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Chapter 2 Expanding services trade by taking advantage of Japan’s strengths
【Key points of Part II, Chapter 2】
・Although Japan’s services exports are growing, led mainly by tourism, the export ratio of services to
GDP is small compared with the ratios in other major countries. It is important to raise the productivity
of services industries and improve the investment environment in the neighboring emerging countries.
・Regarding tourism in Japan, there is a tendency that the number of nights spent and the value of per-
capita consumption are high among long-distance tourists. In order to increase the value of per-capita
tourism consumption, it is important to attract tourists from the United States and Europe, who prefer
long stay.
Section 1 Potentials of services trade
1．Japan’s strengths and weaknesses as viewed through the services trade balance
As shown in the previous chapter, Japan’s services trade in 2015 hit a record high of 19.7 trillion
yen (up 13.9% compared with the previous year) as a result of the effects of structural changes in
emerging countries and the shift of priority in industry to services. The increase in the export value may
partly reflect the effects of the yen’s depreciation, but the fact that the increase is far larger than the
growth in the value of goods trade (up 3.45% compared with the previous year) suggests that factors
particular to the services trade caused the sharp increase. While the value of services imports also
increased to 21.2 trillion yen, the deficit in the overall services trade balance is shrinking, mainly because
of a steep increase in travel exports due to growth in the number of tourists to Japan (Figure II-1-1-20;
indicated earlier).
Figure II-1-1-20 Change in the amount of Japan’s service imports and exports (trillion yen)
(repost)
Source: “Balance of Payments” (Ministry of Finance)
401
In 2015, Japan’s services trade deficit was 1.7 trillion yen, a significant improvement from the deficit
of 4 trillion yen in 2005.
By item, the balance relating to travel improved from a deficit to a surplus (an increase of 3.9 trillion
yen) due to a rise in the number of tourists to Japan. The second largest contributing factor of the
improvement of the services trade balance was an increase in the balance relating to charges for the use
of intellectual property n.i.e., mainly royalties (an increase of 2.0 trillion yen).
Meanwhile, as the balance relating to professional services33 (a deficit of 2.5 trillion yen) and the
balance relating to telecommunications, computer and information services (a deficit of 0.8 trillion yen)
made negative contributions, the overall services trade balance remained in a deficit (Table II-2-1-1 and
Figure II-2-1-2).
Table II-2-1-1 Changes in the services trade balance (Japan)
(100 million yen)
2005 2015 Changes
Services account balance -40,782 -16,784 23,998
Contract manufacturing
services -5,521 -5,154 367
Maintenance and repair services -329 -3,362 -3,033
Transport -5,021 -6,624 -1,603
Travel -27,659 10,905 38,564
Construction 2,700 2,957 257
Insurance and pension services -1,170 -3,824 -2,654
Financial services 2,608 5,200 2,592
Royalties and license fees 3,289 23,750 20,461
Telecommunications, computer
and information services -1,695 -9,926 -8,231
Professional services -7,605 -32,799 -25,194
Personal, cultural and
recreational services -1,122 -766 356
Public services, etc. 740 2,857 2,117
Note: Figures for 2005 are cited from the Historical Data Rearranged Based on the BPM6.
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
33 Refer to Part 1, Chapter 3. Section 1.
402
Figure II-2-1-2 Changes in services account balance (Japan) (on the yen basis)
Note: Figures for 2005 are cited from the Historical Data Rearranged Based on the BPM6.
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
Looking at services trade in 2015 in terms of exports and imports, the export value surpassed the
import value by a large margin in the balance relating to charges for the use of industrial property n.i.e.,
one of the items of the balance relating to charges for the use of intellectual property n.i.e., which led
the services trade surplus. On the other hand, in the balance relating to professional services, although
the export value was large, the import value was much larger, and this was the main negative contributing
factor of the overall services trade balance.
Over the past three or four years, there have been significant changes in the balance relating to
charges for the use of intellectual property n.i.e., the balance relating to professional services and the
balance relating to travel, all of which have a large impact on the services trade balance, according to
data concerning the trend in the past 10 years (Figure II-2-1-3).
