing substitutes (Occupations such as) accounting staff, human resources department payroll staff, data entry staff

Change of jobs in line with the Fourth Industrial Revolution

Focal point of shift in employment structure (2)

METI

METI 41

Envisioned reform of employment structure in line with the Fourth Industrial Revolution (illustrutive)

Losing markets with decrease of jobs and deteriorated quality

Optimal jobs in terms of quality and quantity with global market in possession

As-is scenario Target

(example) Management strategy prepared by global companies, Top-level data scientists and R&D staff etc.

Outflow overseas

(example) ・Planning of various business ・Support work to help with high-skilled data scientist etc. (coordinator to incorporate change of business process into operation) ・Planning/marketing for customized product/ service expected to dramatically increase in the future

(example)Human interaction ・High value added sales/service which can bring about enhanced quality/value of service through direct human involvement

Tendency of low wage/salary for many jobs

New employment

responding to needs

Significant decrease AI and robot etc. will replace

traditional jobs including workers at low value added

production line, salesperson, back office staff.

Jobs to create new business trend by developing AI and robot

Jobs to work together with AI and robot, etc.

Jobs independent from AI and robot, etc.

Jobs to be replaced by AI and robot, etc.

METI

Accumulate jobs internally and externally

METI

5. Projections involving industrial and employment

structures

42 METI

METI

Summary of Projections (towards 2030)

[Projected result]

Nominal GDP growth rate

As-is scenario

Wage increase rate

Status quo scenario Added value will flow overseas due to reliance on overseas platform providers by Japanese industries to provide

business. Inability to generate added value that can respond to societal challenges will bring about low added value and low

growth rate for domestic industries. Workforce concentrating into jobs with low added value and low growth rate that compete with industries of

machine/software will produce a society where low-wage workers are the standard.

Reform scenario

Reform scenario Ability to generate added value that can respond to social challenges will bring about acquisition of industries with high added

value and high growth rate on global basis. Enhanced productivity caused by developed services based on technological innovation and increased entry into labor market will

resolve issues of decreasing workforce. Workforce's shift to jobs which require solely human element in harmony with machine/software will let workers earn high

wages/salary.

Real GDP growth rate

※2015-2030(annual rate)

＋1.4％＋2.2％

＋3.5％＋3.7％

＋0.8％＋2.0％

846 trillion yen 624 trillion yen

592 trillion yen 547 trillion yen Nominal (2020)

(2030)

※This projection result requires continuous study in accordance with the reform’s ever-changing "vision."

Fourth Industrial Revolution-driven added value: 30 trillion yen

43 METI

GDP

METI 44

Projected result of industrial structure (GDP growth rate / number of workers / labor productivity)

Expected to grow in accordance with national economic growth

Expected to grow with efficient production of standardized products, and by deploying widely-used product development cycle

Expected to create new value, significantly increase added value and minimize decrease in workers by deploying customized services and shift to new service industry etc. Expected to increase added value by securing leading position in systemization/platforming of services using customer information

Expected to significantly increase added value and employment as core sector for the Fourth Industrial Revolution, driving economic growth

Expected to increase added value and employment by expanding local markets through identification of potential demand based on customer information

Expected to increase added value enhancing quality of entire system, efficiency of supply and entry into different areas by integrating other service industries

Optimal state envisioned with reform scenario

Expected to have suppressed increase in workers due to efficient provision of social security etc. with AI, robot etc.

※Comparison between 2015 and 2030

Sector

(1) Raw materials

(2) Process manufacturing (intermediate goods etc.)

(3) Customer response type manufacturing

(4) Service /technology provision

(5) Information service

(6) Hospitality service

(7) Infrastructure network

(8) Others

Number of workers ※ ( )denotes number of workers in 2015.

As-is Reform

Labor productivity (annual rate)

As-is Reform

Total

Agriculture/fishery, mining etc.

Automobiles, communication equipment, industrial

machinery etc.

Construction, wholesale, retail, finance etc.

Information service, service for businesses

Hotel, restaurant, entertainment etc.

Electricity, telegraph/telephone etc.

Medical/Nursing Care, governments, education etc.

Petroleum products, pig iron/crude steel, chemical fiber etc.

As-is Reform

Nominal GDP growth rate (annual rate)

※Each sector represents a category representing individual activities related to goods/services in accordance with industrial classification based on activities in the Input-Output Table. For example if company performs efficiently automobile manufacture by introducing IT, its activities are divided into automobile manufacture and information service, and each activity is respectively categorized into "customer response manufacturing" and "information service."

＋2.3%

＋2.9%

＋4.0%

＋2.0%

＋2.5%

＋2.1%

＋2.6%

＋4.7%

＋4.2%

＋5.2%

＋3.6%

＋3.8%

＋3.5%

＋4.0%

＋1.5% ＋2.9%

＋2.3% ＋3.6%

－0.81million －0.71million




－0.17million ＋0.72million


－0.53million

＋0.51million ＋0.28million


(2.78million)

(1.52million)

(7.75million)

(20.26million)

(3.88million)

(14.21million)

(63.34million)

－0.07million

＋4.5%

＋3.7%

＋3.8%

＋1.7% ＋3.0%

＋0.0%

－0.3%

＋1.9%

＋1.0%

＋2.3%

＋1.2%

＋1.6%

＋2.7%

＋1.9%

＋4.1%

＋3.4%

＋1.4% ＋3.5%

(6.41million)

(6.54million)

METI

METI 45 (Source) Compiled by METI based on "Collaborative research result on probability of computerization for occupations in Japan" by Nomura Research Institute and University of Oxford(Dr. Michael A. Osborne, Dr. Carl Benedikt Frey)

Changes in number of workers by occupation (increase rate)

Number of workers by occupation

As-is Reform Optimal state envisioned with

reform scenario

Expected to increase core manpower to engage in new businesses including planning of management/product, marketing, R&D

Number of workers by occupation (annual rate)

As-is Reform

Expected to be on the decrease regardless of success of reform due to replacement by AI and robot

Expected to be on the decrease regardless of success of reform due to streamlining/automation with AI and big data

Expected to increase jobs for sales etc. of products/services with sophisticated consulting needs as a competitive advantage.

Expected to increase jobs for high value added sales/services for which direct human involvement creates enhanced quality/value of services

Expected to be on the decrease due to streamlining / automation with AI and big data ※As-is scenario shows slight increase as it serves as a source of employment. Expected to increase jobs for IT as it meets needs from manufacturing as a whole which is pursuing IoT and improved security

Expected to be on the decrease regardless of success of reform due to replacement with AI and global outsourcing

※Comparison between 2015 and 2030

Occupation

Total

Expected to be on the decrease due to streamlining/automation with AI and big data

(3) Sales (low possibility of replacement)

(4) Sales (high possibility of replacement)

(5) Services (low possibility of replacement)

(6) Services (high possibility of replacement)

Salespeople for customized high-value insurance etc.

Salespeople for low priced/regular insurance, cashiers for

supermarket etc.

Staff at exclusive restaurants, caregivers at expensive nursing care service etc.

Staff with typical restaurant, call center staff etc.

(1) Upstream jobs

(2) Manufacturing/Procurement

(7) IT

(8) Back office

(ⅸ) Others

Management strategy staff, R&D staff etc.

Production line workers, corporate procurement staff

IoT business manufacturing software developer, IT security staff etc.

Accounting staff, personnel staff for salary management, data entry staff

Construction workers etc.

－2.2 %

－1.2 %

－1.2 %

－1.3 %

－0.1 %

＋0.1 %

－0.2 %

－0.8 %

＋1.2 %

－1.4 %

＋1.7 %

－1.4%

＋1.8 %

－0.3 %

＋2.1 %

－0.8 %






＋0.23million -0.51million

-0.03million ＋0.45million

-1.45million -1.43million

-0.82million -0.37million －1.1 % －0.5 %

－7.35million －1.61million －0.8 % －0.2 %

METI

METI 46

(Reference) Projection of industry and employment structures

This model shows the supply/demand adjustment state which represents short/medium-term change of GDP based on total demand including consumption and investment while long-term GDP is affected by potential GDP supply restrictions.

As-is scenario produces a low potential growth rate vector.

The reform scenario indicates upward potential growth due to the Fourth Industrial Revolution. Furthermore, consumption/investment expands with subsequent potential demand and projected increased economic growth rate.

(１) Macro-economic model

This model, based on trends in the past 20 years, projects the percentage of final demand by sectors in 2030, the interim investment structure and labor productivity.

Production value by sectors is projected by the following: final demand from macro-economic model analyzed by percentage of final demand by sectors and this calculated final demand is multiplied by inverse matrix coefficient derived from intermediate input structure.

Number of workers by sectors is projected with production value by sections divided by labor productivity.

(２) Industrial structure model

Number of workers by occupation is projected with number of workers by industry sectors multiplied by ratio of occupations to sectors.

Reform scenario surmises that increased occupations indicate jobs with low possibility of replacement by AI/robot and decreased occupations indicate jobs with high possibility of replacement based on collaborative research by Nomura Research Institute and University of Oxford.

(３) Employment structure model

Projections regarding macro-economic trends such as 2030 GDP, income level, production value by sectors, number of workers by sectors, number of workers by occupations, while considering dramatic improvement of productivity triggered by the Fourth Industrial Revolution, smooth transfer of economic resources to growth industries, shifting employment with business process changes, all of which are derived from a combination of (１) Macro-economic model,(２) Industrial structure model, (３) Employment structure model.

METI

METI 47

＜Main premises of projection＞

Size of workforce Figures until 2014 are derived from actual figures. Regarding figures after 2015, as-is scenario used a projection based on "Zero growth/status of participation," and the reform scenario used a projection based on "Economic revitalization/progress of labor participation“ using data derived from "Estimated labor supply/demand" (May 2014) by JILPT (hereinafter referred to as "estimated workforce") ※ Note: Number of workers in 2030 is affected by long-standing decrease of productive age population due to low birth rate/aging population.

Structural / frictional unemployment 2.8％ - used as assumption based on relationship of past unemployment and vacancy rate (job openings to potential number of employees)

Working hours Average working hours - calculated using "numbers of working hours by gender / age in 2014 "from " Basic Survey on Wage Structure" by Ministry of Health, Labor and Welfare and "numbers of workers by gender / age from "estimated workforce."

Fixed capital consumption rate / Capacity utilization index 8.6％ or less - used as assumption based on relationship of past capital investment and private corporate capital stock. For capacity utilization index, figures in 2014 were used as assumption.

Price increase rate With respect to the baseline price increase rate for, as-is scenario referred to “Projection on medium / long term economy / finance (January 21, 2016)" (hereinafter referred to as "medium/long term projection") by Cabinet Office, and reform scenario referred to the same with respect to price increase index for economic revitalization case. Figures in 2023 were used to assume figures after 2024.

Foreign exchange rate Figures till 2015 are derived from actual figures. Figures in 2015 used to assume figures after 2016.

Finance With respect to each item of national expenditure, general government fixed capital formation is expected to increase with domestic corporate goods price index in the "medium / long term projection" and other expenditures (excluding social security) increase with the consumer price index (virtually no change). Social security expenditure is expected to increase with nominal GDP growth and wage increase rates.

Consumption tax It is assumed that consumption tax will be raised to 10％ in 2017.

METI

METI

６．Japan’s detailed strategies

i. Environmental development for promoting data utilization

48

METI

(1)Development of data platforms and creation of a secondary market for data

Challenges • If data remains enclosed within each companies as it is now, data platforms, which is the basis of global data utilization, will

have to rely on foreign countries.

• On top of such development of data platforms, it is important to simultaneously promote data exchange based on the market’s mechanism by vitalizing negotiation-based transaction and create a market place where data can be openly traded with third parties, etc.

Basic Direction of Efforts

• Promote the development of global data platforms in areas where Japan’s strengths can be leveraged. Internationalize such efforts by creating successful cases as soon as possible.

• In the future, data producers and data users need to be matched up and a system (secondary market for data) where data flows and is mutually used and applied needs to be established. Rights, responsibilities, and transaction rules between the producers and users of data need to be clearly stipulated and discussions towards the development of technical aspects and actual systems for the development of a secondary market of data is to take place.

Short Term Efforts • Development of data platforms (Smart factories, industrial safety, automatic driving map, healthcare/medical, etc. ) • Improve environment for future platform development (Environment for verification, creation of rules and systems, promotion of

international standardization, etc.) • Confirm current contracts regarding data use and application. Create templates for contracts and model provisions. • Promote precedent cases working towards the creation of a secondary market for data. • Switch from the conventional face to face and written operation to promoting the use of IT as a rule.

49

METI 50

For manufacturing sites to connect with each other

between companies (large corporations and SMEs)

and organizations, it is important to carefully

determine how to collect what type of data for

collaboration↓ A public-private working group for related

companies was created (July 2015) and is

working on model cases, information sharing,

and standardization such as the IEC and ISO.

Clarification of competitive area and cooperative area ～e.g.(1) Cooperative area in the manufacturing scene

Data in Competitive

Area

[Cloud]

Data possible to be share

Data Cooperation

Data in the Production Scene

[Edge]

(1)Procurement

(2)Distribution

(3)Sales

Data Cooperation

Creation of Platform [Instruction by the Prime Minister based on the 5th Public-private

Dialogue]

•Create advanced systems to share and use data from the

manufacturing scene collected by sensors amongst factories and

companies at 50 locations throughout the nation by 2020.

