JAPANTechnology & InnovationFINANCIAL TIMES SPECIAL REPORT | Thursday December 9 2010

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Whether you are looking fora December romance, wantto get rid of a hangover orstop a baby crying,Lindsay Whippknows a companythat wants to help

Page 3

Lonely this Christmas?

Start here forthe shape ofthings to come

From hybrid cars to mobilephone airport check-in,Japan is often where thefuture takes shape first.

For a peek at what iscoming down the technolog-ical track, where better tostart than Tokyo’sMiraikan, or “future hall”,which recently displayedthe winners of the nation’sFourth Robot Awards.

This year’s grand prizewent to Toyota Motor andOchiai Nexus for an indus-trial robot already at workon the automaker’s produc-tion lines. Designed to placethe tyres in new car boot,

an ingenious system of bal-anced levers allows therobot to do its jobextremely gently and with amotor running on only 80watts of electricity.

That means it does notrequire the safety cordonrequired for most industrialautomata. Robots arealready working alongsidefactory workers around theworld – soon they willincreasingly be labouringshoulder-to-shoulder.

Most humans will stillwant to give a reasonablywide berth to the Ham-das-R, winner of the small-and medium-sized enter-prise award. This pig-thighdeboner wields its razor-sharp blade with impressivedexterity, guided by anX-ray recognition systemthat allows it to mimic theskills of a veteran meatplant employee.

Robots could also soon beflocking into the field – orat least the greenhouse – if

a strawberry harvestingdevice developed by theNational Agriculture andFood Research Organisationand SI Seiko is any indica-tion. The robot runs alongtracks laid between raisedstrawberry beds, which arealready being increasinglyused in Japan to ease theaching backs of a farmingpopulation with an averageage above 65.

Harvesting strawberriesand other delicate fruit thatripen unpredictably is atricky technical challenge.To decide whether to pickeach berry, the robot analy-ses its size and the propor-tion of its surface that iscoloured green, white andred. If the fruit is ripeenough, it gently plucks itwith a steel arm and storesit in a tray – while also

recording all the informa-tion about it so the berrycan easily be sorted andpacked.

It is not just industrialand agricultural automa-tion that is benefiting fromsophisticated sensory pro-cessing made possible bycheap computing power.

Some vending machinesare using video camerasand face recognition soft-ware to size up potentialcustomers and then flashup drinks recommendationsas a way of nudging themtoward a purchase.

The machines, developedby JR East Water Businessand Omron, can tellwhether a customer ismale or female and roughlyhow old they are, while

Coming soonMure Dickie,Lindsay Whippand MichiyoNakamoto take apeek at the future

Continued on Page 3

Harvester: robot saves aching backs of elderly farmers

Anxious to stay ahead of the pack

One of Japan’s most belovedcomic book characters isDoraemon, a “robotic catfrom the future” with a

stock of wondrous 22nd century tech-nology that he uses to try to solve thepresent-day problems of his haplesshuman companion, Nobita.

The gadgets that Doraemon plucksfrom his fourth-dimensional pocketusually end up causing more troublethan they cure, but the lovable blue-skinned automaton still serves as afine metaphor for Japan’s enduringlove of advanced technology and faithin its transformative power.

All across the archipelago, businesspeople, scientists and officials aresearching for futuristic solutions tothe many problems pressing upon theworld’s third-largest economy.

Demographic decline and a dwin-dling labour force? Build industrialrobots to staff the production linesand synthetically sympathetic domes-tic models to cater to the needs of theelderly. Climate change and pollution?Develop smart grids to reduce powerdemand and filters able to purify eventhe most contaminated industrialponds. Worried about competitionfrom low-cost Chinese manufacturers?Introduce ever more technically com-plicated products packed with sexynew features.

Japan brings formidable resourcesto this feverish construction of thenew. The nation is second only to theUS in research and developmentexpenditure, according to the Organi-sation for Economic Co-operation andDevelopment. In 2008, Japan spent$149bn on R&D in purchasing parityterms, compared with the $121bnspent by third placed – and muchlower cost – China.

The vast bulk of these funds isinvested by established companies,and the result is a steady stream ofimpressive innovation in every fieldfrom electronics to biotechnology.From the 580km/h floating maglevtrain being tested in the mountains ofYamanashi Prefecture to geneticallymodified medicinal rice being culti-vated on the fields of the coastalplains, Japanese businesses are firmlycommitted to refining every aspect oftheir processes and products.

Ikuo Sato, president of Japan SteelWorks, for example, says he plans tomaintain his company’s R&D spend-ing at about 5 per cent of revenues, alevel that has helped to make JSW theworld’s most advanced supplier ofnuclear reactor parts.

Yet times are tough, even for com-panies such as JSW, which saw itssales decline by 4.6 per cent year-on-year in the six months to September.Many other businesses have sufferedfar worse since Japan plunged intorecession following the collapse ofexport demand after the 2008 globalmeltdown. This has undermined theirability to fund innovation, just asSouth Korea, Taiwan and increasinglyChina establish themselves as rivalsin even the highest tech.

Attention is turning to the rela-tively small role that the governmenthas traditionally played in fundingR&D. Less than 16 per cent of Japan’sR&D investment is financed by the

state, compared with an OECD aver-age of 27 per cent. The Keidanren,Japan’s most influential businesslobby, has called for a “stable commit-ment” from the government to liftspending on R&D to about 1 per centof gross domestic product while intro-ducing “permanent and extensive”tax incentives for companies.

Acute fiscal pressures mean satisfy-ing such calls is likely to be impossi-ble, but policymakers are alreadyworking hard to strengthen innova-tion, in particular by offering special

support for “high-growth” sectors andsubsidising the most risky corporateR&D.

Government grants have been cov-ering about two-thirds of the costs ofJSW’s effort to increase the size of theingots it can cast at its century-oldplant on northern Hokkaido islandfrom an already world-record 600tonnes to 650 tonnes.

“We were considering going for 650,but we thought the R&D cost wouldbe very hard to bear,” Mr Sato says. “Ithink this is the first time we’ve hadhelp with R&D.”

Japan is also making progress inensuring its strength in scientificresearch is tapped more effectively togenerate products that can be com-mercialised. Universities have beensetting up committees and offices tomanage their patents. And scientistsare finding it easier to cross betweenacademia and business, says NorioNishi, a professor emeritus ofHokkaido University.

“When I was young, people thoughtthat was not a good thing. Peoplethought professors should be pure,”says Prof Nishi, who is now managingdirector at Nissei Bio, a small biotech-nology company.

There are other ways that Japanshould make fuller use of its researchtalent, says Sadao Nagaoka of theInstitute of Innovation Research atHitotsubashi University, Tokyo, wholast year published the results of asurvey of more than 5,000 Japaneseand US inventors that he conductedwith John Walsh of the Georgia Insti-tute of Technology.