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Government-related
Personal, cultural and recreational services
Professional services
Telecommunications, computer and information services
Royalties and license fees
Financial services
Insurance and pension services
Construction
Travel
Transport
Maintenance and repair services
Contract manufacturing services
Services account balance
(Billion yen)
(Year)
403
Figure II-2-1-3 Services account balance and import and export values (Japan) (2015)
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
Note: Figures for 2005 are cited from the Historical Data Rearranged Based on the BPM6.
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
-515 -336 -662
1,091 296
-382
520
2,375
3,130
-755 -993
-3,280
-1,325
-76
286
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
Contract m
anufactu
ring
Main
tenan
ce and
repair
Tran
sport
Trav
el
Constru
ction
Insu
rance an
d p
ensio
n
Fin
ancial
Royalties an
d licen
se fees
Charg
es for th
e use o
f industrial
pro
perty rig
hts
Charg
es for th
e use o
f copyrig
hts
Teleco
mm
un
ication
s, com
puter
and in
form
ation
Pro
fessional serv
ices
Research
and d
evelo
pm
ent
Perso
nal, cu
ltural an
d
recreation
al
Public serv
ices, etc.
Import value (reversed) Export value
Trade balance
(Billion yen)
Breakdown of royalties and license fees
Breakdown of
professional services
(Overall)
329 536 773 764
453 694 790 957
1,342 1,750
2,375
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Royalties and license fees)
Import value (reversed) Export value Balance
(Billion yen)
(Year)
404
Note: Figures for 2005 are cited from the Historical Data Rearranged Based on the BPM6.
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
Note: Figures for 2005 are cited from the Historical Data Rearranged Based on the BPM6.
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
A comparison between increases in services exports and imports in Japan between 2005 and 2015
shows that export growth was higher than import growth with respect to only a handful of items,
including charges for the use of intellectual property n.i.e. and travel. With respect to
telecommunications, computer and information services, for which growth is expected due to
technological innovation in the field of information and communications in recent years, import growth
was also higher than export growth. Regarding exports, the export growth was high for personal, cultural
and recreational services although the export value was small. Regarding imports, import growth was
high for maintenance and repair services, which are manufacturing-related services. (Figure II-2-1-4).
-760 -762 -1,052 -695 -316 -550 -624 -1,563 -1,982 -2,299
-3,280
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Professional services)
Import value (reversed) Export value Balance
(Billion yen)
(Year)
-2,766 -2,141 -2,020 -1,763
-1,389 -1,288 -1,296 -1,062 -654
-45
1,091
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Travel)
Import value (reversed) Export value Balance
(Billion yen)
(Year)
405
Figure II-2-1-4 Growth rate of services imports and exports by item (Japan) (2005-2015)
Note: Annual growth rates from 2005 to 2015. Figures for the period from 2005 to 2013 are cited from
the Historical Data Rearranged Based on the BPM6.
Source: “Balance of Payments” (Ministry of Finance) and CEIC Database
Meanwhile, in the United States, which is highly competitive in the services trade, both export and
import values grew significantly for items that are presumably creating high value added through new
innovations, such as charges for the use of intellectual property n.i.e., financial services, professional
services, maintenance and repair services. Trade concerning these items is becoming increasingly active,
and the trade balance relating to them recorded a surplus in 2014. In particular, the breakdown of charges
for the use of intellectual property n.i.e., which registered the largest surplus, shows that the surplus
expanded for computer software, a field where U.S. companies are very competitive (Figures II-2-1-5
and II-2-1-6).