•Collaborate with Germany, with which Japan shares a strong

manufacturing industry, in international standardization.

(*Attended by a broad range of manufacturing related companies)

○Control/network equipment manufacturers (Mitsubishi Electric, Hitachi, etc.)

○IT vendors (Fujitsu, NEC, etc.)

○Users (MHI, Toyota Motors, Nissan Motors, etc.)

○Others, trading companies, think tanks, etc.

METI

Clarification of competitive area and cooperative area—e.g.(2) Cooperative area in industrial safety. Efforts in industrial safety are similar amongst companies and have high potential of progress in data sharing as well as its

effectiveness. Start on the organization of data that can be shared as well as on the verification of the effectiveness of data sharing by

collaboration amongst companies in the same industrial complex. Reflect the results of the verification process in new regulation systems and promote continuous monitoring utilizing IoT etc.

Support insurance development and other efforts, too. ＜Examples of topics to be verified＞

・Alert “Anomaly” ・Long detection lead time → Large impact on production

Time flow

Normal Signs

Index for status management

Lower limit alarm

Upper limit alarm

・Alert “unusual situation” ・Shorten detection lead time → Minimal impact on production

Early detection

Past New

(2) Continuous monitoring of operation status (early detection of anomaly/signs)

(1) Parts management for common equipment (Packing & sealing for rotating machinery, etc.)

Companies

Certified Companies

Privileges in regulations depending on ability to

maintain safety. Certification Criteria (Additional) ・Utilization of IoT, Big Data, etc. ・High level risk assessment ・Evaluation of saftey capability by third party, etc.

＜Regulation system for high level Self-controlled Safety＞

Super Certified Companies

Certification Criteria ・Creation of an organization specializing on safety. ・Implementation of PDCA ・Ensure sufficient education and training etc.

• Allow use of new inspection methods

• Allow lower frequency of inspection to enable long term continuous operation

• Allow broader minor changes of facility by “filing a report” only, etc.

Organic collaboration of verification and regulations systems.

51 METI

METI

linkage

Base

Road surface information, traffic lane information, 3D structure information, etc.

Traffic regulation information, road construction work information, large area weather information

Accident information, traffic information, small-area weather information, etc.

ITS’s predictive information (vehicle information in the vicinity, pedestrian information, traffic light information.

《Dynamic Information(＜1sec) 》

《Quasi-dynamic Information(＜１min) 》

《Quasi-static Information＜１ｈour)》

《Static Information(＜１month)》

Autonomous driving related data

52

Clarification of competitive area and cooperative area ―e.g.(3) Cooperative area related to autonomous driving maps

Various autonomous driving related data exist

Of those data, economies of scale can be expected by inter-company collaboration in 3D map information etc.

In Europe, 3 German automobile manufacturers have jointly bought a map company.

Scope of Cooperative Area and area of competition needs to be determined.

[PM's statement at the 5th Public-

Private Dialogue] • Make autonomous driving maps ready

for practical use as early as 2018. • Gather automobile manufacturers and

map companies to create a cross-company unified specification and create a proposal for international standardization by the end of FY 2016.

METI

医療情報を預かり、適切な管理のもとで匿名加工等が可能な機関

収集機関

医療機関

医療機器メーカー

医育機関

製薬企業

健康関連企業

人工知能を適用した医療システム

開発

新技術、科学的発見

新薬/新技術開発の効率化

新サービス、商品の開発

離島・僻地診療所

病院

健康サービス提供者

診療所

行政

先制的な行政データに基づいた医療政策の決定

根拠に基づく最適な治療

臨床研究・疫学研究用データ

53

(Clarification of competitive Area and cooperative area ―e.g.(4) Cooperative area related to healthcare and medicine. Utilize the massive amount of treatment and examination data, etc. compiled

(to create big data) for drug development and R&D of treatment methods, etc.

(Source： Excerpts with partial changes to material from the Council for Next Generation Medical ICT Platforms.

[PM's statement at the 5th Public-Private Dialogue] In order to utilize data for new drug and treatment development, legislation to create an organization that engages in simple and easy collection of large amount of treatment/ examination data, anonymizes and safely manages the data is to be developed by the end of next year.

効果① 医療サービス、医療行政

効果② 新技術/臨床研究、疫学研究、人工知能等

効果③ 新産業/個人の為の健康サービス等

Collecting body

Medical institution

Medical device maker

Medical education

Pharma

Health-related companies

Island / rural clinic

Hospital

Health service providers

Clinics

Public administration Effect 1 Medical services and administration Effect 2 Clinical research, epidemiological research, AI, etc. Effect 3 New industry/health services for individuals etc.

Institutions that can properly manage and anonymize medical data

Clinical research, epidemio-

logical research

data

Determine health Policy on the basis of

pre-emptive administrative data

Optimal treatment based on evidence

Development of AI-applied

medical system

Scientific discovery of new technology

Efficient R&D for drug discovery

Development of new services and products

Solid line ≒ named data Dotted line ≒ anonymous data

METI 54

(Clarification of competitive area and Cooperative area ―i.e.(5) Cooperative area related to healthcare and medicine.

Promote the utilization of receipts, health check-ups, and healthcare related data, with the consent of the data source individual, by creating a “Healthcare Data Consortium”, capable of data analysis, from entities, mainly “health conscious” companies, that accumulate and utilize their employees’ and other data.

(Source: Reference material from Ministry of Economy, Trade, and Industry, Next-Generation Healthcare Industry Council, Health Investment Working Group (10th

meeting))

[PM's statement at the 5th Public-Private Dialogue] • Start verification project compiling

and analyzing receipt, health check-up, and healthcare data held by medical institutions, companies and insurers by the end of this FY.

• Start efforts that provide stronger incentives to medical insurers to contribute to prevention and health promotion, including the above effort.

Health

check-

up

健康

Verification image of utilizing medical receipt, health check-up and healthcare related data to prevent the aggravation of lifestyle related diseases

Make symptom transparent to

ensure continuous treatment

Alert if symptom worsens

Doctor/public health nurse

本人

Health

care

re

lated in

form

ation

Instruction on exercise

Health

leve

l

Recove

ry Healthcare related data (steps walked, pulse, temperature, weight,

blood pressure, sleep…)

Medical receipt data

Health check-up data

Company/insurer

Integrate

Examination data etc.

Health

check-

up

Medical institution

Health

care

re

lated in

form

ation

Health

care

re

lated in

form

ation

Health

care

re

lated in

form

ation

Feedback loop

Intervene at an appropriate timing

Must c

onsu

lt m

edic

al institu

tion

Worried about a symptom

METI

(2) Promotion of personal data utilization

55

Challenges • Clarification of rules on obtaining consent from the data source individual and on the anonymization

process is insufficient. Social recognition on the merits of personal data utilization is insufficient. • There are cases where useful data remain scattered, not compiled to a sufficient size. • There are cases where companies and administrative bodies possess large amounts of personal data

which are kept idle and remain both unutilized by themselves and not supplied to third parties.

Basic Direction of Efforts • Keeping in mind the balance with ensuring protection of privacy, accelerate clarification of rules on

obtaining consent from the data source individual and on the anonymization process, and publicize the rules.

• Develop an organization that engages in simple and easy collection of large amounts of treatment/ examination data, anonymizes and safely manages the data (by the end of next year).

• Look into creating an organization that records personal data with the involvement of the data source individual and compiles the data for uniform management in order to provide various companies with the data.

Short Term Efforts • International standardization of guideline to obtain consent from data source individuals. • Create guideline for anonymization process (To be developed by certified personal information protection

organizations of each industry) • Materialize the plan of creating a proxy organization that does not require consent of the data source

individual in the healthcare and medical field, etc. • Consider a framework of utilizing personal data with the involvement of the data source individual.

METI 56

(参考)英国の対応 The UK is running a public-private joint project “midata” since 2011, which is a

framework that enables consumers to freely access their own personal data obtained by private companies, also making it possible for the data to be provided to third party companies as needed.

(Reference) EU Data Protection Regulation Draft Article 18 (Rights to data portability) 2 The data subject holds the right to obtain those data he/she provided the controller in a structured and commonly used

electronic format, and also holds the right to transfer data from one electronic processing system to and into another, without being prevented from doing so by the controller.

(Reference)Efforts in the UK ～midata～

Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (7th meeting)

UK: How midata works

fields Electric power providers

Financial Institutions

(banks, credit cards, etc.)

Mobile Communications

carriers

(1) Request data disclosure (2) Obtain data real time (machine readable format)

(3) Provide data

Third part company (4) Data analysis

Individual

Participants: British government, consumer organizations, regulators (ICO, OfCom, OfGem), private companies (Google, British Gas, Lloyds TSB, 02, etc.) (5) Advice,

recommendations

METI

(3) Development of ecosystem that produces security technologies and human resource for security

Challenges • In order to strengthen cyber security, the government needs to take leadership and collaborate with

players from the industrial side to create an eco-system where an industry is created around security.

Basic Direction of Efforts • Develop an eco-system where actual incident management, analysis of new attack information, R&D

based on such information, and development of human resource based on such practice collaborate and look into creating a system where security countermeasure needs are created in the industrial side.

• Clarify standards related to security countermeasures and introduce a system of evaluation in by market. • Further, consider utilizing frameworks of regulation in fields where the maintenance of a certain

standard of service and security is needed according to industry law.

Short Term Efforts • Spread the Cyber Security Management Guideline. • Accelerate the development of technology and human resource that will lead to strengthening cyber

security countermeasures. • Strengthen security countermeasures at important infrastructure companies. • Strengthen recruitment of human resource for security (develop human resource for security through the

creation of national qualifications and other measures and promote the recruitment of qualified human resource)

57

METI

○Many incidents of leakage of important information have occurred by targeted cyber attacks to governmental organizations and companies.

○On top of information leakage, there is an increased risk of cyber attacks that result in physical damage targeting social infrastructures and IoT systems. With the 2020 Tokyo Olympics and Paralymic games ahead, the risk will grow further.

58

[ Cyber Attack to IoT System]

July 2015, a security researcher proved that Chrysler’s “Connected Car” system (a system which enables the driver to start the engine and understand the current position of the vehicle using GPS through a smartphone) had vulnerabilities through which it can be hacked.

Specifically, he pointed out that a third party could stop the engine or control the brakes by remote operation using a smartphone.

Chrysler recalled 1.4 million vehicles.

Source：Wired Magazine

17.2% 19.6%

0%

5%

10%

15%

20%

25%

2011年度 2012年度 2013年度

[Percentage of Targeted Attacks with Confirmed Information Leakage、 etc]

(Source)Drafted by the Ministry of Economy, Trade, and Industry based on the IPA “Information Security Incidents Damage Situation Survey” 2011, 2012, 2013.

23.8％

[Attacks to Public and Industrial Infrastructure Overseas]

Damage to blast furnace of a steel refinery (German, 2014) Fraudulent manipulation of control system was gained by

targeted attack. Resulted in damage of blast furnace.

Large scale blackout in Ukraine (2015) Fraudulent manipulation of control system was gained by targeted attack. Resulted in a large scale blackout effecting millions of homes in western Ukraine for 3 to 6 hours.

(Reference) Cyber attack update

Source: Ministry of Economy, Trade and Industry, Industrial Structure Council, New Industrial Structure Committee (7th meeting)

METI

(4) Intellectual property policies in the face of Forth Industrial Revolution

59

Challenges • A new system for intellectual property encompassing new informational assets such as creations using

artificial intelligence and databases compiled by sensors, etc. is needed.

Basic Direction of Efforts • Clarify how to handle creations using artificial intelligence etc. as intellectual property. • Prevent free rides on related technologies and databases. • Secure appropriate compensation when technology or data is shared with a third party. • In order to promote innovation by smooth utilization of data, develop a new system for existing

intellectual property, taking the balance of protection and utilization into consideration.

Short Term Efforts • Consider how future intellectual property protection should be established regarding new informational

assets such as creations using AI, databases, etc. as well as related technologies. • Develop plans to promote the collaborative utilization of intellectual property. • Develop a new copyright system (a rights limitation system with a certain level of flexibility, etc.)

METI 60

(Reference) Protection of database comparison of systems by nation

EU Japan USA

Creative

Protected by Copyright Law

Not Creative

Sui generis right(Special Right)

Content: Right to prohibit actions of extracting substantial parts of the database’s content or

the secondary use of the content.

(None) (None)

Japan, US, and the UK all protect databases with creativity by copyright laws.

On the other hand, there are no systems that grant rights to databases deemed not creative in Japan and the US, while the EU protects their right by granting a “special right”.

※Databases deemed not creative can be protected as “trade secret” if it is not made public. Certain protection may apply through conduct control by tort law, etc..

Source: Reference material for the Ministry of Economy, Trade Industrial Structure Council New Industrial Structure Committee (7th meeting), Mr. Miyake’s reference material at the Study Group on Cross-sectional Systems toward the Forth Industrial Revolution.

METI

(5)Modality of new rules of competition corresponding to Forth Industrial Revolution

61

Challenges • In order to develop a fair environment for competition and to promote innovation, parts of platformers

not encompassed by existing laws need to be enumerated and the need of new policies, including not only aspects pertaining to competition related policies, for new problems that arise where existing laws do not or may not effectively cover need to be evaluated.