The survey found that far fewerinventions in Japan came from peopleworking in very small companies thanwas the case in the US, where spin-

offs and start-ups have played a cen-tral role in the extraordinary flower-ing of innovation experienced in par-ticular in areas such as Silicon Valley.

Building a new company tends to bea bigger challenge for Japanese entre-preneurs, not least because of tighterregulation and the lack of a vibrant

venture capital industry willing totake a punt on untried executives.Venture capitalists or angel investorsaccounted for nearly 20 per cent of thefunding of the smallest US companiesin the inventor survey, but less than 1per cent of that of their Japaneseequivalents.

Prof Nagaoka also found that rela-tively few Japanese inventors filedtheir first patents after they enteredtheir 30s, while many US counterpartsmade their first breakthrough muchlater in their careers. This reflects inpart a tendency among Japanese com-panies to move senior personnelbetween different roles and depart-ments over their career rather than todevelop them as specialised research-ers, Prof Nagaoka says. “Even a veryprolific inventor may be transferredto a management role, a job not reallybest for exploiting his capabilities,” hesays.

Nor do such staff tend to jump toanother employer, since salariedworkers in Japan often expect and areexpected to remain with one companythroughout their career. The Keidan-ren has already recognised that thislack of mobility is an impediment toinnovation, saying companies shouldbe more willing to accept “job hop-ping” among researchers and engi-neers.

Meanwhile, Japanese companiestend to retain researchers even if theydecide not to continue backing theirline of research, whereas in the USstaff might lose their jobs and con-tinue to pursue their ideas elsewhere.

“We had some comments frominventors in the survey [saying] thatin Japan, once a project is discontin-ued within a company, the seed isbasically dead,” Prof Nagaoka says.“There’s basically no mechanism totransfer that seed to another part ofthe economy.”

There is no time to waste in creat-ing such mechanisms. As executivesuniformly acknowledge, the technol-ogy gap between Asia’s first success-ful advanced economy and its neigh-bours is closing fast.

Japanese businesses, scientists andofficials will have to work evenharder and smarter in the future ifthey want to make sure that the cool22nd century technology inDoraemon’s four dimensional pocketdoes not turn out to be made inChina.

Mure Dickie reports onJapan’s efforts to retainthe upper hand as rivals inTaiwan, South Korea andChina raise the stakes

Inside this issueVenture capital New companylistings are few and far between,writes Lindsay Whipp Page 2

Textiles Cutting­edge technology isone of the reasons Issey Miyakereturned to Japan, writesMichiyo Nakamoto Page 2

Digital advances Companies maynot be as safe from competition assome believe. Jonathan Soblereports Page 3

View from the US Mure Dickietalks to the US ambassador aboutthe lessons to be drawn from his25 years as a lawyer in Silicon ValleyPage 4

Ian

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2 ★ FINANCIAL TIMES THURSDAY DECEMBER 9 2010

Ingenuity transforms salmon sperm into cigarette filters

Salmon sperm is just nottasty – and that is goodnews for innovative tech-nology company Nissei Bio,which wants to turn it intocigarette filters.

While sushi lovers devourthe sperm and sexual organsof fish such as cod, a lack ofappetite for salmon “milt”means the northern islandof Hokkaido generates thou-sands of tonnes of wastematerial rich in DNA eachyear, says Norio Nishi, Nis-sei Bio managing director.

With the right processing,

DNA can be used as a filterto capture dangerous tox-ins, says Professor Nishi,who is also professor emeri-tus at Hokkaido University.

Nissei Bio is not the onlybusiness trying to use partsof a salmon left behindwhen the flesh and eggs arecarted off to supermarkets.In the nearby coastal townof Zenibako, Ihara & Co, aprocessor of salted herringroe, is extracting collagenfrom wild salmon skin andhopes to use it to produceartificial veins and arteriesfor medical use.

Many small and medium-sized companies acrossJapan are determined tobuild their futures aroundtechnological innovation, atask made increasinglyurgent by competition fromrivals in China and else-

where, and by a domesticmarket beset by deflationand demographic decline.

Nissei Bio and Ihara havebenefited from governmentresearch grants for innova-tion and the increasing will-ingness of academic institu-tions to collaborate withbusiness to create market-able new technologies.

Yet their experiences alsounderscore the challengesinvolved in developing pro-ducts to tap new markets.

Prof Nishi’s role at NisseiBio stems from his realisa-tion as a scientist that col-leagues tended to focusonly on DNA’s function as avehicle for genes, whileneglecting its potentiallyuseful chemical structure.

Nissei Bio’s main busi-ness is based on DNA foodsupplements marketed as

having an anti-ageingeffect. But Prof Nishi wantsto use other properties ofDNA, such as the fact thatit is dissolved in the intes-tine rather than the stomach– allowing it to be used fortargeted drug delivery – andthat the spaces in its doublehelix structure are good attrapping harmful toxins.

His team has developed a“secret process” to turn theDNA extracted from driedsalmon milt into granulesthat can be used selectivelyto filter out dioxins. NisseiBio has already sold its fil-ters to Chinese cigarettecompanies and to SouthKorean electronics groupSamsung for use in air puri-fiers, Prof Nishi says.

But while DNA filters canremove dioxins from ciga-rette smoke without the

loss of flavour caused bycharcoal, they are consider-ably more expensive. “Costis our weak point,” he says.

Samsung’s interest in Nis-sei Bio’s DNA filters alsoappears to be fading, as thecompany looks for other

new technologies to differ-entiate its products.

Nissei Bio, which wasestablished in 1994, is tryingto increase the efficiencywith which its materialremoves toxins from gases.

“In aqueous solutions, itis very effective, but remov-

ing such materials fromgas, for example cigarettesmoke, is technically verydifficult,” Prof Nishi says.

Ihara & Co, a family-runseafood enterprise estab-lished in 1956, faces a battleto build a business aroundmarine collagen extractedfrom salmon skin.

The effort began in the1990s as a collaborationwith state-funded research-ers that Ihara hoped wouldoffset falling demand for itscore product of herring roe,which was once consideredan essential part of NewYear’s Day family meals.

Collagen, a fibrous pro-tein, is used in cosmeticsand the food industry, butis usually extracted fromcow or pig carcases. Iharahoped that concerns aboutbovine spongiform encepha-

lopathy – mad cow disease –would create demand forcollagen from a BSE-freesource even if was pricier.

Unfortunately for Ihara,when Japan was hit by aBSE scare, it was unable tomarket its collagen effec-tively to win significantshare of the market beforebig suppliers switched tomarine sources too.