Maintenance and repair
Transport
Travel
Construction
Insurance
Financial
Royalties
Telecommunications,
computers and
informationProfessional
Personal
Government
0
5
10
15
20
25
-10 -5 0 5 10 15 20 25
Average a
nn
ual
grow
th r
ate
of
exp
orts
Average annual growth rate of imports
(%)
(%)
Larger
growth in
exports
Larger
growth in
imports
406
Figure II-2-1-5 Services account balance and import and export values (United States) (2014)
Source: United States Department of Commerce and CEIC Database
Figure II-2-1-6 Changes in services account balance (United States) (royalties and license fees)
Source: United States Department of Commerce and CEIC Database
14.9
-4.2 66.5
-32.7
67.8
88.2
2.6 33.8 0.1 21.3 12.3
-3.7
-150
-100
-50
0
50
100
150
200
Main
tenan
ce and rep
air
Tran
sport
Trav
el
Insu
rance
Fin
ancial
Royalties an
d licen
se fees
Teleco
mm
unicatio
ns, co
mputer
and in
form
ation
Pro
fessional serv
ices
Research
and d
evelo
pm
ent
Pro
fessional an
d b
usin
ess co
nsu
lting
Tech
nical, trad
e-related
services
and b
usin
ess services
Public serv
ices, etc.
Import value (reversed) Export value Trade balance
(Billion dollars)
Breakdown of
professional services
-20
0
20
40
60
80
100
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
OthersDistribution of movies and TV programsFranchise feesTrademarksComputer softwareCharges for the use of industrial property rightsTotal of royalties and license fees
(Billion dollars)
(Year)
407
Between 2005 and 2014, export growth was higher than import growth on average for most items,
indicating an increase in services exports. Import growth was higher than export growth for research
and development services and technical, trade-related services and business services (all of which are
component items of professional services), suggesting that the use of outsourcing services has advanced
on a global scale in these fields (Figure II-2-1-7).
Figure II-2-1-7 Growth rate of services imports and exports by item (United States) (2005-
2015)
Note: Annual growth rates from 2005 to 2014
Source: United States Department of Commerce and CEIC Database
As shown in Part I, Chapter 3, in global services trade, there was a trend of increasing exports during
the past 10 years with respect to telecommunications, computer and information services and
professional services in line with the advance of information and communications technology and the
shift of priority in industry to services.
Regarding growth sectors in which the export growth rate rose in the past 10 years, India, the United
States, China and Germany made significant contributions to the export growth for telecommunications,
computer and information services, which recorded the highest average annual growth rate of 9.7%.
With respect to professional services (average annual growth rate of 8.2%), for which trade became
active against the backdrop of the penetration of information and communications technology and the
shift of priority in industry to services, the United States, China, Germany and India also made
significant contributions to export growth. With respect to construction services (average annual growth
rate of 9.4%), which recorded growth due to the economic growth of emerging countries, China’s
Maintenance and
repair
Transport Travel
Royalties
Insurance
Financial
Telecommunications,
computer and
information
Research and development
Professional and
business consulting
Technical, trade-
related, etc.
Government
0
5
10
15
20
25
-5 0 5 10 15 20 25
(%)
(%)
Larger growth in
exports
Larger growth
in imports
Avera
ge a
nn
ua
l g
row
th r
ate
of
exp
orts
Average annual growth rate of imports
408
contribution was large. Meanwhile, Japan tended to make significant contributions to the export growth
for services related to traditional areas, such as charges for the use of intellectual property n.i.e. and
construction services, including royalty income and construction of local factories relating to Japanese
companies’ overseas expansion. (Figure II-2-1-8).
Figure II-2-1-8 Countries’ contributions to the growth rate of services exports by sector
Note: Figures are the average annual growth rates of services exports by sector from 2005 to 2014.
Source: WTO Database
Regarding the ratio of services exports to GDP in G20 countries in 2014, Japan was ranked low with
respect to most items other than charges for the use of intellectual property n.i.e. Compared with
Germany, Japan was far inferior in terms of service exports with respect to most items, indicating that
there is much room for further growth (Figure II-2-1-9).
409
Figure II-2-1-9 Ratio of services exports to GDP in G20 countries (2014)
Note: Ends of each line represent the maximum and minimum values of the ratio of services exports to
GDP in each sector among G20 countries.
Source: WTO Database and “National Accounts Aggregates” (UN Statistics)
2．Improvements of the institutional environment intended to promote services trade
As shown above, services sectors are where developed countries in particular have a strong potential
to increase income from abroad at a time when the shift of value added from goods to services is ongoing
due to new innovations.