• In the event that the Fair Trade Commission confirms incidents where fair competition is being inhibited or incidents against the Anti-monopoly law, quick and strict legal action must to be taken.

Basic Direction of Efforts

• Collaborate with related governmental agencies to understand the competitive environment in the digital market and scrutinize key issues and challenges.

• Clarify what cannot be encompassed by existing laws and consider how Japan should deal with parts not covered and consider the need of new methodologies in a broad range of existing systems.

• Streamline the environment for enforcing the Anti-monopoly act and the Fair Trade Commission will take quick and strict legal action if it confirms any violation.

Short Term Efforts • Reorganize ideas on how to correspond to platforms and consider what measures need to

be taken.

METI

(Reference) Statement of objection sent to Google (April 20th, 2016)

On April 20th, the European Commission sent a Statement of Objection to Google stating the company is forcing manufacturers of smart phones and other mobile devices to pre-install its application and set as default, leading to close off ways for other company’s applications from the market and stifling competition.

Concerns of the European Commission(Press Release)

Google requires to pre-install Google Search (search app), Google Chrome (browser) and other apps as default as a condition to license Google Play (Application Store) to Android devices.

→Points out the following three effects (1) Makes it difficult for Google’s competitors to have their search apps and browsers installed as default to smartphones and other mobile devices. (2) Lowers incentive for manufacturers of smartphones and other mobile devices to set search apps and browsers that compete with Google Search and Google Chrome as default. (3) Lowers incentive for consumers to download competing search apps and browsers. Android is an open-source system meaning that it can be freely used and modified.

However, Google, as a condition to pre-install Google Play and Google Search to a modified operating system (Android fork), requires a manufacturer to enter into an “Anti-Fragmentation Agreement” that commits to not to sell devices running on Android forks.

→Denies consumers’ access to innovative smart device services enabled by superior OS (Android fork)

Google grants significant financial incentives to manufacturers of smartphones, etc. on

condition that they exclusively pre-install Google Search as search apps on their devices.

Google’s Comment (Statement by Executive Vice President on same day)

Since its release in 2007, Android has served as the engine for both mobile software and hardware innovation, empowering many manufacturers of smartphones, etc. and has allowed developers of all sizes to reach consumers. As the result, users enjoy extraordinary choices of apps and devices at ever-lower prices.

Google takes the European Commission’s concerns seriously but also believes that its business model is giving consumers OS with unprecedented performance while keeping manufacturers’ costs low and flexibility high.

(Source)European Commission’s press release, Google’s blog

※Statement of Objection • Statement of Objection is one of the procedures preceding the European Commission’s decision on a cease and desist order or penalty, and

outlines objections raised against the party and its supporting evidence. • Companies receiving the statement have 12 weeks to present their argument in writing and to submit supporting evidence, and may also

request an oral hearing. • The sending of the statement of objection does not prejudge the final outcome of the investigation and European Commission will take decision

after receiving counterarguments from related parties. • There is no legal deadline for the Commission to make decisions. 62

METI

６. Japan’s specific strategy

ii. Fostering and securing human resources, improving flexibility in

employment systems

63

METI

[PM’s statement at the 26th Council for Industrial Competitiveness] • Make programming education a compulsory subject from elementary and secondary education. • Make full use of IT to assist in each student studying at their varying levels of proficiency.

64

(1)Development of an educational system encompassing new needs Challenges • With the introduction of artificial intelligence etc. to the workplace, skills required, job descriptions and businesses themselves

have greatly changed. In order to nurture capabilities to open doors to new generations and create new values, the existing educational system and learning system needs to further evolve.

Basic Direction of Efforts • Reform content and methodology of education through active collaboration with private entities and by effectively utilizing ICT,

such as making programming education a compulsory subject in elementary and secondary education. • Develop and recruit top class human resource that can lead global competition in the forth industrial revolution and create

new business trends through reform of higher education. • Convert content of higher education and continuous learning by workers to an educational content that matches the society’s

needs for the forth industrial revolution.

Short Term Efforts

• Make programming education a compulsory subject, evolving in tandem with children’s development, which will serve to nurture logical thinking abilities etc. in elementary and secondary education. Provide related assistance such as in the development of teaching materials and dispatching of human resource.

• Develop content and utilize human resource from the private sector through collaboration of the public education world and the industrial sector. • Strengthen learning by the individual’s proficiency level by utilizing IT (Verification of using adaptive learning, etc.) • Draft action plan based on the Government, University, Industry Research Roundtable on the Development of Human Resource in the Science and

Technological Area (surveys to understand actual conditions, matching science and technology related human resource with jobs etc. ) • Work on the details of creating higher education organizations offering practical vocational training. (IT data, tourism, design, etc.) • Create a “Forth Industrial Revolution Ministerial Meeting for Human Resource Development (tentative)” to discuss “industrial policies”, “employment

policies”, “education and human resource policies” all in one.

METI 65

Programming education around the world --A trend of becoming a compulsory subject In order to develop human resource that meet the needs of a forth industrial revolution,

countries around the world are making programming education a compulsory subject.

In Japan, programming is only included in junior high school industrial arts and homemaking class in its measurement and control unit, and as an elective in high school IT information courses.

UK Programming education is a compulsory subject for children

between age 5 and 16 as “computing class” since September 2014.

USA The “Every Student Succeeds Act”, including computer

science in its curriculum, was enacted on December 10th, 2015. Computer Science will now become a compulsory subject throughout the US in the future.

Finland Programming education has become a compulsory subject

for children between age 7 and 16 with its curriculum revision of 2016.

(Source)Department for Education Web (UK)

(Source)White House Web (USA)

Israel Programming education is a compulsory subject in high

school since 2000.

METI

“Comprehensive Human Resource Development Initiative Toward the Forth Industrial Revolution” ～Efforts at the Elementary/Secondary Education Stage～

66

Source：26th Council for Industrial Competitiveness Reference material submit by the Minister of Education, Culture, Sports, Science and Technology

“The Next Generation School” (A new education program will start from 2020)

Develop Information Utilization Skills Integral to the Next Generation

In order to open new horizons for the new generation, skills needed to utilize necessary information to create new values and skills to identify and solve problems utilizing ICT will be developed, according to the developmental stage of children.

ICT will be effectively leveraged in the process of identifying and solving problems, etc. for each and all subjects, in lines with the characteristic of the subject. Programming education will become a compulsory subject, according to the developmental stage of children. Opportunities to learn programming through experience will be secured in elementary school, programming education regarding contents will be included in junior high school, and information class will become an all-high school wide compulsory course.

Creation of a “Next Generation School”, Catering to the Needs of AL and Individual Learning

For the comprehensive development of basic knowledge and skills such as vocabulary and reading comprehension, as well as creative problem solving skills, teaching will be improved from a perspective of proactive deep learning through dialogues (active learning).

The disparity in academic abilities, stemming from gaps in vocabulary and reading comprehension skills which start from lower grades of elementary school will be resolved, and increased evolutionary learning and other measures will ensure children are taught according to the needs of the individual. Secure opportunities for children to learn and experience in a variety of fields in science, arts, and culture.

With the best mix of enhanced teaching by teachers in the classroom and capitalizing on the merits of diversity, each child will be taught carefully according to their individual understanding level and problem solving skills will be developed. Team schools and the “Headquarter for the collaboration of schools in the area” will be utilized to provide diverse learning and experience opportunities outside of the education program for children.

In order to develop capabilities and skills needed for the next generation and to create valuable learning achievements, informatization of schools centering on contents created by effectively mixing knowhow and human resource from the

private sector and the knowledge accumulated by teachers and schools is integral.

The public sector and private sector will collaborate to create an “education program with doors opened to society”

The Ministry of Education, Culture, Science and Technology, Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communication will collaborate to create a public-private consortium consisting of school officials, ICT related companies, and start-ups and will start working on the development and sharing of good educational contents and dispatch instructors to schools. Efforts to make schools ICT-ready to support leading edge education will be accelerated. An “Acceleration of Information of Education Plan” will be drawn up to promote the creation of environment for the informatization of schools centering on contents, and support industry-government-academia collaboration towards effective utilization of ICT according to the actual situations of ICT environment at each school.

*The Ministry of Economy, Trade, Industry will especially support in the promotion of contents development in collaboration with ICT companies and securing instructors. The Ministry of Internal Affairs and Communication will support from the aspects of utilization of the cloud, equipping with Wi-Fi, and nationwide road tours.

METI

(2)Recruiting global human resource

67

Challenges

•During a time of transition, shifting workforce to growth areas, human resource from overseas needs to be recruited in specialized and technical areas not only at the top level but for middle skill level as well.

Basic Direction of Efforts • In order to change “unclear job descriptions”, ”long work hours”, “compensation system that doesn’t

correlate with performance”, “little career paths at headquarters”, “Japanese language barrier” in Japanese corporations, a workstyle revolution will be promoted through the formation of pressure from the labor market as well as capital market.

• Create a better environment, such as cutting down on the time needed to apply for permanent residence.

Short Term Efforts • Create the “Japanese Version Green Card for Highly Skilled Human Resource from Overseas” which will

offer one of the world’s fastest application. (Shorten the required period of stay before applying for permanent residence for highly skilled human resource from overseas )

[PM’s statement at the 26th Council for Industrial Competitiveness] • Introduce the “Japanese Version Green Card for Highly Skilled Human Resource from Overseas” which

will have one of the shortest period of stay requirement before applying for permanent residence.

METI

International comparison of permission for permanent residence/green card • The UK and US clearly state categories for permanent residence application such as entrepreneurs, corporate

employers with a certain income or above for the UK and large scale investors, managers/board members of multinational companies, special skilled workers/knowledge workers for the US.

• Permission for permanent residence in Japan requires a longer period of stay to apply compared to the US, etc., and there is no clear statement of type of human resource, such as entrepreneurs, investors, researchers, etc., that the government is looking for.

Period of Stay Required for Application for

Permanent Residence Application by Mail

or Internet Employment by

Company Type of Permanent Resident Sought

by Government

Japan １０ years as a general rule 5 years exception: - “Contributors to Japan” - “Highly Skilled

Professionals”

Directly submit to Immigration Counter

Required (Incl. self-employment)

(1)Good behavior and conduct (2)Asset and skill to maintain a living (3)Matches the benefits of Japan (No criminal record, tax records, period of stay)

UK 5 years as a general rule - 3 years for some entrepreneurs

Internet from overseas, mail domestically

Depends on Category Not required for investors

Entrepreneurs/investors Corporate employers with a certain

income or above

US Green Card

No requirement Internet from overseas, mail domestically

Depends on Category Not required for investors

Investors Managers/board members of

multinational companies Special skilled workers/knowledge

workers

Korea 5 years as a general rule - Advanced Science & Technology Area PhD: 1 Year or longer BS: 3 Year or longer - Point System: 3 Years or longer

Not available for new applications, available for renewals.

Required Entrepreneurs/investors Researchers in advanced science

and technology Human resource in specialized

profession Expatriates of multinational

companies 68

METI 69

(3)Promotion of a diverse workforce

Challenges • In order to battle and succeed in fast-changing global competition, it is critical to make the most out of

diverse human resource, regardless of nationality, sex, and age, and optimize recruiting and placement.

Basic Direction of Efforts • Promote “Workstyle Revolution” by the formation of pressure from the labor market and capital market. • Similarly, utilize pressure from the labor and capital markets to create an employment environment where all can take part,

so that women and the elderly can take part in the workforce.

Short Term Efforts • Promote “Workstyle Revolution” • Create opportunities for dialogues between companies promoting diversity as a management goal and

the capital market (on the modality of human resource strategy, etc. )

METI

[International Comparison of percentage of women in managerial positions and board members] Japan Korea Singapore Germany UK

Total Population (2013, Unit: million) 12,741 4,926 541 8,272 6,313

Foreigner population (Ratio) (Unit: million, US 2011, Japan 2014, Others 2012)

212(1.7％) 149(3.0％) 149(28.1％) 721(9.0％) 479(7.5％)

Working foreigners (Ratio) (Unit: million)

79(1.2％) 2014

76(2.9％) 2013

124(37.0％)

2012

245(6.1％) 2014

264(8.8％) 2013

11.2

2.1

42.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Managerial Position Board MemberWorkers in general

[International Comparison of Foreigner Population and Number of Working Foreigners

70

(Reference) Diversity in Japan (women/foreigners) Compared to the percentage of women in the workforce, the percentage of women in managerial

positions is, in an international comparison, low.

Both the percentage of total population for the number of foreigners and working foreigners are low. Diversity of nationality at the top level of companies is also low.

METI

(4) Improve flexibility of the labor market and employment system

Challenges • Japan continues to have a membership style (workers ascribe themselves to companies and the

companies invest in human resource) employment system. • Need to transform into an employment framework which can smoothly react to global and speedy

changes in business.

Basic Direction of Efforts • Consider plans to improve mobility in the labor market by providing assistance to shift workforce with

small risk. Further, there is a need to develop a system to promote reorganization of companies and industries as well as promote active regeneration of businesses.

• Change to a labor law system that stands on the precondition that evaluation and management will be based on the individual’s performance.

• Look into changing the social security system based on the majority of population being employed by a single company for a long term.