So Ihara focused on offer-ing a premium product tofood and cosmetic compa-nies, using only wild Japa-nese salmon and boastingof a production process thatresults in high levels ofpurity and keeps thestrands of collagen intact.

Now Ihara’s research staffare working with academicsto develop collagen that canbe used in artificial bloodvessels. Marine collagen

blood vessels could be thin-ner than those made withother materials, while overtime patients’ bodies wouldbe able to naturally replacethem with their own colla-gen, says Kazuo Mori, headof Ihara’s collagen business.

In 2005, Ihara registered apatent for what it calls the“world’s first elastic colla-gen”. But it has had to askstate researchers to help itfind a way to make its prod-uct stiff enough for bloodvessel use and there is noguarantee of success.

But Mr Mori insists thateven failure to come upwith marketable artificialarteries would not end thecompany’s quest to makesomething new out ofmarine collagen. “We’vecome this far,” he says. “Wehave to find something.”

Rice at theforefrontof research

Like most rice-cultivatingcultures, the Japanese haveput their staple food to usein many forms, rangingfrom starch to sake.

In the latest use of one ofthe world’s most belovedgrains, scientists and corpo-rations in Japan are apply-ing advanced technology todevelop rice with a varietyof medical benefits.

Professor Hiroshi Kiyonoand his team at the Univer-sity of Tokyo’s Institute ofMedical Science have usedgenetic engineering technol-ogy to produce an oral rice-based cholera vaccine.When this MucoRice is con-sumed the body producesantibodies that enable it tocombat the real toxin.

There are numerous bene-fits to an oral choleravaccine compared withexisting injected ones, saysProf Kiyono. Pathogens caninvade the body throughthe skin, the nose, themouth and rectal cavities,and infect the mucosalsurface that lines the diges-tive, respiratory and repro-ductive tracts.

“Injection cannot provideimmunity at the mucosalarea,” which is equivalentin surface area to one and-a-half tennis courts, he says.

“Injection-type vaccinesprovide protection like apoliceman inside a housewhere the door and win-dows are not locked, so aburglar can invade thehouse. But if we couldinduce mucosal immuneresponses as well, it wouldbe like locking the door andwindows as well as havinga policeman inside.”

An added benefit is thatan oral vaccine does notrequire disposable syringesand needles, and it is possi-ble to administer in tabletor capsule form.

Crucially such a vaccinewould not require refrigera-tion either, a big problemfor developing countries.

Prof Kiyono’s studiesshowed that monkeys thatwere fed MucoRice pro-duced antibodies that pre-sented neutralising activityagainst toxins, which theymaintained for six months.

What is more, severaldoses of MucoRice did notinduce allergic reactions.

Prof Kiyono’s team isworking with Nippon PaperIndustries to grow Muco-Rice in a closed harvestingfacility so as not to affectthe natural environment.The group is also workingwith regulators to draw uprules for growing and mar-keting “rice as a new vac-cine product, and a newvaccine storage and deliv-ery vehicle”, he says. “Thisis no longer food. It is medi-cine.”

Nippon Paper is alsodeveloping rice to treatother conditions, rangingfrom cedar allergy to diabe-tes and influenza. “The ideais to orally consume the[cedar] allergen. That way,if the body recognises cedarpollen as something that itconsumes, it won’t react toit as an alien element,” byhaving an allergic reaction,says Saori Endo-Kasahara,

research manager at thecompany’s forestry scienceresearch laboratory.

Nippon Paper, whichdeveloped advanced geneticengineering technologythrough its work with trees,was commissioned by theministry of agriculture, for-estry and fisheries todevelop rice that could helpalleviate cedar allergy, simi-lar to hay fever and wide-spread in Japan.

The idea was that oralconsumption of the cedarallergen could offer a bettersolution than injection.

The cedar allergen has tobe injected in small por-tions to prevent the bodyfrom going into shock andso it takes many years toinject a sufficient amountto have an effect.

But Nippon Paper hasbeen able to develop ricecontaining the cedar aller-gen, which when consumedorally will, theoretically,not cause the body to havean allergic reaction, saysMs Endo-Kasahara.

Rice is a convenient car-rier because it acts like acapsule, preventing theallergen from being decom-posed before it reaches theintestines.

One difficulty is in ensur-ing stability of the commer-cial product because themodified rice must containthe same ratio of allergen.This is crucial since the riceis considered a drug ratherthan food.

Nippon Paper is usingwater rather than soil togrow the rice, which makes

it easier to control the ratioof what goes into the rice.

It expects to start clinicaltrials on humans withinfive years.

Meanwhile, KamedaSeika, Japan’s leading riceconfectionery group, is tak-ing a different approach todeveloping rice with vari-ous health benefits.

Yume Gohan, whichmeans dream rice, has onlya fraction of the amount ofprotein found in ordinaryrice and is therefore suita-ble for people who sufferfrom renal failure andrequire dialysis treatment.

Their reduced ability todigest protein means theymust restrict their proteinintake without reducingtheir overall calorie intake.

Kameda developed equip-ment that exposes the riceto protease, an enzyme thatdissolves the protein in therice without breaking downthe rice itself.

“If this rice is consumedthree times a day, the con-sumption of protein can bereduced by about 15grammes and that allowsthe patient to eat otherfoods, such as fish,” saysTakehisa Kumagai, man-ager of Kameda Seika’s riceresearch centre.

Kameda is also develop-ing rice with a lactic acidbacterium to alleviate thesymptoms of atopic derma-titis and cedar allergy. Italso hopes to develop ricewith fewer calories to helpdiabetes patients.

Rice acts like acapsule, preventingthe allergen fromdecomposingbefore it reachesthe intestines

Years of stagnation leave market bereft

They say a picture paints athousand words, but some-times a few figures do thetrick.

In the case of Japaneseventure capital, it is paint-ing by numbers and it lookslike this: The venture capi-tal market in the US is 10times the size of Japan’s,while outstanding govern-ment guaranteed loans toprotect older small busi-nesses in Japan are 10 timesthat of the US, says Nori-yuki Takahashi, a professorin the economics manage-ment faculty at Tokyo’sMusashi University.

“These are such symbolicfigures, revealing the differ-ent perspectives of the USand Japan,” Prof Takahashisays. “Japan is placingimportance on the old.”

Japan needs some of thenew. About 20 years of stag-nant growth and more thana decade of near-constantchronic deflation has leftthe market bereft of newcompany listings on thecountry’s multiple stockmarkets.

The financial crisis madematters worse, leading tohigh risk aversion amongpotential investors in ven-ture capital funds, andmore volatile markets, mak-ing it more difficult for ven-ture funds to exit throughlisting companies in whichthey have invested.

