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Hopes are high for Japan’s Digital Agency

Japan digital agency
Hopes are high for Japan's new Digital Agency

In a push to prioritize digitalization, Japan’s new Digital Agency has begun operations. Called the “pillar of the new growth strategy” by Prime Minister Yoshihide Suga, the hopes for the new government body are high.

Despite its tech-savvy economic image, multiple issues have highlighted the need for digital reform in Japan. Just recently, the Covid-19 pandemic underlined the urgent need to accelerate the country’s digital ecosystem. Recent issues included problems with a Department of Health-backed Covid-19 contact tracing application (COVID-19 Contact Confirmation App COCOA), slow process of linking online vaccine booking systems with “My Number” personal identification system as well as the delayed distribution of the emergency cash handout program of $920 per individual last year.

To handle the hurdles caused by the pandemic and break away from a traditional bureaucratic culture, the Suga administration announced the plans for the new agency about a year ago. 

“Japan’s IT policies failed in the past”

Japan’s Digital Agency is set up to oversee reforms and aimed at upgrading the online services and infrastructure of the government agencies.

With roughly 600 officials, the agency will work on the unification of municipal IT systems and cloud, as the country has more than 1,700 local governments. But each ministry and municipality has its own customized IT systems, which makes it difficult to share information. Therefore, the Digital Agency will create an integration, through a cloud platform system, which will enable virtually all parties to use the same applications and platforms.

Aiming to enhance the convenience of administrative services, the agency is also asked to develop a system that can help residents in completing all types of procedures via smartphones in a matter of 60 seconds.

Furthermore, the new agency is empowered to make recommendations and authorize the annual IT budget across the national and local government organizations, and quasi-public sector businesses.

Yoko Ishikura, an honorary professor of business strategy at Hitotsubashi University, was appointed as the chief digital officer, at Japan’s Digital Agency. She will work alongside digital minister Takuya Hirai.

“We are in an era where digitalization matters to every policy,” Hirai said in a recent news conference. Japan needed to accept that its IT policies failed in the past, the digital minister added. “There’s a lot to catch up on.”

Japan’s companies aim to digitize

Prioritizing digital transformation has never been more important for Japanese companies than now. The Ministry of Economy, Trade, and Industry projects a shortfall of 450,000 information technology professionals in the world’s third-largest economy by 2030. 

As the coronavirus outbreak and its led restrictions have worsened business conditions, Japanese business leaders are undertaking bold digital transformations that would provide competitive advantages.

In a survey by Jiji Press, overall 11 out of 12 electronics, information technology, and communications firms surveyed have responded that they already beefed up their digital hiring or plan to hire more IT talent in the near future. The survey added that firms are also looking for IT experts specializing in artificial intelligence (AI) to speed up digital transformations.

Not only that, but these companies located outside big cities are also showing an increased interest in going digital, because of the outbreak-led limitations. According to CrowdWorks, a crowdsourcing service that links Japan’s outsourcers with firms or subcontractors, orders for system development, data entry has been rising from Japanese firms outside large metropolitan areas like Tokyo and Osaka. As per the report, to replace the shortage of information technology specialists, the number of orders outsourcing from rural areas to urban cities has risen 80% in two years. Other services to staffing companies and freelancers in urban centres are also increasing, as per the report. 

However, the Japanese firms are far behind global peers, when it comes to leading the digital push. Japan ranks 27th globally and seventh in Asia, behind countries like Singapore, China, and South Korea in the World Digital Competitiveness Ranking, compiled by the International Institute for Management Development.

According to a McKinsey report, since the outbreak of Covid-19, Japan’s rate of increase in digital efforts was lower (less than 10%) than most of its peer countries like the US, China, South Korea, India as well as few European countries. This signalled that this result was not due to low consumer-side demand, but due to the insufficient scaling and development of digital services by most Japanese companies. As per the report analysis, cultural, talent and organizational issues were among the top barriers for a digital shift in Japanese firms.

In another survey by Internal Affairs and Communications Ministry, only 13% of Japanese companies responded that they are working on digitization, which was far behind the 60% in the US. As per the report, over 50% of firms cited a scarcity of human resources as a barrier to promoting digital transformation.