Short Term Efforts • Add the “improve productivity” and “enhance competitiveness” point of views to “equal pay for equal work” • Create a “Forth Industrial Revolution Ministerial Meeting for Human Resource Development (tentative)” to

discuss “industrial policies”, “employment policies”, “education and human resource policies” all in one. 71

METI 72

(Reference) Improvement of workforce mobility

The largest inhibitor of changing domains that make up a business portfolio or pulling out of a business domain is said to be the “disposition of employees”

As it is crucial to shift the workforce to growing industries and businesses, improvement of mobility within the labor market through assistance for shifting the workforce with small risk as well as developing a system to promote active regeneration of businesses may be needed. [Top Inhibitor of Closure of Business Domain] n=4,377

(出所)ＲＩＥＴＩ森川副所長レポート『日本企業の構造変化：経営戦略・内部組織・企業行動』

Number of Times Percentage

Difficulty in the disposition of employees in the domain 1,379 31.5% Relationship with supplier and customer 765 17.5% Fear of damaging corporate image 700 16.0% Historical and personnel related background of domain

590 13.5%

Cost of pulling out of business 476 10.9% Competitors continue the business 33 0.8% Legal and other institutional background 6 0.1%

Others 428 9.8%

380

274

150

53 38

0

50

100

150

200

250

300

350

400

[HR & Labor Related Concerns for M&As n=895]

(Source) General Research and Study 2013, “Research and study on creating fair fules in the M&A market” (Study on the relationship etc. between listed companies and their shareholders)

Unifying working

conditions

Difficult to reduce

number of employees

Losing talented human

resource

Difficult to agree with labor union

Other


METI

(Reference) To a mutually independent partnership between “company” and “individual” (1) Crowdsourcing as the initial stage Croudsourcing, an online system to match up outsourcing contracts, is starting to gain grounds in Japan.

Currently, work such as system development, web page production, and writing are the main types of work handled. However, the types and amount of work may grow and the quality may become more sophisticated in the future.

73

Upwork ・Largest crowdsourcing company in the US. Covers skilled work such as programming, writing, translation, and designing to simple work such as clerical paperwork, bringing together a diverse crowd of workers from around the world. (Registered users: 9.3 million)

・The individual freelancer’s track record and evaluation is transparent through ratings by clients.

(Reference) Upwork website

InnoCentive ・Crowdsourcing company created in the US to solve scientific problems in research and development. Sophisticated topics such as starting a business, chemistry, computer science, engineering, food/agriculture, life science, math/statistics, physics are handled.

・Used by large companies and the government, etc. As the topics handled are more sophisticated than conventional crowdsourcing, the time frame per contract is long (1 to 2 months) and the compensation is high (USD 2,000 to millions)

(Reference) InnoCentive website

Efforts in Japan (Lancers, Crowd Works)

(Reference) Crowdsourcicng Association website

Created a business matching mainly IT related contract work for clients, including large companies, with individual workers. A track record of number of orders and evaluations by clients determine the workers’ market value, creating a clearer correlation between the individual’s “track record and skill” and “compensation table” than the real world.

Efforts in the US

※Registered users: Lancers- over 700,000 (undisclosed/estimate), Crowd Works – 8 million (as of December 2015)

METI

(Reference) To a mutually independent partnership between “company” and “individual” (2) Diverse workstyle as a transition

In order for the individual to be able to attain their individual workstyle of preference, a diverse forms of workstyle such as double work, human resource loans, regular employee dispatch, etc. have started.

74

en Factory: Active Support of Double Work

Panasonic: Regular Employee Dispatch

Highlights “No Mono-work” in its human resource policy and actively encourages engaging in a business besides one’s main occupation. En Factory calls this “parallel work” and approximately half of its employees actually “parallel work”.

In a bi-annual internal study group, parallel workers report their achievements to all employees.

Examples of “Parallel Work” At en Factory: Service Supervision / Parallel work: BCP Consultant At en Factory: SE / Parallel work: Regional vitalization coordinator

(Reference)en Factory website Survey on Efforts Related to Side Businesses and Double work 2014 (Small and Medium Enterprise Agency)

Rolled out a regular employee dispatch operation for highly skilled engineers who wish to develop their career as a specialist and not as management.

Engineers enrolled in this system will have the opportunity to continuously be involved with high level projects, thus keep up or improve his/her skill level and market value.

(Reference) Panasonic website

METI 75

６．Japan’s specific strategy

iii. Accelerating innovation and technology development

(“Society 5.0”)

METI

(1)Development of an open innovation system

76

Challenges • R&D at companies, universities and R&D entities close doors from each other leading to insufficient inter-organizational

mobility in funding, human resource, technology and data amongst them. • We have yet to see Japanese start-ups that have the capability to compete on a global scale and Japan remains left out

from global networks of entrepreneurs and their supporters.

Basic Direction of Efforts • Regarding academic-industrial collaboration, triple the size of investment to universities and R&D entities in the next

ten years. • Strengthen support systems to connect start-ups from the local market to the global market. Become a hub of the

global network of entrepreneurs and their supporters. Strengthen strategic collaboration between large corporations and start-ups.

Short Term Efforts • Strengthen efforts for the promotion of serious academic-industrial collaboration in research (develop an academic-

industrial collaboration system involving the entire organization at universities. Strengthen intellectual property management, etc.).

• Provide support and create environment for the promotion of open innovation between large corporations and start-ups. (support research & development, create templates for contracts, etc.)

• Create environment to promote active investment to mid to long term innovative R&D at companies that lead to innovation. • Create a governmental organization consortium to carry out all policies related to start-ups that connect local areas in

Japan with the world. • Strengthen functions to provide financing to start-ups (vitalize corporate venture capitals, etc.)

[PM's statement at the 5th Public-Private Dialogue] • Strengthen the academic-industrial collaboration system and target tripling corporate investment into

universities and re R&D entities within the next ten years.

METI 77

(Reference)Japan’s current innovation eco-system (1/3) (technology) Half of all companies see no progress in open innovation compared to 10 years ago.

Of all technologies, 61% are developed by a single company and 64% remain idle without being commercialized which indicates that open innovation, both spin-ins and spin-outs, have not progressed. Especially, collaboration with start-ups are especially slow to progress for both spin-ins and spin-outs.

More active

＜Has open innovation become more active

compared to 10 years ago?＞

(Source) Industrial Structure Council, 3rd Small Committee on R&D and Innovation

(n=111)

(％) Independently 61.4 Group company 8.4 Domestic competitor (horizontal cooperation) 2.7

Domestic company in the value chain (vertical cooperation)

5.6

Other domestic company (collaboration with different industry)

3.9

Domestic University 8.6 Domestic public organization 3.1 Domestic start-up 0.9 Overseas University 1.2 Overseas public organization 0.3 Overseas company (excluding start-ups) 1.5

Overseas start-ups 0.4 Commissioned from other companies, etc. 2.1

＜Percentage of independent development and collaborative development with external organizations＞

Spin In

(％) Keep idle 63

Commercialize at a group company 10

Try to utilize at a different company 6

Spin-off of employees/organization

(start-up) 2

Continue discussions behind the scene 20

＜Disposition of technology/ideas not commercialized＞ Spin Out

(n=97)

(n=97)

More active No change Less active

More active 47%

No change 50%

Less active 3%

METI

(Reference)Japan’s Current Innovation Eco-system (2/3) (Human Resource) Extremely low mobility amongst human resource in research, and more dynamic

interchange of talent across organizational borders is needed.

78

*For movement between domestic organizations, the figure represents the number of “researchers that have joined from external organizations”. *Source for the number of researchers at domestic universities, incoming and outgoing researchers (mid-long term) is the Ministry of Education, Culture, Science and Technology “General conditions of international research and development”.

■Mobility of human resource in research by organization type as of 2013.

Approx. 200 Human resource in research

Approx. 666,000

Companies Universities

Human resource in research Approx. 389,000

Approx. 1,200

Public research Organizations, etc.

Human resource in Research Approx. 86,000

Approx. 500

Approx. 7,400

Overseas

Approx. 15,200 Approx. 5,200


METI 79

“Organization” to “organization” academic and industrial collaboration is slow to evolve, as seen in the fact that when compared to overseas, the rate of funding provided to researches at Universities from companies is low and that the average budget per research is low, etc.

■Percentage of total research budgets of companies contributed as research funds of

Universities.

Nation 2008(％) 2012(％)

Japan 0.44 0.46

US 1.06 0.91

Germany 3.65 3.65

UK 1.96 1.71

Korea 1.78 1.34

China 3.99 3.32 Source：Drafted by the Ministry of Economy, Trade and Industry based on the

OECD「Research and Development Statistics」

■Joint research budget per research at Japanese and other Universities.

Less than 1 million yen

39%

1 to 3 million yen

43%

3 to 5 million yen

9%

5 to 10 million yen

%

Above 10 million yen

4%

(Reference) Japan’s current innovation eco-system (3) (Funding)


The average budget is approx. 2 million yen at Japanese Universities

10 million yen per research is the prevalent budget size at Universities overseas.

METI

(2)Creation of world’s leading innovation centers, development of national projects, acceleration of implementation to real life (Artificial intelligence, etc.)

80

Challenges • Japan has been left out of the global innovation network in all aspects such as human resource, technology, and funding. • In order to create innovations that can lead the forth industrial revolution, a new large scale national project is needed, something similar to

efforts on artificial intelligence in the US and Europe. • Japan lacks sufficient environment, systems, locations where top global researchers can freely engage in leading edge research encompassing

all the way to implementation in real society.

Basic Direction of Efforts • Strengthen technology intelligence across government related organizations. Take global trends into consideration and draft and

implement a technology strategy in important fields (integrated research of artificial intelligence, which is a generic technology, and robotics, bio, energy/environmental technologies, etc.).

• Attract top class human resource from around the world and develop five universities and R&D entities into leading edge strategic research centers.

• Strengthen functions of universities and R&D entities, collaborate with Innovation Network Japan, and strategically implement achievements to real society.

Short Term Efforts • Create “Strategic Conference for Artificial Intelligence Technology” through the collaboration of public research organizations which will serve

as the commander in the promotion of artificial intelligence R&D. Draft a technical roadmap for R&D goals and its commercialization (by the end of this fiscal year). Work on launching an AI national project that can lead the world.

• Take a unified approach for the promotion of technology development utilizing deep learning and introduction to the working scene and its verification. Accelerate innovation and implementation to real society.

• Attract top class human resource in a variety of fields and organize the environment (compensation rules, regulation systems, etc.) to develop a global open innovation center to promote open innovation.

• For national projects in general, take global trends into consideration, and drastically cut down on the number of project in order to select and concentrate.

• Further strengthen the function of implementing R &D achievements to real society at universities and R&D entities. (Fraunhofer Model)

[PM's statement at the fifth meeting of the Public-Private Dialogue] • Create at least five academic-industrial cooperation strategic research centers with the world’s top class professors and

research facilities for companies by the end of the next fiscal year.

METI

(Reference) Isolation from global networks (1/3)(technology)

The number of international joint authorships of papers have greatly increased around the world between 2003 and 2013. While joint authorships between European nations and the US have increased, the increase for Japan is relatively small.

Source: Central Education Council, Excerpt from Summary of Deliberations “Graduate School Education Reform Playing a Leading Role into the Future” 81

*Size of the circle of each nation represent the number of scientific articles (articles carried in academic journals and articles included in proceedings at international conferences) *The lines connecting nations represent the number of international joint authorship articles, and larger the number the thicker the line.

Source: Drafted by the National Institute of Science and Technology Policy based on “Scopus” by Elsevier

Turkey

Iran

South Korea

Poland Sweden Belgium

Switzerland

Italy

Spain

Canada

Australia

Brazil

Taiwan

Germany

India

China

Russia Netherlands

Japan

UK

France

US

Turkey

South Korea

Poland Sweden Belgium

Switzerland

Italy

Spain

Canada

Australia

Brazil

Taiwan

Germany

India

China

Russia Netherlands

Japan

UK

France

US

Iran

METI

(Reference) Isolation from global networks (2/3)(Human resources)

Looking at the movement of researchers worldwide, the US is at the core of international research networks. On the other hand, Japan is left out of international research networks.

Source: Central Education Council, Excerpt from Summary of Deliberations “Graduate School Education Reform Playing a Leading Role into the Future” 82

*The thickness of the arrows are based on the number of researchers moving between the two nations (1996 to 2011). Source of the number of moving researchers is the “Number of researchers” in OECD reference material “International flows of scientific authors, 1996-2011”. *Data represented in this chart is only for the two nations between which over a total of 2,000 researchers moved during the designated time.

Source: Drafted by the Ministry of Education Culture, Science, and Technology based on OECD’s “Science, Technology and Industry Scoreboard 2013”

or more

METI 83

(Reference) Isolation from global networks (3/3)(Funding) Although funds from overseas are increasingly making up a larger percentage of total research funds

used in Japan, the percentage continues to be much lower than that of other major nations.

(Source)Ministry of Internal Affairs and Communications 2013 Science Technology Research Survey Research funds・・・ Personnel expenses, raw material, purchase of tangible fixed assets, lease obligation, etc.