“Europe and the US seemto be recovering but Japanisn’t matching that pace, sofundraising for venture cap-ital is [still] difficult here,”says Tetsu Ochiai, managerof the fund planning sectionat the state-owned Organi-sation for Small andMedium Enterprises andRegional Innovation(SMRJ), which has a coupleof funds that invest inyoung companies. The fundprovides about a 10th of allventure capital.

There is still no domestic

pension money invested inthe venture capital market,as there are not yet alloca-tions for this more riskyasset class. That is in starkcontrast to other markets inwhich alternative assetclass allocation can beabout 10 per cent, says oneventure capitalist.

Prof Takahashi highlightsseveral problems other thanthe lack of risk money andunstable markets.

First, the age for mostentrepreneurs to start newbusinesses is during their30s and 40s, but this agerange is shrinking.

Second, women are stillnot occupying high enoughpositions in companies thatwould give them the neces-sary experience and inspira-tion to start a business.

Third, the level of manycourses aimed at nurturingentrepreneurs remains low.

Fourth, much of the riskcapital that goes to newcompanies arrives in smallamounts, making invest-ment in the early stagesdifficult. Moreover, thedecision-making process toget that cash to companies

is often excessive, partlybecause many funds arerun by financial institutionsthat cannot take too muchrisk.

Analysts say this meanscompanies are smallerwhen they list, preventingmany institutional inves-tors from buying them. Thestock loses out on liquidityand subsequent fund rais-

ing then becomes difficult.Academics and executives

talk of increasing risk aver-sion among the youngergeneration, who face muchless job security these days.As a result, graduates aremore likely to opt to enterlarge companies or becomecivil servants.

It is not all doom andgloom, though. Globis Capi-

tal Partners is a fund thatoperates in the same way asmany in the US. Thatincludes bigger initialinvestments in new compa-nies. Globis invests between$3m and $5m initially, fiveto 10 times more than tradi-tional funds, says SoichiKariyazono, a partner atthe firm.

Globis’s strategy is multi-pronged. Aside from itsmain venture capital busi-ness, it runs Japan’s biggestMBA course with 300 stu-dents a year.

The course uses casestudies from Harvard Uni-versity, as well as localcases created from Globis’sown investments.

It also provides corporatetraining for potential high-fliers and publishes educa-tional books on businessmanagement.

“The basic concept is toprovide these three ele-ments of: people, knowledgeand capital,” says Mr Kari-yazono.

This means the compa-nies in which Globis investsobtain access to a networkof people as well as to big-

ger companies that maywant to form an alliance.

“Our approach is notunique but very normal ifyou look at global stand-ards,” says Mr Kariyazono.

Masayuki Makino, chiefexecutive of back office andsupply chain softwaredeveloper Works Applica-tions, received about Y1.5bn($17.8m) from Globis for hiscompany before it listed in2001.

Mr Makino had spentmonths asking about 100firms for money, all ofwhich shunned him, sayingthat the six month old com-pany was too young. A fewmonths later, he met Globisand it still has outsidedirectors on Works Applica-tions’ board today.

This is good news rela-tively speaking, but theinternational image is stillthat of a Japan with a holewhere more active invest-ment should be.

Much will depend onwhether the country getsout of its double-decadefunk, but it needs success-ful new companies to helpit on its way.

Venture capitalLindsay Whippreports on a dearthof investment andentrepreneurship

Traditionalskills takeon anotherdimension

Issey Miyake has sprunganother creative surprise onthe fashion industry with anew line of clothes that turn

into striking three-dimensionalshapes when worn, and collapse,origami-like, into flat pieces offabric when they need to befolded away.

But apart from the stunningdesigns themselves, the most sur-prising thing about the IsseyMiyake collection is that theclothes are made of 100 per centrecycled polyester.

Polyester, which is used tomake everything from plasticbottles to conveyor belts, has longbeen valued for its ability to berecycled, unlike natural fibres.

But until recently, recycledpolyester was not on any fashioni-sta’s radar screen as it was con-sidered inferior in quality and, atbest, suitable for rugged outdoorwear. However, Mr Miyake saidhe “felt that it could be used forsomething more” if the impuritiesin recycled polyester could beremoved.

That is where Teijin, one ofJapan’s leading textiles makers,was able to put its advanced recy-cling technology to use.

Recycled polyester is made byshredding the products, such asPET (polyethylene terephthalate)bottles, into small fragments,melting them and turning theresulting polymer into fibre,explains Yukihiro Shigemura,general manager of the fibre prod-ucts research and developmentdepartment at Teijin Fibers.

But impurities that get mixed inlimit what you can do with therecycled polyester – for example,you cannot make very thinthread, says Mr Shigemura. Andrecycled polyester cannot be re-used again.

The idea of recycled polyesterthat can be used over and overagain existed for a long time, “butit seemed too difficult to do”, saysMr Shigemura.

Teijin was able to make the ideaa reality by developing specialisedequipment and using its chemicalrecycling technology to return theused polyester to its originalraw material of dimethyl tereph-thalate.

The technology, for which thecompany has more than 10 pat-ents, enables it to make longthreads with recycled polyesterand to make the end productmuch softer than conventionallyrecycled polyester.

The most difficult part of theprocess is taking the colour out ofthe product that is being recycled,says Mr Shigemura.

This is because polyester isdifficult to dye in the first place.

“It’s like forcing the colour intothe polyester, so it is difficult tothen get it out,” he says.

But another difficulty is toensure that the original product,which is to be recycled, has a pol-yester content of 80 per cent ormore.

Consequently, it takes a degreeof commitment for companies touse Teijin’s system, dubbed the“eco-circle,” to recycle theirproducts.

Patagonia, the outdoor sports-wear company, Henri Lloyd, theBritish marine apparel maker,and Li Ning, the Chinese sports-wear company, are among the 135companies that collect their prod-ucts from customers and payTeijin a fee to recycle them.

Teijin’s technology was just the

thing for Mr Miyake, who waslooking for a way to preserve tra-ditional skills, such as the art ofkimono-making, and to combinethem with the latest technologythat can make clothes outlastshort-term trends. “In variousparts of [Japan], factories are

being closed,” he says, with a hintof sadness.

“But the R&D capabilities of theJapanese have to be maintained, Ithought, so I wanted to do some-thing about this. We place impor-tance on technology rather thanfashion and trends. We try not toget too involved in trends but to

make things that can be worn fora long time,” he adds.

Whether in pursuit of longevityor other benefits, Japanese textilemakers are delving ever deeperinto technological advances toimprove the functionality of theirproducts.

Teijin, for example, has also pio-neered an ultra-fine polyester,which it calls Nanofront, andwhich has an unprecedentedthickness of 700 nanometres – orone-7,500th of a hair.

By reducing the size of polyes-ter fibre using nano-technology,Teijin has been able to produce afabric that is soft and comforta-ble, resistant to slippage andquick to dry.