<Breakdown of research funds used in Japan and the percentage of research funds coming from overseas>

-- : Companies -- : Universities -- : Public organizations

Amount of research fund (m

illion yen)

Percentage of overseas funding in major nations’ research funds

(data from 2012) Percentage of research fund from

overseas (%)

UK China France Germany US Japan

Source: Ministry of Education, Culture, Science, and Technology, Science and Technology Policy Bureau, Science Technology Catalog 2014

METI

Develop a system for research on artificial intelligence Create the “Conference for Artificial Intelligence Strategy” under the direction of the PM. Starting this fiscal year, this conference

will be the commander in facilitating collaboration in AI technology R&D amongst the Ministry of Internal Affairs and Communications, Ministry of Education, Culture, Sports, Science and Technology and Ministry of Economy, Trade and Industry.

Draft a roadmap for R&D goals and its commercialization (by the end of this fiscal year)

Conference for Research Collaboration (Director’s Meeting)

○Overall coordination of research (approve on detailed theme for collaborative research)

Government/companies, etc. in the Field of Exit

Deploy Achievements

Conference for Artificial Intelligence Strategy ○Commander of the 3 Ministry collaboration for

artificial intelligence R&D and innovation policies (Chairman, advisor (CSTI), industrial sector, academia, executives in supervisory

roles from 5 companies, bureau directors from 3 Ministries) (Secretariat to be co-hosted by the 3 Ministries)

Conference for Industrial Collaboration ○Overall coordination on the collaboration of R&D and

industries (human resource development, standardization, road maps, technology, intellectual property trend analysis, regulation reform analysis, etc.)

National Institute of Information and Communications Technology(MIC)

Director of CiNet Center: Toshio Yanagida

RIKEN AIP Center

(MEXT) Director: Masashi Sugiyama

National Institute of Advanced Industrial Science

and Technology AI Research Center

(METI) Director: Junichi Tsujii

Collaboration

84

Task Force ○Work on the actual promotion of tasks by setting task forces

by issue, for example, on the drafting of a road map.

[PM's statement at the 5th Public-Private Dialogue] • Integrate industry-government-academia and create the “Conference for Artificial Intelligence Strategy” which will preside over

related government agencies. Draft a roadmap for R&D goals and its commercialization (by the end of this fiscal year)

METI

Artificial intelligence and deep learning

85

Behavior prediction Abnormality detection

Robust autonomous behavior in the face of change of environment

Environment recognition and behavior according to context Technology to “touch softly”

Comprehension of language

Large scale comprehension of knowledge

(1) (2) (4) (3) (5) (6)

Diagnostic imaging Advertisements

Crime prevention & surveillance Security Marketing

Automatic operation logistics Automation of agriculture Optimization of production equipment

Home choirs, nursing care Understanding others Substitute emotional labor

2015 2020 2025 USA & Canada take the lead

2030

Improvement of image recognition accuracy

Image Recognition

Multi-modal Recognition

Behavior Interaction Symbol Grounding Knowledge Acquisition

2006

Deep learning and its impact on industries Education Secretary Assistance to white collar jobs

Translation EC for foreign countries

Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (2nd meeting) Presentation material by Associate Professor Yutaka Matsuo

METI 86

Next generation R&D for artificial intelligence-direction of R&D and sample projects- AI is a technology that can be integrated with a variety of fields. Taking into consideration the strengths of Japan, below are the

main fields with which integration should be promoted. --Manufacturing: Integrate with Japan’s strong manufacturing capabilities, the world’s top class industrial robots and automobiles to create an unmatched manufacturing industry.

--Human Life: Integrate with Japan’s high quality service industry, medical/nursing care service, logistics, etc. to provide a rich prosperous lifestyle.

--Science / Engineering: Integrate with the world’s top class fundamental science to promote the development of science and technology.

Indicate the direction to which R&D is to evolve, attract leading edge technology and human resource from overseas research organizations and universities, and engage in R&D with both public and private sectors, who will become users, taking part. Further, align R&D achievements with challenges and data at the exit, and provide total support using tools to implement achievements to real life, such as human resource development, standardization strategies, etc. so that all efforts will find a way out.

Human Life (AI × IoT)

Science/Engineering (AI × Big Data)

Manufacturing (AI × Robotics)

ex) In life science, clinical medicine, material science and engineering, etc., new hypothesis and theories etc. will be automatically generated based on a variety of experimental data, leading to the acceleration of fundamental research.

ex) Support to various industries through consumer behavior analysis will bring various added values to services, leading to the improvement of life satisfaction.

ex)Improve productivity in manufacturing through work assistance for small quantity large variety production using teachingless industrial robots, failure prediction during assembly work, etc.

Future Image to be Accomplished by Projects (examples) AI for

Planning to look into flagship projects integrating multiple fields (Ex. :Fundamental technologies for ultra high speed development of advanced materials project)

METI

(3) Strategically promoting the management of intellectual property and international standardization

87

Challenges • Lack system to propose high quality international standardization as an “all Japan” effort after confirming areas of

competition and collaboration. • Human resource that can strategically secure international standardization and work on intellectual property management

while connecting them to management strategies and collaboration with R&D efforts eyeing international standardization are needed.

Basic Direction of Efforts • The government will provide one-stop support from intellectual management, development of human resource that can

work on international standardization, formulation of standardization strategies at companies, to the creation, proposal, and negotiation of international standardization drafts.

• In government lead R&D initiatives, make up projects that eye strategic acquisition of rights and international standardization from the beginning.

Short Term Efforts • Reinforce international standardization activities by the National Research and Development Agency (involvement through

project management, etc.). • Increase standardization education at universities, etc. (in both humanities and science courses) and newly create a

qualification system related to standardization. • In order to incorporate standardization as part of business and management strategies at companies, promote the creation

of Chief Standardization Officer positions. • Support of global business development through creating a leading patent review system etc. • Take a comprehensive look at the modality of industrial property rights taking into consideration changes in industrial

structure and subsequent changes in corporate patent strategies.

METI

Type of Standardization Combination of Standard and Patent(Typical patterns)

Case Study *Excerpts from ”Analysis of Strategic Cases Related to Intellectual Property and

Standardization (2014 edition)” (Ministry of Economy, Trade, and Industry)

(1) Standardization of

Product Specification

Standardize including company’s patent.

Blue-ray Disc 〔Panasonic/SONY, etc.〕

・Internationally standardized the specifications for Blue-ray Discs ・Patents needed to conform with the standard is licensed for low cost to all parties without discrimination.


Interface Specification

Standardized peripheral interface to company’s patent

QR Code 〔Denso〕

・Standardized the basic specification of QR codes and provided it at no cost. ・Reading technology for QR codes remains in a black box and reading devices and software are sold for profit. ⇒Attained top share in Japan as reading device manufacturer.


Performance Criteria /Evaluation Method

Standardized the evaluation method of product including company’s patent.

Crystal Device 〔Quartz Crystal Industry Association of Japan〕

・The industry as a whole created an IEC quality evaluation standard for crystal devices. ・Manufacturing technologies remained a black box thus competitiveness maintained.

Standard

Patents

Patents etc.

Standard

Standard Evaluation

QR Code was standardized

and made available at no

cost

Secure profit by reading

device

License

(Reference) Types of international standardization and case studies

88

Created a grade for high quality crystals that only Japanese companies can produce.


Patents etc.

METI

Market Strategy Board ・Project Team “”The future of factories” Standardization Management Board

・8th Strategic Group “Forth industrial revolution/smart manufacturing” ・Technical Committees(*) Ex. 65th Technical Committee Industrial Process Measurement and Control Devices

Chair：Tyco Chair：Rockwell Automation

Siemens

Chair： Deutsche Telekom

Technical Management Board ・Strategic Advisory Group “Forth industrial revolution” ・Technical Committees(*) Ex. 184th Technical Committee ”Automation system & integration”

* Committee to draw up international standards of technical elements

Chair： Siemens

(Source) Reference material by Yasuyuki Nishioka, Professor at Hosei University

Chair： Schneider Electric

President: Junji Nomura

President: Zhang Xiaogang

(Reference) US and Europe take the lead in international standardization

89 METI

http://www.iec.ch/index.htm

METI 90

６．Japan’s specific strategy ⅳ. Fortifying financial functions

METI

(1)Fortifying equity finance toward the supply of risk money

91

Challenges

• In order to vitalize innovation at start-ups and elsewhere, equity finance functions by private equity (PE funds) and venture capitals (VC) etc. need to be strengthened to supply more risk money to support bold decision making of corporate management.

• Given the current background where large Western corporations are using their huge financial powers to buy out technology start-ups, a strategic approach involving both public and private entities is needed.

Basic Direction of Efforts • Stronger equity financing capabilities by diverse financial entities, namely corporate venture

capitals (CVC), is needed. • Upon verification of achievements by public-private funds etc., consider further strengthening

their function.

Short Term Efforts • Create systems to increase financing to venture capitals, etc. from companies, institutional investors, etc.

and grow the venture capital industry. • Consider strengthening support functions such as political investment by public-private funds that will

support side by side.

METI 92

(Reference) Capturing financing for growth from the global capital market

(Reference) Drafted by the Ministry of Economy, Trade, Industry based on Google Finance (November 23rd, 2015 closing price)(Reference material for 3rd Secretariat Meeting)

Companies that have created strong expectations for growth of business through a virtuous cycle of data utilization have captured high levels of financing from the global capital market which lead to their speedy growth investment such as M&As.

Aggregated market value

(billion dollars)

Net profit

Aggregated market value = net profit x 10

METI

(Reference)Capital strength is the key to M&A investment to technology start-ups

Source: Analysis by Ministry of Economy, Trade and Industry based on SPEEDA

R&D key to the forth industrial revolution requires a larger scale investment than conventional investments for internet start-ups (on top of human resource investment to programmers, etc., investment for facilities and machinery is needed).

IT companies like Google and Apple utilize their huge M&A resources ,earned from their main business, for active M&As of technology startups. This size of M&A resource plays a large part in competitiveness.

*M&S Resources: Operating cash flow less investment in tangible fixed assets such as capital investment, etc.

93

54

25

13

3.8

4.2

1.0

0.3

14

Apple

Microsoft

Alphabet(Google)

Amazon.com

Facebook

製造業(平均)

非製造・非金融業(平均)

参考）トヨタ自動車

Comparison of “M&A Resources*”(billion dollars; average for 2013-2015)

5 Companies spent

approx.11trillion yen a year(Approx.

99 billion n USD)as investment resource

GAFA +M

Top 135 TSE 1st Section companies

spent approx. 10trillion yen a year(Approx. 91

billion USD)as investment resource

>

Labor Intensive

Knowledge Intensive

Internet Start-ups

Technology Start-ups

AI, Bio, Material, Robotics, etc.

High

Low

Money

(Degree of Capital

Intensiveness)

Size of investment needed grows

** Companies listed in the 1st section of the TSE that have over 10 billion USD average sales in the last three years. (73 manufacturers, 62 non-manufacturing/non-finance companies)

Manufacturer (average) Top Companies Listed in the 1st section

of the TSE**

Non-manufacturing/ non-finance (average)

Reference) Toyota

METI

(Reference)Creation of Innovation Through Growth Investment

In the last two years, Google has bought over 10 start-ups that develop and sell artificial intelligence and robotics related technology.

Likewise, Western companies with huge funds engage in one after another growth investment (M&A, capital investment, R&D, etc.) to acquire technology and leading edge human resource, etc. for the creation of innovation.

94

…

Name of Company Main Product Date of MBO Overview SCHAFT (Japan) Humanoid robots December 2013 First start-up at Tokyo University. Won first place prize at the DARPA

Robotics Challenge in 2013. Industrial Perception Robot arms December 2013 Industrial robot (for logistics, automatic unloading machine for trucks, etc.).

A spin-off from Willow Garage, famous for its OS for robots Meka Robotics(US) Robotics December 2013 A spin-off start-up from the MIT Computer Science and Artificial Intelligence

Laboratory. Bipedal robots, etc.

Holomni (US) Robotics December 2013 Development of robotic vehicles capable of moving in various directions.

Bot & Dolly (US) Robot shaped camera December 2013 Advanced video filming device utilizing robot arms. Works together with

projection mapping. Boston Dynamics(US) Robotics December 2013 Spin-off from MIT. Creates humanoid and animal shaped robots.

Nest (US) Home automation January 2014 Manufactures thermostats and fire alarms. Functions as the hub for smart-homes. CEO is Tony Fadell, first developer of iPod.

DeepMind Technologies (UK) Artificial intelligence January 2014 Developed artificial intelligence that can learn how to play various video

games through reinforcement learning.

Jetpac (US) Artificial intelligence August 2014 Travel guide application applying big data analysis, image processing and

machine learning.

Vision Factory (UK) Artificial intelligence October 2014 Image recognition system using deep learning.

Revolv (US) Home automation October 2014 Manufactures hardware used as a hub for Connected Homes (links devices in a household)

Timeful (US) Artificial intelligence May 2015 Utilizes machine learning to propose optimized behavior to users to deepen

learning experiences.

Source: CrunchBase

[Companies Google has Acquired]

METI 95

我が国の資金供給構造 Indirect investment prevails in Japan and financial entities taking business risks do not play a large role.

On top of increasing the sizes of PEs and VCs, there may be needs for banks to supply risk money or for complementation by government policy financing.

(Source) Banks/Credit unions/Government affiliated financial institutions: Bank of Japan “Loans and Bills Discounted by Sector” 2014 Corporate bonds/Equity: Japan Securities Dealers Association “FACT BOOK 2015” PE: “Japan Buyout Market Review--First Half 2015” Public-Private Investment Fund: "Verification Report on the Guideline for Public-private Investment Fund Operations” VC: Venture Enterprise Center “Venture Whitepaper 2015”

Direct Financing Indirect Financing

Note: Banks/Credit unions/Government affiliated financial institutions: New loans as funding for equipment, less loans to local public bodies and individuals as well as international yen loans Corporate Bonds: Amount raised at listed companies. Equity: Amount raised at listed and newly listed companies PE: Total amount for Buyouts and PIPEs Public-private fund: Actual investment amount for 2014

Corporate Bonds 8.6 Trillion Yen

ＰＥ

656.9 Billion Yen

ＶＣ 1,17.1

Billion Yen

Banks 23.7 Trillion Yen

Equity 2.0 Trillion Yen

Business Investment (Risk Money)

Government Affiliated Financial

Institutions 3.0 Trillion Yen

Public-Private

Investment Funds 185.0 Billion Yen

Credit Unions 3.9 Trillion Yen

(Reference)Size of Suppliers of Capital (Flow)

METI 96

(Reference)Exit strategies for start-ups(Japan/US)

(Source) Drafted by the Ministry of Economy, Trade and Industry based on the Venture Enterprise Center’s “Venture Whitepaper 2015” (Note) For IPOs and M&As in Japan, when multiple VCs invest in the same company, each investment received count as an exit.

Comparing exit strategies for start-ups, Japanese start-ups have a higher ratio of IPO and lower ratio of M&A compared to the US

M&A IPO

Change in breakdown of method of exit of companies receiving VC investment in Japan (data for IPO & M&A only)

Change in breakdown of method of exit of companies receiving VC investment in the US (data for IPO & M&A only)

M&A IPO

METI

(2)Vitalization of investment in intangible Assets toward Fourth Industrial Revolution

97

Challenges • In order to create new innovations making full use of innovative technologies such as artificial intelligence, etc., drastic

increase needs to be made in investments for intangible assets such as R&D assets, information assets, intellectual property, human resource, etc., on top of the current investment centering on tangible fixed assets such as production facility, etc.

Basic Direction of Efforts • Consider the modality of investment in intangible assets to create sustainable corporate values as well as methods to

evaluate such values in order to lead to increasing effective and substantial intangible asset investment. • Promote the accumulation of intangible assets as a nationwide effort and increase political support to vitalize innovation at

companies.

Short Term Efforts • On top of capital investment catering to the needs of the forth industrial revolution, consider beefing up incentives for

investment in intangible assets which will become platforms for innovation as well as for mid to long term R&D investment, etc.

METI 98

(Reference) Corporate investment in intangible assets

High percentage of corporate investment go to intangible assets (R&D, brand assets, investment in human resource, etc.)

Corporate Investment and Capital Investment in the GDP

(Reference material)”Are Companies Only Racking Up Cash? Deviations from GDP Statistics (February 22nd, 2016)” by Hajime Takata, Managing executive officer and chief economist of Mizuho Research Institute http://www.mizuho-ri.co.jp/publication/research/pdf/today/rt160222.pdf?ad=ml

Investment recognized by the company

Investment that should be reflected in GDP

Scope of investment currently reflected in GDP To be included in capital investment (R&D) after the new standard is introduced in December 2016

(1) Approximately 6.8 trillion yen

･Buildings, structural objects ･Machinery, facilities, etc.

Tangible Fixed Assets

Approximately 5.8 trillion yen

･Software ←

0.9 trillion yen ･Plant engineering ･M

ineral exploration


(2) Approximately 2.5 trillion yen (3) Approximately 1.5 to 2.0 trillion yen

Innovative Assets Approximately 1.9 trillion yen

･Copyrights, licenses

･Designs, etc.

･R&D

Intangible Assets

Information assets

1.0-1.5 trillion yen

･Databases

Approximately 100 billion yen

Economic competitivity ・Brand asset, etc. ・Human resource assets unique to companies ・Organizational structures, etc. Approximately 0.7 trillion yen

Foreign direct investment

Equity as investment and loans ・Foreign direct investment portion

・M&As, etc.


・Land ・Underground resources ・Fishing grounds, etc.

Natural resources


(net amount for land purchase)

Purchase of used products


Approximately

1.0 trillion yen

*Used the latest data available for each item. Each number are rounded off, thus the sum total be different. (Reference) Created with JIP database of RIETI by Mizuho Research Institute

METI 99

(Reference) Investment in Intangible Assets and Innovation, a virtuous cycle toward enhanced productivity

Investment in intangible assets is important*１, as this investment supports innovation in companies, such as catering to the needs of the forth industrial revolution, creation of innovative technology, etc., reform into a corporate organization that can utilize and apply new technologies, etc. In the US, investment in intangible assets has already grown to a size larger than that of tangible assets.

(Source of chart)RIETI”JIP Database 2013”, INTAN Invest “intangible investment data website Aug.2014”, Cabinet Office “93ＳＮ”, US Department of Commerce “National Income and Product Accounts Tables Jan.2016”

*１：In Corrado’s research one third of the US’s increase in productivity from the 1990’s to early 2000’s is estimated to be a result of investment in intangible assets. Corrado, Hulten, Sichel (2005), “Intangible Capital and U.S. Economic Growth.” Review of Income and Wealth 55, pp.658-660

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Intangible Asset＞Tangible Asset

Tangible Asset＞Intangible Asset

Japan

US

US/Japan Comparison of Intangible Asset/Tangible Fixed Asset Investment

Investment Am

ount in Intangible Asset / Investm

ent Amount in Tangible Asset

METI

(3) Further enhancing the functions of finance and settlement placing FinTech as the core

100

Challenges • FinTech brings hopes for possibilities of utilization in regional vitalization and making financial and

settlement services more convenient, efficient, and close to people. Centering around this trend, advancements of financial and settlement services need to be promoted.

• In doing so, it is important to design incentives such as creating an environment that makes it most convenient and carefree for FinTech, providing the most advanced services, to operate successfully.

Basic Direction of Efforts • The effect of FinTech’s innovation of financial services doesn’t only effect the finance industry itself but is

extremely important from the aspects of advancement of management and improvement of productivity at SMEs, etc. as well as smooth financing, etc. It can hugely contribute to asset building of individual families, too.

• With such understanding, there is a need to consider how to work on the institutional side and information system side in a integrated manner to maximize the power of FinTech.

Short Term Efforts • Develop a FinTech “eco-system” (consider the modality of “Open API(note) ”, make financing of financing

related IT companies easier for financial groups, create systems to introduce voluntary registration system to settlement business agencies, etc.)

• Finance and settlement infrastructure reform (promotion changing all credit card authorizations to IC equipped cards, etc.)

• Work on user protection and the safety of systems, etc. (Note)API(Application Programming Interface): a specification for connection for using functions such as apps. By making this public (Open API), anybody can design and provide services.

METI

Robo Advisor

(Reference)FinTech services expanding across boarders of industries

Mobile transfer

Bitcoin Market Place

101

Crowd / Automatic accounting

Company Finance Industry Private home

budgets

Crowdfunding

Newcomers

Newcomers

Insurance

Investment

Loans

Settlement

Virtual currencies

Investment

Transfers

Savings

Insurance

Crowdfunding / P2P Lending

Insurance companies

Securities Companies

Banks Accounting

Corporate accounting

Credit & Loans Utilizing Real Time Transaction Information From SNS and e-commerce.

Settlement ＋ Operating Capital Loans

Settlement by Dongle

Prevention of Fraudulent Use of Credit Cards

Pay-for-use Automobile Insurance

Telematics Information Service

Asset management

Online / Short term small amount / Automatic Lending

Small-amount Periodic Investment

Home budgets

Data Aggregation (Home budget information)

METI 102


ⅴ. Facilitating smooth conversion of industrial and employment structures

METI

(1) Establishing a governance system in which business owners are able to swiftly and boldly make decisions

103

Challenges

Basic Direction of Efforts • As a system of corporate decision making, it is important to develop a governance system that can

respond to changes in business environment, enabling quick and bold decisions, such as starting a new business domain or selling / closing a business domain.

• To do so, it is important to strengthen the monitoring function of the board, including a reform of the appointment/dismissal procedures of the CEO. Specifically, board member’s meetings should take in diverse knowledge including that from outside board directors, and center its activity on reviewing and decision making on management and business strategies. At the same time, decisions regarding business execution need to be made quickly through delegation of power to top management, including the CEO. It is also important to enhance the clarity and objectivity of the polices and process regarding the appointment / dismissal of CEOs, which is an important strategic decision for the company.

Short Term Efforts • Promote corporate governance reforms and strengthen its effectiveness (compile and organize information on practices both domestic and from overseas regarding enhancement of functions of the board, draft a business practice policy, etc. )

• In Japan, shuffling and closing of business domains tend to happen after the business or the company’s results fall in the red.

• Japanese companies need to adapt to discontinuous and quick changes under the direction of a CEO. The modality of corporate management, such as “setting a growth target”, “strategy and methodology to attain goals”, “strong-willed decision making”, etc., need to be reviewed for change, keeping in mind that the competition is with global corporations.

METI

Energy Energy

Energy Energy

Aviation

Aviation

Aviation

Aviation

Healthcare

Healthcare

Healthcare

Healthcare

Transportation

Transportation

Transportation

Transportation

Finance Finance

Finance Finance

Home electronics/ devices Home electronics/ devices

Home electronics/ devices

Home electronics/ devices

Media Media

Media

Material Material

Other

Other

Other

$m

$20,000m

$40,000m

$60,000m

$80,000m

$100,000m

$120,000m

$140,000m

$160,000m

$180,000m

2000 2005 2010 2015

(Reference) Shuffling of business domains at European & American companies (1)Change of business domains at GE

(Source)GE Annual Report

Shrunk finance businesses which GE had grown up to 2000 and other non-core businesses to strengthen energy, aero engine and other businesses.

104

＄130B ＄117B

＄140B ＄150B

Change in Sales by Division at GE

2011 Sell NBC Universal Comcast (US)

2015 Announce closure of GE Capital. Subsequently sells other finance related businesses.

2007 Sell plastic business to SABIC (Saudi Arabia)

2013 Buy Avio’s (Italy) airplane division.

2005 Sell most of re-insurance business to Swiss-Re

2013 Buy energy division of Alstom (France)

2016 Sell consumer electronics division to Haier (China).

＄36B ＄52B ＄72B ＄92B

METI

Electric power Electric power

Electric power Electric power

Industrials Industrials

Industrials

Industrials

Healthcare

Healthcare

Healthcare

Healthcare

Transportation

Transportation

Transportation

Transportation

Finance

Finance

Finance

Lamp/LED

Lamp/LED Information and communication

Information and communication

Others Others Others

€m

€10,000m

€20,000m

€30,000m

€40,000m

€50,000m

€60,000m

€70,000m

€80,000m

€90,000m

2000 2005 2010 2015

Reference) Shuffling of business domains at European & American companies (1)Change of business domains at Siemens

(Source) Siemens Annual Report

Discontinued businesses with little future prospect or little synergy with main businesses. Focused on profitable businesses.

105

€77B €77B €75B €69B

2006 Merge and spin out communication network business with Nokia

2010 Un-consolidate lighting company Osram. Spin off in 2013.

2011 Sell nuclear power division to Areva (France)アレバ(仏)に原子力事業を売却

2011 Sell IT service division to EtoS(France)

2006 Buy Bayer’s diagnostic pharmaceutical business.

2007 Buy Date Behring (US), testing machinery company

2007 Sell car parts business

€36B €42B €61B €66B

Change in Sales by Division at Siemens

METI

(2)Development of systems and environments to enable quick and flexible revival and shuffling of business domains

106

Challenges • Global companies need to engage in large scale M&As using a variety of methods and buy out

promising start-ups, actively spin-off business arms to elevate stockholder value, and strengthen the power to promote the company’s business.

• Same goes for domestic companies and each entity will need to create an environment where business domains can be flexibly and quickly reshuffled according to each company’s situation.

Basic Direction of Efforts • All needed systems and environments need to be created so that diverse corporate needs can be met to

enable quick and flexible shuffling of business portfolios.

Short Term Efforts • Consider the creation of systems and environments to enable quick and flexible revival and shuffling of

business domains. • Promotion of early stage efforts for reviving businesses and succession of businesses at SMEs, promotion

of investment taking the timing of succession as an opportunity.