Garments made with Nanofrontfit tightly to the skin and are non-slippery, so they prevent the mus-cles from moving much duringexercise, which reduces energyexpenditure, Mr Shigemura says.

Teijin, which is the only com-pany in the world that has com-

mercialised nano-fibres, also usednano-technology to develop theworld’s first Morphotex fibres.

The fibre, which is not commer-cially available, was inspired bymorpho butterflies in the Amazon,whose cobalt blue wings are theresult of the interplay of light andstructure rather than pigment.

Traditional textile production inJapan may be a dwindling art andthe mass production of garmentsmay have shifted to China. ButJapanese companies are still atthe forefront of advances infabrics and many other materials,adding to the sophistication andbenefits of products such aspolyester.

“The reason I came back toJapan was because I realised andwas attracted to the fact thatJapan is a country that can dosuch things,” Mr Miyake says.

Future Beauty: 30 years ofJapanese Fashion, Barbican ArtGallery, until February 6 2011

TextilesIssey Miyake is usingrecycled polyester inhis latest range, saysMichiyo Nakamoto

Fantastic plastic: Issey Miyake’s origami­like collection is made from recycled polyester Lyndon Douglas

‘We try not to gettoo involved in trendsbut to make thingsthat can be wornfor a long time’

BiotechnologyScientists havedeveloped a choleravaccine, writesMichiyo Nakamoto

New technologiesBusinesses need totap new markets,writes Mure Dickie

Japan needssuccessful newcompanies tohelp it shakeoff its doubledecade funk

Collagenfrom wildsalmon skincould be usedfor artificialblood vessels

Japan | Technology & Innovation

FINANCIAL TIMES THURSDAY DECEMBER 9 2010 ★ 3

ContributorsMure DickieTokyo Bureau Chief

Michiyo NakamotoDeputy Bureau Chief

Lindsay WhippTokyo Markets andInvestment Correspondent

Jonathan SobleTokyo Correspondent

Stephanie GrayCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

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The shape of things to come

also considering the time ofday and temperature indeciding which products tohighlight.

For a middle-aged male, amachine would in themorning be likely to slap a“recommended” sign on theimage of a canned coffee onits large touch-sensitive dis-play, but switch to promot-ing green tea during theday, and water at night.

A teenage girl might besteered toward a sweet fruitjuice or tea.

Data collected from themachines should help JREast Water better target itscustomers. The companysays the machines havebeen selling nearly triplethe number of beveragessold by conventional units.

Consumers could soonfind another innovationcompeting for their atten-tion, given the obviouspotential for advertisers ofa new form of speakerunveiled in prototype byYamaha, the musical

instrument and technologygroup.

Its TLF (Thin Light Flexi-ble) electrostatic speakersare as thin as a piece ofpaper, not much heavier,and can be hung on wallsor rolled up for transport.

Developed by Yamaha’sCentre for Materials andComponents Technologies,the speakers are also highlydirectional, meaning thatthe sound they produceshould only be audible if alistener is standing directlyin front of them.

While such a featurewould be fatal in a homehi-fi, it means numerousspeakers with differentsoundtracks could be placednext to each other withoutcreating a promotionalcacophony.

One Japanese innovationalready beginning to enjoywidespread use in overseasmarkets such as Europeand the US is the QR, or“quick response”, code – amatrix barcode that cangive users with a mobile

phone or similar deviceaccess to information rang-ing from a restaurantaccess map to an airlinecheck-in number.

Invented in 1994 byDenso, a Toyota affiliate,and now ubiquitous inJapan, QR codes are beingadopted more widely over-seas in part due to theefforts of SET, a Tokyo-based but internationally-managed advertising andcommunications agency.

SET has been transform-ing QR codes from dullblack-and-white two-dimen-sional boxes, indistinguish-able from one brand to theother, into branded designsthat can even be made thefocal point of an advertisingcampaign.

Simple objects can evenbe assembled into montagesthat work as QR codes. ForJapanese women’s labelCecil McBee, SET created acode out of sequins. Forconfectionery brand FriskInternational, it used 500strong mints.

Continued from Page 1

Digital advances threaten to blunt country’s cutting edge

Spend enough time around Jap-anese tech-industry types, andyou will soon get to know theword suriawase.

Meaning “to join by rubbingtogether”, the term has becomeshorthand for the sort of trickyhigh-precision manufacturing atwhich Japanese companiesexcel: take one finely craftedcomponent, nestle it snugly intothe next; repeat until you havea purring Honda engine.

Suriawase technologies arebeloved by Japanese engineers

and executives, because theyare difficult to master – and tocopy. In an era when cheaperSouth Korean and Taiwaneseproducts are pushing theirwares off electronics storeshelves, many Japanese manu-facturers are looking for refugein fiddly-ness and complexity.

“Suriawase is what Japan hasalways been good at. It’s the ter-ritory we can defend most eas-ily,” says Tatsuhiko Atsumi ofTDK, a leading maker of capaci-tors, inductors and the tinymagnetic components at theheart of computer hard-diskmotors.

The problem for Japan, how-ever, is that finding suriawasetechnologies to defend is gettingincreasingly difficult. Modernelectronic products such as flat-screen televisions and videorecorders, for all their apparentsophistication, are in many

ways simpler than their prede-cessors just a few years ago,with off-the-shelf microchipshandling many of the functionsonce performed by delicatemechanical parts.

“In the analogue era, the mostimportant components weresuch things as cylinders foraudio equipment or opticallenses,” says Fumio Ohtsubo,president of Panasonic, one ofJapan’s largest electronicsgroups.

“Assemblers and parts makersco-operated to make those partsa bit smoother, or a bit betterintegrated. But with digitaltechnology, this structure haschanged drastically. Our com-parative advantage has fallen.”

Takahiro Fujimoto, the Uni-versity of Tokyo professor whopopularised the concept of suria-wase, put it this way to the FTlast year: “We lost semiconduc-

tors, but we still keep the toiletbowl” – a reference to the back-side-warming, private-parts-spraying, self-cleaning wondersfound in many Japanese WCs.

Even carmakers – the ulti-mate suriawase specialists – areconcerned that a simpler tech-nological future could maketheir businesses more vulnera-ble. Battery-powered vehiclessuch as the Mitsubishi iMievand Nissan Leaf, which goes onsale this month, represent theindustry’s leading edge – buttheir electric motors are far lesscomplicated than traditionalinternal-combustion engines.

“When it comes to electricvehicles, it’s harder to differenti-ate ourselves from other compa-nies,” says Shinzo Kobuki, thesenior managing director atToyota in charge of the Priusand other green vehicles.

“Engines are a suriawase tech-

nology, but electric motors allhave more or less the samebasic design.”

A classic suriawase technol-ogy is the printer. As anyonewho has ever suffered a paper-jam knows, these remain fiddly,highly mechanical products. Itis no coincidence, analysts say,that Japanese companies suchas Canon, Seiko Epson andRicoh dominate the market,along with the neighbouringterritory of photocopiers.

Because smooth-working,long-lasting printers are difficultto make, profit margins havestayed comfortably at about10-12 per cent even during reces-sions – reinforcing for technol-ogy executives the value of thetrickier-the-better businessmodel.

Not all suriawase technologiesare mechanical, however. Japa-nese materials companies such

as Nitto Denko and Toray,which makes advanced carbon-fibre components for Boeing’snew 787 Dreamliner, are reck-oned to have retained their com-petitive advantage for similarreasons.

“Materials are close to ana-logue technologies. They’re diffi-cult to develop and to copy,”says Toshihiko Omote, deputychief technology officer at NittoDenko. The Osaka-based com-pany, founded in 1918 as amaker of varnish and electricaltape, is today a leading supplierof optical films used in flat-screen televisions.

Mr Omote warns, however,that Japanese materials and pre-cision-component makers arenot as safe from competition assome believe. They have builttheir technological lead throughyears of close co-ordination withmanufacturing customers. But

as South Korean, Taiwanese andChinese industry matures, hesays, its sophistication willspread from assemblers to parts-and basic materials-makers too.

“We have a sense of crisis.We’ve watched our customersstruggle [with foreign competi-tion], and although there maybe a time-lag, in a few years weare likely to be in the same posi-tion. We can’t be complacent.”

Peter Kenevan, an electronicsindustry consultant at McKin-sey, says suriawase-focused Jap-anese companies need to planfor when Asian rivals catch up.

“Printers are a great busi-ness,” he says, “but what hap-pens when a Chinese companyfigures out how to make thesethings? It will happen eventu-ally. Companies need to askthemselves: what if we had tobuild this product at half thecost tomorrow?”

High precisionHigh­tech productsface growingcompetition fromforeign groups, saysJonathan Soble

Devices thatmake life alittle easier andlift your mood

Japan would not be the samewithout its love of making thelittle things in life that bit eas-ier, more efficient, cuter or sim-

ply more fun.Such demand has pushed companies

from mobile content providersthrough to lavatory manufacturers todevelop some of the quirkiest prod-ucts and services in a bid to luresavvy Japanese consumers, who mayalready have everything they need.Many may not make it to customersoutside this north-east Asian archipel-ago, but they add a certain somethingto life here.

Here are just a few.Arguably one of the most kooky

services is downloadable ringtonesthat affect your mood, helping listen-ers give up smoking, find a partnerbefore Christmas, get rid of a hang-over, stop babies crying, drive crowsand loud groups of teenagers awayand even hear the real voices of SantaClaus and Rudolf, to name but a few.

Really?Well, to an extent. Index, a Tokyo-

based mobile content provider, andJapan Ring Tone Laboratory have col-laborated on numerous melodies thatcure your malady, satisfy your curios-ity, make you happy and removeannoyances.

Index admits that most tunes arenot scientifically proved to work, butare just a fun way to enjoy yourmobile phone.

Each tune is composed with guid-ance from Matsumi Suzuki, who runsthe JRTL, and has been a joint winnerof the 2002 IG Nobel peace prize thathonours innovations that make peoplelaugh and think) for the invention ofBow-Lingual, a device that translatesthe woofs and whines of dogs intohuman lingo – recently becoming apopular iPhone application in Japan.

To put people in the Christmasspirit, Index and the JRTL have pro-duced a Santa Claus composition.

Using Prof Suzuki’s so-called montagevoice technology that measures vari-ous parts of the head, such as thewidth of the nose, the cheeks and jawto create voice simulation for charac-ters in paintings such as the MonaLisa. The collaboration used NormanRockwell’s interpretation in Santa’scase, and recorded the noise made byreindeer.

The “hate the smell of smoke” mel-ody has recently proved a success, notleast because the timing of its launchcoincided with a 40 per cent taxincrease on cigarettes.

The tune is meant for pure enter-tainment, Index says. However,thought has been put into the compo-sition that is intended to create a feel-ing of anxiety.

The tune, which would fit well intothe score of a B horror film, has avoice-over that warns of the dangersof tobacco addiction.

There may be something to itthough – if you listen to it enough,that is. “I was listening to the melody

so much as I was creating it over thecourse of a month, I’ve actually nowgiven up smoking,” says Rie Araki,responsible for composing the tune atIndex and who smoked about 20 ciga-rettes a day. “[Though] it’s probablydue to the tax increase, so there werea lot of people around me quitting atthe time.”

On the subject of smoke and rathermore seriously, there is the wasabismoke alarm.

Most will know wasabi only as thatsmall green, pungent radish blob sit-ting between the raw fish and vine-gared rice of sushi. However, itappears there is more to the spicyroot than meets the eye – or nose.

Air Water Safety Service, a Kobe-based company, and the psychiatricmedicine department of Shiga Univer-sity of Medical Science have devel-

oped a smoke alarm for the hard ofhearing that emits wafts of wasabistrong enough to wake up someone ina deep slumber. They used wasabi, asit contains allyl isothiocyanate, whichstimulates the trigemenal nerve thatis responsible for facial sensations.

According to research from Japan’sNational Research Institute of Fireand Disaster, more than 60 per cent ofdeaths by fire are because people donot escape in time, and 45 per cent dieat night time.

Each alarm costs Y52,500 ($623), andthe company has sold about 130 ofthem since launch last year.

Moving on to personal hygiene:introducing the solar-powered tooth-brush that needs no toothpaste.

An early version of this toothbrushhas already found its way to to someUS and European bathrooms.

However, Shiken, the toothbrushspecialist, has developed a boosted-upversion of its techno-toothbrush thatis already for sale in Japan and willreach overseas markets next year.

Toothpaste is arguably unnecessaryfor cleaning one’s teeth, a Shikenspokesman says. However, most peo-ple like to use it because it is whatthey are used to.

The company’s toothbrush has asolar panel and semiconductor in thehandle, which generate electronswhen light hits them. The electronsmove into the mouth via saliva andremove the hydrogen ions in theplaque, breaking it down and makingit easier to brush away.

The previous model did not havethe solar panel, so created fewer elec-trons. Shiken sells about 300,000 tooth-brushes a year in Japan and about3.5m toothbrush heads. It is makingthe brush handle longer and fatter forbigger western hands.

And finally, what is likely to be ofless international relevance but isclassic Japanese entertainment: themicrophone muter for home karaoke

and bad singing. In urban Japan,walls can be thin and living arrange-ments cramped, making it very diffi-cult for the country’s karaoke fans topractise at home using their NintendoWii, especially if they are not particu-larly talented singers.