METI

Date Completed

Acquiring Company (Country)

Acquired Company (Country)

Transaction Amount (million dollars)

Percentage acquired by TOB (％)

Considerations (%)

friendly／ hostile

１ 2007/04/16

Japan Tobacco Gallaher Group(UK) 14,654 100 Cash：100 Equity：0

friendly

２ 2008/05/14

Takeda Pharmaceutical Millennium Pharmaceuticals (US)

5,734 100 Cash：100 Equity：0

friendly

３ 2013/12/18

Bank of Tokyo-Mitsubishi UFJ Bank of Ayudhya (Thailand)

5,279 72.01 Cash：100 Equity：0

friendly

４ 2013/03/26

Dentsu Aegis Group (UKI) 4,116 86.37 Cash：100 Equity：0

friendly

５ 2010/06/08

Astellas Pharma OSI Pharmaceuticals (US)

4,031 100 Cash：100 Equity：0

friendly

６ 2008/11/04

Bank of Tokyo-Mitsubishi UFJ Union Bank of California (US)

3,707 38.88 Cash：100 Equity：0

friendly

７ 2008/01/28

Eisai MGI Pharma (US) 3,557 100 Cash：100 Equity：0

friendly

８ 2015/1/13

Otsuka Pharmaceutical Avanir Pharmaceuticals(US)

3,427 100 Cash：100 Equity：0

friendly

９ 2010/12/13

NTT Dimension Data (South Africa)

3,119 100 Cash：100 Equity：0

friendly

10

2010/10/06

Panasonic Panasonic Electric Works (Japan)

3,041 32.16 Cash：100 Equity：0

friendly

Date Completed

Acquiring Company (Country)

Acquired Company (Country)

Transaction Amount (million dollars)

Percentage acquired by TOB (％)

Considerations (%)

Friendly/Hostile

１ 2007/11/02

RFS Holding(Netherlands)

ABN Amro Holding(Netherlands)

98,189 98.80 Cash：93 Equity：7

not friendly

２ 2005/08/09

Royal Dutch Petroleum(Netherlands)

Shell Transport & Trading(UK) 74,559 100

Cash：0 Equity：100

friendly

３ 2009/3/26

Rosche Holding(Switzerland)

Genentech(US) 46,695 47.82 Cash：100 Equity：0

hostile

４ 2007/11/14

Rio Tinto Canada Holding (Canada

Alcan (Canada) 37,630 100 Cash：100 Equity：0

friendly

５ 2006/08/08

Mittal Steele(Netherlands)

Arcelore (Luxemburg) 32,240 93.70 Cash：29 Equity：71

friendly

６ 2006/04/19

Telefonica(Spain) ０２(UK) 31,659 100 Cash：100 Equity：0

friendly

７ 2005/06/30

Telecom Italia(Italy) Telecom Italia Mobile(Italy) 28,821 44.65 Cash：66 Equity：34

friendly

８ 2007/10/05

Group of Investors(Italy)

Endesa (Spain) 26,438 45.62 Cash：100 Equity：0

hostile

９ 2011/04/08

Sanofi Aventis (France) Genzyme(US) 23,898 100 Cash：84 Others: 16

friendly

10 2007/04/23

Iberdrola (Spain) Scottish Power(UK) 22,210 100 Cash：53 Equity：47

friendly

(Reference) Create environment to enable speedy and flexible shuffling of business domains Looking at the top 10 M&As overseas in the last ten years, shuffling of business domains using

diverse tactics such as spin-offs and TOBs with treasury stocks as consideration. For example, TOBs with treasury stocks as considerations are popular overseas while TOBs in Japan are typically by

cash.

107

Top 10 TOBs in Japan by Transaction Amount (Past 10 years) Top 10 TOBs in the World by Transaction Amount (Past 10 years)

(Source) Drafted by the Ministry of Economy, Trade and Industry based on Thomson One and Press Releases from Companies

METI 108


vi. Disseminating the outcomes of the revolution to SMEs and local economies

METI

(1) Establishing bases on which IoT and other new technologies are introduced into and utilized in SMEs and communities Challenges • The fruits of the forth industrial revolution need to be delivered from large corporations to SMEs and from national government to local

municipalities. Such diffusion to SMEs and regional areas have been a challenge in other nations, including Germany. • At the actual business scene of SMEs, the development of basic platforms for the utilization of IT is a challenge. Support needs to start from the

development of basic capabilities. • In the actual working level of manufacturing, agriculture, construction, etc., aging and lack of successors are serious problems. Succession of

knowhow is an urgent issue.

Basic Direction of Efforts • Promote the trend of IT investment at SMEs, broadening from investing in internal control operations to business activities that produce actual

profit such as the manufacturing process, service, sales activity, etc. • Actively promote the introduction of robots, etc. to support automation at the working level. • In order to link the development of such basic platform systems with developing new business models, create support systems for international

standardization. • Increase the value added to services and products using new artificial intelligence (deep learning, etc.)

Short Term Efforts • Bill for Strengthening SME’s management. (in a “guideline by business area”, which will be drafted for each industry, sample cases of SMEs

increasing their earning power through IT investment in their business activity and SMEs making IT related facility investment a policy and actively and boldly investing in IT will be supported)

• In the next two years, support over 10,000 SMEs introduce IT to their company by specialists. Especially, for the manufacturing industry, centers will be created where companies can receive consultation by “Smart Manufacturing Supporter’s Squad”, consisting of specialists in IT, “Kaizen” activities, and introduction of robots.

• Reduce the initial introduction cost of small-sized versatile robots by over 20%. Support the increase of human resource (system integrators) that can assist in the introduction of robots.

• In order to improve productivity at SMEs that do not have sufficient workforces, promote investment for labor savings and automation through capital investment related to service robots and IoT.

• Increase “Partnership organizations for the support of utilization of standardization” (regional banks, etc.) to 47 prefectures in order to support standardization at SMEs.

• Promote technological development and its introduction to the working level using deep learning in various areas as an integrated approach and accelerate innovation and its implementation to actual society.

• Development of a robot test field, etc. based on the Fukushima Innovation Coast Plan. 109

METI

１．Assist in the Introduction of Robots (Lower introduction cost, double supporting partners )

２．Support by Specialists (support by IT Specialists and the “Smart Manufacturing Supporters’ Squad (Smart monodukuri ouentai)”)

●The most serious bottleneck in the adoption of IT is not being able to take the first step due to lack of IT literacy.

●Increase the number and types of IT and other specialists at “General support centers (Yorozushien kyoten)”.

●Make the process more efficient through standardization of the robot introduction process and related skills. ●Develop a small-sized versatile robot (platform robot) ●Reduce the introduction cost of small-sized versatile robots by over 20% in the next 5 years and double the number of supporting businesses (Sier) to 30,000 persons.

●Many SMEs do not know how to improve their operations, and how to utilize new technologies such as IoT robots, etc. in doing so.

●Provide one-on-one support for not only “kaizen” but for the introduction of IoT/robots by training and dispatching human resource that can support the process.

(１) Support by IT specialists

(２) Support by “Smart Manufacturing Supporter’s Squad”

●Specialists will support over 10,000 SMEs in the next two years to teach knowhow on IT adoption etc. ●As part of this effort, start creating locations where consultation by the “Smart Manufacturing Support Squad” is available.

Introducing robots/Promotion of adopting IT at SMEs

110

Training at Schools Former workers with

strong production skills

Dispatch to SMEs Human resource with knowledge on

IoT/robots ＋ Knowhow on

“Kaizen” in the field

Knowhow on the introduction of

IoT/robots ＋

Start Creating Centers Nationwide this Year Consultation at

centers

110

Smart Manufacturing Supporter’s Squad ・ “Kaizen” activity at companies ・ Support introduction of IoT/ robots

[PM's statement at the 5th Public-Private Dialogue]

METI 111


vii. Further enhancing economic and social systems to address the revolution

METI

(1) Ideal approaches to regulatory reform so as to address the revolution

112

Challenges • With the development of the forth industrial revolution, business activities with higher levels of uncertainties have become

important. • In new service areas such as the sharing economy, services not expected under conventional regulations are appearing one

after another, resulting in the government measures falling behind. • For this reason, it is difficult to sufficiently react to the new needs in the private sector by reforming existing regulations

and systems.

Basic Direction of Efforts • Firstly, a “future vision” needs to be shared, and a concrete goal to be met within a mid-term timeframe is to be set. • Then, create a road map including all elements needed to attain the goal (reform of regulations, business promotion ideas,

business development in the private sector, self-regulations, etc.), followed by the development of a mechanism where the roadmap is altered as the situation changes while carrying out short term measures.

Short Term Efforts • Introduction of a regulation reform mechanism whose goal is to create the world’s most advanced business environment

through a new form of public-private collaboration. ex) Autonomous driving cars on local roads, drone operation management system, negawatt marketplace, sharing economy, etc.

Creation of a regulation system integrated with hard infrastructure platforms (5G, creation of data center, etc.) • For the development of the sharing economy from which various businesses are born, support the private sector create

self-regulatory standards such as user protection.

[PM’s statement at the 26th Council for Industrial Competitiveness] • A “roadmap method” where actual reform of systems are planned backward from by when what technology is to be

available in society.

METI

“Backward planning roadmap method” to conquer Forth Industrial Revolution

１. Share a long term vision of the future

２．Set concrete goals with a mid-term deadline.

３． (1) Create a roadmap of all elements needed to achieve the goal (regulation reform, business promotion policies, private business developments, etc.) (2)Carry out concrete short term reforms

○ Under the forth industrial revolution, drastic and unforeseeable innovation and changes in business models may occur.

○ In order to meet the needs of an uncertain future and to conquer international competition, regulation planning backward

from the long term future vision and a mechanism to review administrative procedures need to be introduced.

We will make mobility service by autonomous driving and autonomous cruising on highways possible at the 2020 Olympic & Paralympic Games. In order to do so, needed verification will be available, and systems and infrastructure will be created by 2017.

PM’s Statement at the Public-private Dialogue on Future Investment (November 5th, 2015)

Future Vision of Autonomous Driving Backward Counting

Goal Roadmap Method ・Reduce traffic accidents, alleviate traffic congestion, reduce environmental load.

・Utilization of autonomous driving technology in various industries (logistics, mobile service, etc.)

・Reduce driver’s load and secures free time

2016 2017 2018 2019 2020 (

1)Purpose ()Spec

(

3)Business Model

Area of Cooperation

Ⅰ. Map

Ⅱ. Communication

Ⅲ. Social Receptivity

Ⅳ. Ergonomics

Ⅴ. Functional Safety, etc.

Ⅵ. Security

Ⅶ. Recognition Technology

Ⅷ. Judgement Technology

* Keep in mind the possibility to use as a data platform in later phases of the project (phased increase in map area, etc.)

(Source) Autonomous cruising business review meeting “Future approaches” (March 23rd, 2016)

Roadmap Example for Collaboration Area

113

International Standardization Clarify spec of Platform map

Measurements

Creation of platform map (complete highways)

Creation of map system (incl. updates)

Verification testing utilizing map system

Phased increase in map area

Clarify business model (Subjects of the business, etc.)

Clarify purpose

(1) Purpose (2) Spec

(3) Business Model

Start autonomous driving on local roads around

2020 at the earliest. (level 2)

Start autonomous driving on highw

ays around 2018 at the earliest (level2)

METI

(2) Improving administrative services through the utilization of data

114

Challenges • Given the existing functions of the government, it is difficult for the government to respond to society’s needs due to

financial and staffing constraints and improved productivity (enhanced added value and efficiency) of the government itself is needed.

• Disclosure and utilization of data held by government organs need to be further promoted as well.

Basic Direction of Efforts • The government, before the private sector, will utilize innovative technology to fundamentally change its operation

processes for enhanced efficiency and the drastic improvement in the convenience of services they provide. • Disclose data held by the government for active and thorough utilization.

Short Term Efforts • Take an integrated approach on the promotion of regulation reforms, simplification of administrative procedures, and

adoption of IT, and work on reducing regulation and administrative costs, using a business operator’s point of view, with a target value and deadline.

• Work quickly on enhancing productivity of administrative services and the creation of new services. ex.) Simplification of personal and corporate authentication, enhanced efficiency of administrative work by the utilization of AI (more advanced and efficient patent administration), new services utilizing the public personal authentication system (My Number), etc.

• Conduct a meticulous research on the data held by government organizations (central and municipal). Actively disclose such data and promote utilization in the private sector (ensure administrative systems use API)

[PM’s statement at the 26th Council for Industrial Competitiveness] • Drastically reduce administrative costs using a business operator’s perspective. In order to do so, reform of regulations,

simplification of administrative procedures and adoption of IT will be carried out as an integrated effort.

METI

20

9

14

15

21

23

25

29

30

47

49

0 10 20 30 40 50 60

その他

データの著作権の取扱ルールが不明確である

利用に際して費用が発生する

利用の用途が制限されている

関連データとのリンクができていない

データの検索や加工に制限がある

提供されているデータの更新頻度が低い

必要なデータをどこで入手できるかがわかりにくい

データを提供する機関毎にフォーマットが異なる

提供されているデータの内容が詳細ではない

データがすぐに活用できる形式で提供されていない

(units: number of companies)

Further utilization of government held data expected

115

Source: “Infrastructure development for Japan’s society in the era of informational economy” (March 2014, Japan Users Association of Information Science/project commissioned by the Ministry of Economy Trade and Industry)

Source: “Toward an accurate understanding on the current situation regarding official statistics and policymaking” (May 17th, 2011, Japan Federation of Economic Organizations)

8

21

39

42

135

151

154

213

273

0 50 100 150 200 250 300

項目が多すぎる (内容が細かすぎる)

公表される頻度が低い

加工方法(実質化、季節調整等)が不適切

項目が少なすぎる (内容が充実していない)

対象分野に関心はあるが、調査の存在を知らない

手引・解説が不十分、利用方法が分からない

精度に疑問がある

インターネット上のデータの使い勝手が悪い

公表時期が遅い

(total number of answers)

Although currently undergoing work for further utilization, government held data have issues such as quantity and user friendliness, and hasn’t been able to sufficiently meet needs.