However, Tokyo-based Xing (pro-nounced Ekushingu), has produced amicrophone muter it calls the “NotNoisy KaraOK! Mute Mic USB”, whichhas a muting cup that fits around theuser’s mouth and chin, and insidewhich is the microphone.

Niche productsServices range fromesoteric ringtones to awasabi smoke alarm,writes Lindsay Whipp

Xing, a Tokyo company,has introduced amicrophone mute forkaraoke and bad singing,making it easier for fansto practise at home

Behind the smile: virtual voicetechnology has created what the

Mona Lisa might have soundedlike, based on measurements

of facial features Getty

Japan | Technology & Innovation

4 ★ FINANCIAL TIMES THURSDAY DECEMBER 9 2010

Entrepreneurial spirit inneed of a shot in the arm

Few subjects are closer tothe heart of John Roos, USambassador to Tokyo, thanthe importance ofentrepreneurialism – andthe Silicon Valley veteranhas plenty of thoughts onhow Japan might do moreto encourage it.

Since his arrival inTokyo in August last year,Mr Roos has madepromotingentrepreneurship a bigtheme of his work – andhis Twitter feed –alongside moreconventional activitiessuch as defending the US-Japan security alliance andUS economic interests.

Achievements such asadvanced robots, maglevtrains and hybrid carsdemonstrate that Japanesecompanies are “incrediblyinnovative”, Mr Roos saysin an interview with theFT, but Japaneseindividuals often find itharder than it could be toturn their ideas intoproducts.

“What I’ve focused on isinnovation throughentrepreneurship and smallcompany formation. That’sthe area in which I thinkit is generallyacknowledged that Japancould use a shot in thearm,” he says.

In Japan, for example,innovations that take placewithin a larger companybut which do not fit intoits strategic plans are morelikely to go to waste thanin Silicon Valley, wherethey are often spun out inthe form a new venture

that can focus ondeveloping them, Mr Roossays. Similarly, Japaneseuniversities generate“tremendous amounts” ofresearch and patents, butthey are less likely to leadto the creation of newcompanies.

Mr Roos is well placed tomake such comparisons.Before his appointment, heworked for nearly aquarter of a century atWilson Sonsini Goodrich &Rosati, one of the top USlaw firms specialising intechnology companies andstart-ups.

Compared with their UScounterparts, Japanesewould-be entrepreneurs canface higher regulatoryhurdles and greaterdifficulty in funding theirdreams because of the lackof a vibrant venture capitalindustry.

“An entrepreneurtypically needs to take outa loan in order to start acompany as opposed togetting equity capital, andthat often leads to adisincentive in starting upthe company,” he says.

Such observationsbroadly reflect the views ofJapanese experts andanalysts – and ofgovernment officials keen

to find ways to boost thenation’s anaemic growthrate. So what does theambassador suggest hishosts do to smooth theentrepreneurial path?

Mr Roos cites six SiliconValley “success factors”that Japan might do wellto emulate.

First, he says, it isimportant to celebrateentrepreneurs. It is alsovital to give thoseentrepreneurs secondchances.

Developing disruptivetechnologies and setting upnew companies is alwaysgoing to be a riskybusiness – Japan cannotafford to write off thosewho fail at their firstattempt.

A mobile workforce isimportant – “you have toattract talent from allwalks of life” – as isdiversity, says Mr Roos,noting the 80-pluslanguages spoken inSilicon Valley.

Female talent should bemore fully tapped, he says,citing estimates that Japancould boost gross domesticproduct by 15 per cent ifemployment of womenmatched that of men.

And finally thegovernment should offer

strong support toentrepreneurs in general,not attempting to pickwinners but creating anational strategy thateases their way, theambassador says.

Replicating some of theseSilicon Valley features inJapan will be no easymatter, however.

Many Japanese admireentrepreneurs such asHiroshi Mikitani, founderand chief executive ofonline group Rakuten, andMasayoshi Son, who builtthe Softbank internet andtelecoms empire.

But the political andbusiness establishmentsand mainstream media stilltend to favour moreconventional corporateleaders.

Furthermore, publicnervousness aboutimmigration in a nationthat likes to think of itselfas highly homogenous,means politicians arecautious about allowing inmore foreign workers,despite acceleratingdemographic decline.

Some policymakers alsoappear comfortable withold fashioned approachesto the division of labour bysex.

But Mr Roos is upbeatabout the prospects forchange. “Many of thesethings I’m talking aboutare bubbling up,” he says.“There is interest and agrowing commitment tofinding ways of enhancingnew company formationthrough entrepreneurs.”

The ambassador is alsoin no doubt that Japan’seducated workforce,formidable science andtechnology resources andimpressive creativitymeans that the benefits ofsuch change could beimmense.

“If you could unleashthat entrepreneurial spirit,you would see a lot oftremendous companies,” hesays.

InterviewJohn RoosMure Dickie talksto the USambassador aboutthe lessons ofSilicon Valley

John Roos: beating the drum for Japanese entrepreneurs

Hydrogen cars A long and winding road

When environmentalists imaginethe future of the car, many lookbeyond petrol­electric hybrids oreven fully battery­poweredvehicles to a time when carsmight be powered by hydrogen.

Powerful as well as super­clean, hydrogen fuel cellsharness the chemical energyproduced when hydrogen ismixed with oxygen from the air.

Fuel­cell vehicles, now inadvanced prototypes at severalmanufacturers, have muchlonger ranges than battery­driven ones, but the sameimportant virtue: no toxicexhaust emissions.

For all its green appeal,however, hydrogen has sufferedsome setbacks. In June 2008,Honda, Japan’s second­largestcar company, became the firstautomaker in the world to put afuel­cell car in the marketplace,when it started leasing thehydrogen­powered FCX Clarityto a few hundred drivers inCalifornia.

Takeo Fukui, then Honda’spresident, had dismissedbattery­powered electric vehiclesas underpowered “golf carts”.Although Honda was developinga new version of its hybrid, heinsisted the technology would belimited to smaller models andsaid Honda had no plans for abattery­only vehicle.

Yet, just two years later,Honda executives rarely mentionhydrogen. During the recessionthe company slashed funding forthe Clarity, which cost morethan $1m each to build.

Takanobu Ito, who succeededMr Fukui as president in 2009,says the infrastructure neededto process and distributehydrogen “isn’t moving forward”.California’s “hydrogen highway”,for instance, has only 30 fillingstations serving cars such theClarity.

Originally, 150 were supposedto have been built by this year.

Mr Ito has steered Hondaaway from fuel cells andtowards batteries, expanding thecompany’s line­up of hybridsand announcing plans to launchan all­electric vehicle in 2012.

The shift will make Hondamore like Toyota and Nissan,rivals that have been promotingbattery power as the bestmedium­term alternative topetrol. Toyota has its Priushybrid and Nissan the Leaf, anew all­electric familyhatchback.

Yet, Japanese

engineers and executives havenot given up on hydrogen.

On the contrary, fuel cellsmay have big potential forgrowth back home in the nextfew years – not in cars buthome power generation.

Last year, five natural gasutilities joined a group ofhardware makers to build andsell fuel cells for residentialheating and electricityproduction.

About 5,000 of the boxy1.5m­tall machines have beensold so far, but Toshiki Shimizu,head of the fuel­cell business atPanasonic, one of thecompanies involved in theproject, sees demand expandingquickly.

“We want to build this into abusiness equal to refrigerators,air conditioners and other homeappliances,” he says.

As with many greeninnovations, the main barrier topopularisation is cost.

Panasonic’s generator, andsimilar ones from Toshiba andothers, sell for about Y2.5m($29,635). Although Y1.1m ofthat is covered by governmentsubsidies, and a Tokyohousehold can expect to saveY50,000­Y60,000 a year onelectricity and hot water, theprice is still too high for all buthardcore greens, Mr Shimizuadmits.

He expects that to changesoon, however.

As Panasonic scales upmanufacturing and simplifies itsdesign, costs should come downfar enough in five years thatmost customers will recoup thepurchase cost within a decade,even without governmentsubsidies, he says.

Ultimately, the spread of fuelcells for the home could helpadvance the cause of hydrogen­powered cars. If enough homesinstalled fuel cells, utilities mighttake up the business ofseparating hydrogen fromnatural gas themselves.

That would create economiesof scale and bring down theprice of fuel cell­generatedelectricity, while making it easierto use hydrogen for otherapplications – such as filling upfuel cell cars.

Jonathan Soble

Honda FCX:the fuel­cellcar wasleased toCalifornians

Bid to carve out a green niche

Under a green hilltop inGunma prefecture a400-tonne “oxygenditch” filled with

microbes cleans sewage wastegenerated by about 3,000 localresidents.

“When the microbes arehealthy, it doesn’t stink,” saysMasahiro Takahashi, an engi-neer at Amcon, a small Yokoha-ma-based company whose equip-ment is at the heart of the facil-ity and five others like it inGunma, a rural area two hours’drive north-east of Tokyo.

The water in the ditch doesindeed look and smell clean.After the microbes have workedon it a few days, it is pureenough to pour into a nearbyriver. Keeping it that way,though, requires draining excess“sludge” from the ditch at regu-lar intervals.

To meet the local waterauthority’s goal of reducing pol-luting waste from the treatment

plant to virtually zero, thesludge, too, must be cleaned.That is done in a small woodenbuilding, where an Amcon“dewatering press” squeezesdirty water from the ooze,before a heater dries the nutri-ent-rich remnants into fertiliser.

On average, a 15kg bag ofgreyish pellets is all that is leftof the neighbourhood’s wasteeach day. The bags are left in anopen shed beside the plant forlocal farmers and gardeners totake for free.

Amcon is a small company,with 60 employees, but it is get-ting bigger, thanks to growingdemand for environmentallyfriendly technology, not only inJapan but in China. In the pasttwo decades, Amcon hasinstalled 1,500 of its patenteddewatering presses but, startingin 2015, a new factory in Fuzing,south-east China, is to produce1,000 a year.

Amcon’s ambitions reflect abroader push by Japanese man-ufacturers into environmentaltechnology. Groups such as Nis-san, Hitachi and Panasonic arereorienting themselves around“green innovation”, while thegovernment of Naoto Kan, theprime minister, has put the con-cept at the centre of an updatedindustrial policy, which many

hope will revive Japan’s compet-itiveness in manufacturing.

The green shift is partlydefensive. As South Korean, Tai-wanese and now mainland Chi-nese producers come to domi-nate areas that were onceJapan’s near-exclusive territory,from semiconductors to televi-sions, it is becoming essentialfor Japanese companies to findnew niches.

According to a survey byCLSA, an investment house,Japanese technology groupshave lost almost a third of theirglobal market share in the pastdecade to Taiwanese andKorean rivals. The commodi-tised nature of consumer elec-tronics, combined with a strongyen and the lower labour costsand taxes of Asian rivals,threaten to accelerate the trend.

At the same, companies alsosee plenty of opportunity in thegreen sector, given concerns

about global warming and agrowing awareness of pollutionproblems in emerging markets.Executives see China as a mir-ror of Japan two generationsago: a country that has dirtiedits environment in the quest foreconomic growth but is showingsigns of wanting to go clean.

The list of Japanese compa-nies touting green innovation islong. Sharp has built a newsolar-cell factory that will raiseits output to 1.3GW this year,from 790MW last year, part ofan expansion that could lead toa fourfold growth in Japan’ssolar panel market by 2020,according to Ernst & Young.

Sanyo, nearly bankrupt a fewyears ago, has re-emerged as theworld’s largest maker ofrechargeable batteries. Nissanand Mitsubishi Motors havebegun selling battery-drivenelectric vehicles, building on agreen-car market pioneered byToyota’s Prius petrol-electrichybrid.

Panasonic is expanding itsenergy businesses, from electric-vehicle batteries to hydrogenfuel-cell generators (see right),and hopes to more than triplerevenues from the segment toY3,000bn by 2018. Meanwhile, ithas announced plans to makeits manufacturing operations

greener, doubling the ratio ofrecycled materials used in itsproducts and raising the recy-cling rate for its own industrialwaste to virtually 100 per cent.

“Being environmentally con-scious has costs, but in the endit’s the same as eliminatingwaste,” says Machiko Miyai,associate director of Panasonic’senvironmental affairs division.“It leads to better productionefficiency.”

Of course, Japanese compa-nies are not the only ones chas-ing the green market. Chineseproducers have already vaultedpast Sharp and other Japanesesolar-panel makers in volumeterms.

The Japanese are hoping thatthe higher energy conversionratios achieved by their moreadvanced technology will allowthem to charge higher prices,but some analysts warn thatthis strategy may be overopti-mistic.

“I have heard the argumentbefore that Japanese companieswill compete on quality ratherthan cost, but quality is not amonopoly and if they relyoverly on this sector alone Ithink they would risk comingunstuck,” says Mike Hugh, chiefexecutive of Asia CleantechGateway, a research firm.

EnvironmentJonathan Soblereports on efforts torevive competitivenessin manufacturing

China’s chimneys: executives see green opportunities in China. A mirror of Japan years ago, with a dirty environment in the quest for growth, it now wants to go clean AFP

Technology groupshave lost a third oftheir global marketshare to Taiwaneseand Korean rivals

Japan | Technology & Innovation