Problems with official statistics Issues on the utilization of public data (multiple choice)

Not readily usable on the Internet

Doubts on accuracy

Doubts on accuracy

Insufficient guides & comments, can’t understand how to use

Interested in the surveyed area but don’t know what surveys exist

Not enough questions (insufficient content)

Inappropriate processing of data (conversion to real value, season adjustment, etc. )

Too many questions (too detailed)

Low publication frequency

Data format differs by organization

Content of the data is not detailed

Data isn’t provided in a readily usable format

Low data update frequency

Limit to search and processing

Difficult to find where the data is available

Cannot link with related data

Purpose of use is limited

Cost is incurred for use

Rules regarding copyright of data is not clear

Others

METI 116

List up each and all work from application to examination and research and analyze whether AI can be applied or not.

Collaborate with intellectual property related agencies of other nations with high interest in AI such the US and Australia, etc.

Formality Examination (Documentation, fee payment, etc.)

Submit Application

Substantive Examination

Approximately 6,000 out of the approximately 300,000 applications are brought to the counter.

While 70% of the process is machine processed, complicated procedures such as fee exemptions are handled by hand by staff.

Research related technology from the 100 million patent documents worldwide and other academic documents.

Patent Administration Work and the Application of AI

Understand content of invention

Conventional art research

Decision on Patentability

Grant patent

Reject

Decision on whether patent requirements are met (Main samples of requirements) ● Whether there has been a same invention in the past. (Novelty) ● Whether it is not easily invented. (Inventiveness) ● Whether the content of documentation is clear. (Written description)

Create a more advanced and efficient work process for patent administration

Carefully read the application document, understand the content of invention, and grasp the scope the application wishes to get patented.

Create search index for applications and organize as patent information.

Organize patent information

Utilization of AI for advanced and efficient patent administration

METI

(3) Enhancing the development of business overseas through strategic collaboration and cooperation among industries

117

Challenges • For Japan to ensure it obtains the fruits of the forth industrial revolution, it is important to actively promote stronger

international collaboration, further international harmonization of related systems and connect such efforts to vitalizing innovation and gaining new overseas markets.

Basic Direction of Efforts • In order to develop a global digital market toward the forth industrial revolution, promote the organization of basic concepts

surrounding the utilization of data and the creation of an internationally harmonious regulation system. • Efforts to support the internationalization of infrastructure systems that cater to the needs of the forth industrial revolution

will be promoted through strategic efforts under public-private collaboration, including the upgrade financing functions as needed.

• Strategic efforts will also be made on the development of open innovation and international standardization.

Short Term Efforts • Confirmation of the “free flow of data” rule, international survey on regulation systems regarding the utilization of data • Speedy and steady implementation of expansion measures for a “high quality infrastructure partnership” and further

reinforcement of related efforts (promote the international standardization of “high quality infrastructure”, infrastructure planning and development of human resource capable of its evaluation, strengthen collaboration with the Asia Development Bank, faster and broader yen overseas loans, etc.). Support production at optimal locations corresponding to corporate strategies.

• Consider reinforcing systems and functions of organizations that contribute to increasing the supply of risk money to support internationalizing companies.

• Support the large area expansion of contents asset capitalizing on characteristics of a local area.

METI

(4) Permeating the outcomes of the revolution throughout society

118

Challenges • Although the forth industrial revolution has the potential of bringing huge benefits to individuals, the

economy , and to society, naturally, the diffusion of new assets and services would be inhibited unless recognition and understanding of the innovative technology is gained by individuals and society.

• Meanwhile, the Japanese are yet to understand these innovative technologies nor the merits they will bring.

Basic Direction of Efforts • In order to gain social acceptance of the changes brought about by the forth industrial revolution, it is

integral to create an environment for secure data utilization as well as attend to ethical issues the new technological revolution may present.

• On top of all that, it is important to put in efforts for international collaboration as needed, and to specifically and directly communicate with society how they are integral and their merits through social verification and through dialogues.

METI

Word version

119 METI

METI 120

1. Global economy in need of new growth engine

There seems to be no driving force for the world economy as suggested that economy in developed countries remain stagnant for a long period after the failure of Lehman Brothers. Furthermore concerns about the future arise now that emerging economies such as China which was once boomed have weakened in recent years.

Despite this global economic situation, Japan has maintained almost full employment supported by Abenomics. In addition many companies reported high profit, and succeeded in resolving most of issues of corporate excessive capital investment.

However Japan to experience all-out economy based on population decrease will be faced with structurally suppressed growth both in supply and in demand. The failure to resolve such constrained growth might cause distinct stagnancy of economic growth, giving serious impact of long stagnancy on Japan.

To grow out of this stagnancy to shift to the new phase of growth, it is crucial to concurrently to realize :(1) improved potential growth rate through productivity revolution based on new innovation (supply side), (2) exploration of potential demand by designing new products/services that respond to social needs with innovation results (demand side).

The key to successful shift to the phase of growth is to aggressively reform economic and social system that properly identify and drive technological innovation such as IoT, big data, AI etc. which represent the Fourth Industrial Revolution regardless of developed or developing countries.

METI

METI 121

2. What is happening now? - Impact of the fourth industrial revolution -

Competition is becoming fierce for the connection or use with data while a source of newly generated value is shifting to "data." In this competitive situation, persons able to create opportunities for business expansion in the years ahead can attract vast fund globally and swiftly and aspire for further growth by M&A etc., which eventually accelerates scale and speed of the competition. Thus we have already plunged into the word of competition of speed where "Winner takes All" is dominant.

Large scale competition involving a wide range of companies arises to all types of industries beyond their traditional boundaries. Therefore there is a possibility of drastic reform where it would be extremely difficult to predict the future for industrial/employment structure themselves. In this sort of reform its "light" and "shadow" exist with regard to smooth shift to new employment etc. while new opportunities are spreading globally. Ahead of occurrence of this reform redesigning efforts will be required for the entire system of economy and society including various legal systems.

In European countries and USA, especially global companies that are pursuing global strategies are sharply increasing in the number. In respect of global strategies USA is pursuing "from network to the real" using its strength in information domain for the utilization of "real data" at production sites whereas European countries are deploying "from the real to network" using their strength of manufacturing. However they have just begun to review economic and social system.

In order for Japan to quickly respond to these trends and to globally lead the world, it needs "compass" to show the way to overcome "market failure" coming from uncertainty of information and the way to how the public and the private can collaborate.

METI

METI 122

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure

(1) Promising areas as new growth frontier

Newly generated goods and services with the Fourth Industrial Revolution will create possibility of acquiring new markets in developed countries as well as in emerging countries (China, Next China countries etc.) expected to grow in the future.

Presently Japan less reliant on overseas demand has more potential for growth in overseas demand than any other developed economies (export dependency rate for Japan: 18%, 32% for world average, 28% for UK, 46% for Germany). It is crucial to acquire new markets by utilizing TPP which allows for giant free trade area.

Moreover we see possibility of resolving global issues with technological innovation in the Fourth Industrial Revolution To follow up on this, new markets will emerge to respond to "needs for resolution of issues" that spread worldwide.

Virtually global economy will hereafter experience the economy with decreasing population (majority of countries worldwide will be faced with the issue of decreasing population). Additionally we see the surfaced challenges of improving levels of medical/health and education, restrained energy/environment due to rise of developing countries.

Japan is supposed to be one of the developed counties faced with these challenges. In this respect we see possibility of Japan's securing competitive advantage in world market by realizing advanced reform for individual/company basis as well as social system ahead of any other countries in the world.

Responding to the Fourth Industrial Revolution is indispensable for both aspects of strengthening competiveness of Japan's economy for acquiring overseas demand on global basis and of resolving social/structural issues.

On the other hand these approaches are subject to competition of speed with other countries, and losing competition leads to no chance to utilize Japan's advantageous position that Japan has endeavored to secure.

METI

METI 123

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (1) Shift to new industrial structure through facilitating needs (1/2)

Social/structural issues (i.e. customer's true needs) which go beyond our capabilities can be essentially dealt with by utilizing innovative technology/data such as AI for the Fourth Industrial Revolution. Competition will be conducted as to who will discover or acquire this new frontier expected to be spread globally. ("Move," "Live smartly," "Keep healthy, support the elderlies, "Get smartly" etc.)

To this end source of new added value should be directed to "data." The key to secure competitive advantage relies on how speedily we can produce innovative products/services that can respond to true needs while functioning a cycle of collecting data, ensuring shift such data to big data and analyzing and utilizing them.

Some companies or industries can grow by exploring and acquiring new markets using deftly these data, but others cannot, which puts us in harsh situations.

Hereafter competition will become fiercer for such promising industrial sectors. We see possibility of totally new value to be generated where there is integration among data, technology, human resource, fund which exist within their traditional boundaries as per industry type, companies and business. So we might see reorganization between totally different industries or mutual entry instead of traditional reorganization between the same industry. As a result major changes of industrial structure will occur.

METI

METI 124

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (1) Shift to new industrial structure through facilitating needs (2/2)

Specifically,

(1) New value chain and new industries will emerge beyond traditional boundaries of industry types in response to "customer's true needs (e.g. move conveniently)."

(2) In this trend we see significant growth in information service sector playing focal role in data utilization and customization service using customers' data. On the other hand the sectors of raw materials and intermediate input will be put into harsh situations.

Japan is required to realize swift and flexible change in industrial structure to quickly respond to these reforms continuing globally.

METI

METI 125

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (2) Shift to new industrial structure

We see progress of labor saving in non-regular workers besides regular workers with emergence of robot etc. This is generally expected to lead to the resolution of manpower shortage facing Japan to experience real population decline.

Additionally major reform of business processes themselves may bring about new needs of employment including jobs that create workplace where workers with good command of AI and robot etc. work together with them or jobs to focus on more value through more human communication/interaction than before.

On the other hand we see possibility of change in skills required for middle class workers who occupy core group in the entire employment. For example it is highly probable that jobs for traditional back office etc. will decrease on a large scale.

Changes in business process in line with the Fourth Industrial Revolution will bring about new needs of employment including middle skill workers. Therefore it is necessary to develop human resource in response to change in employment structure and to smooth switch over labor force to growth areas.

METI

METI 126

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (3) Specific "Vision" of reform

As mentioned before the trend of the Fourth Industrial Revolution swiftly spreads to various fields, affecting an optimal economic/social system.

Thus it is extremely difficult to envision decisive scenario for actions for strategies in each field based on correct understanding of such reform as a whole.

Rather in this situation it is effective (1) to identify key domains in response to "global customers' true needs," (2) to envision multiple, long term scenarios as to who and how they envision new business models using technological reform, (3) to analyze impact ("light" and "shadow") on industry, employment and economy/society, (4) set specific med-term goals by identifying key turning-points, and (5) to develop road maps that describe tasks (regulatory reform, business promotion etc.) required for the public/private, going backward in time of such goals, and to perform short-term specific reforms based on road maps.

Besides it is crucial to follow up on such "Vision" in dynamic way as it is subject to change as per time goes on.

Hereafter we need to perform deep study on various fields including "Move," "Live smartly," "Keep healthy, support the elderlies, "Get smartly" etc.

METI

METI 127

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (4) Estimates involving industrial and employment structures

We projected possibility as to what industries and occupations will grow or decline with economic model, making this projection help with identifying future direction of reform.

The projection was conducted for two scenarios: "As-is scenario" where reforms in line with the Fourth Industrial Reform are not mutualized continuing a state of low economic growth, and "Reform scenario" where there are dramatic improvement of productivity triggered by the Fourth Industrial Revolution, smooth transfer of economic resource to growth industries, jobs conversion as per change in business process. (For details on two scenarios see 4．described later.

＜Entire vision /Macro economy＞

"Reform scenario" reveals that high value/high growth sectors will be generated by providing new services and products that help resolve social challenges, responding to customers' true needs. Additionally it says that workforce's shift to jobs which require solely human element in harmony with machine/software will let workers enjoy high wage/salary.

METI

METI 128

3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (4) Estimates involving industrial and employment structures

<Industrial structure envisioned with reform scenario>

The scenario reveals significant increase in added value and number of workers in such fields as "Customer response type manufacture sector (production of final goods)" where enhanced value is expected by realizing customization to respond individual need based on customer data, and shift to new services etc., and "Information service sector" that plays core part in the Fourth Industrial Revolution and expands demand on the whole industry basis.

In addition to these, higher growth rates than average one will be expected in such sectors as "Hospitality type service (e.g. tourism)" expected to expand market by making potential demand etc. surface using customer data, and "Infrastructure network (e.g. transportation, telecommunication) " which creates new value by entering into different sectors through integration with other service industries.

<Employment structure envisioned with reform scenario>

The scenario reveals increase of workers in such occupations as "Upstream jobs (e.g. management strategy staff, R&D staff), "Sales" of product/service with sophisticated consulting capability which becomes source of competitive advantage, and with low possibility of replacement with AI/robot etc., "Services (e.g. attendant with exclusive restaurant) with high added value and low possibility of replacement where direct human interaction leads to enhanced quality/value, and "IT" which creates more demand on the whole industry basis.

On the other hand the scenario indicates further replacement with AI/ big data/IoT/robot and decrease of workers in such occupations as workers production line, corporate procurement management staff, salesperson with high possibility of replacement including cashier with supermarket, clerk at bank counter with high possibility of replacement and back office staff including staff of accounting/salary management.

METI

Documents

- Japan's strategies for taking the lead in the Fourth … "Vision of New Industrial Structure" - Japan's strategies for taking the lead in the Fourth Industrial Revolution - Interim