In particular, Japan is in a different environment compared with Europe, where countries at various
different economic levels are located close to each other in free trade environment. The value of services
imports in the Asia-Pacific region, including Japan, is the second largest, after the value for Europe,
where intra-region services trade is active, and the growth potential is large. The neighboring Asian
countries, where services demand will expand in line with further economic growth, are presumed to
have high growth potential as a market (Figure II-2-1-10).
Turkey 3.7%
UK 3.1%
ROK 2.5%
India 2.7%
UK 2.5%
Japan 0.8%
France 0.6%
UK 1.1%ROK 1.2%
UK 0.1%
Turkey 0.2%
0.3%0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Japan 0.4%
Japan 0.8%
Japan 0.9%
Japan 0.1% Japan 0.2% Japan 0.1% Japan 0.0%
Japan 0.3% Japan 0.1%
Japan 0.0%
Germany 1.1%
Germany 2.0%
Germany 1.5%
Germany 0.8%Germany 0.5%
Germany 0.4%
Germany 0.3%Germany 0.3%
Germany 0.1%
Trav
el
Pro
fessional serv
ices
Tran
sport
Teleco
mm
unicatio
ns,
com
pu
ters and in
form
ation
Fin
ancial
Royalties an
d licen
se fees
Pro
du
ct-related
Insu
rance an
d p
ensio
n
Constru
ction
Pu
blic serv
ices, etc.
Perso
nal, cu
ltural an
d
recreational
410
Figure II-2-1-10 Changes in the value of services imports (by region)
Note: The above figure shows the total of the import values of the countries belonging to each region.
As for the Middle East and Africa, the average annual growth rate is calculated for the period from 2005
to 2012.
Source: “WDI” (World Bank)
Below, we will look at the improvements of the services trade environment that should be made as
a foundation for invigorating Japan’s services trade.
(1) Japan’s services exports still facing high barriers
Regarding services trade, there are non-tariff barriers related to domestic institutions and national
cultures and customs, so it is said that services trade involve more diverse challenges than goods trade,
such as the need for coordination of interests within countries and inter-governmental negotiations that
take into consideration the circumstances of individual countries, including lifestyle habits34.
Meanwhile, empirical studies conducted at the company level suggest that compared with European
companies, Japanese companies may be facing higher barriers in services exports.
According to the results of the analysis of the impact of differences in productivity between
individual companies on the presence or absence of services exports that was conducted by the Research
Institute of Economy, Trade and Industry based on raw data obtained through the Basic Survey of
Japanese Business Structure and Activities35, Japanese companies exporting services are rather smaller
34 Ito and Ishido (2012). 35 Morikawa (2015)
9.1
6.2
7.3
11.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
500
1,000
1,500
2,000
2,500
2005 2013 2005 2013 2005 2013 2005 2012
Asia and Pacific Europe and Central
Asia
Americas Middle East and
Africa
(Billion dollars)
Other services
Financial and insurance
Transport
Travel
Average annual growth rate from 2005 to 2013 (right axis)
(%)
411
in number (approx. 6% of the total) than those exporting goods (approx. 21%)36 and those exporting
neither goods nor services (approx. 77%), their size (in terms of the number of employees) is large, their
total factor productivity (TFP) is high, and their wages are high in many cases. Even if the effects of
such factors as the company size and the type of industry are excluded, TFP and the average wage are
higher for Japanese companies exporting services37 (Figures II- 2-1-11 and II-2-1-12). These results
suggest the possibility that Japanese companies hesitate to start services export because they have to
bear a higher fixed cost than if they start goods export38. On the other, the results of previous studies
concerning the United Kingdom and other European countries39 do not provide indications that the
fixed cost necessary for services export is higher than that necessary for goods export. It is difficult to
quantitatively show what notable costs Japanese companies face in exporting services compared with
European companies, but it is possible, for example, that services export is affected by such factors as
the depth of history behind the development of services trade, the distance to export destinations40,
language barriers and the state of regulation in export destinations. In the next paragraph, we will review
the state of regulation in export destinations based on statistics prepared by the OECD.
Figure II-2-1-11 Distribution of TFP of non-exporters, goods exporters and services exporters
Source: “Services Trade and Productivity” (Morikawa) (2015)
http://www.rieti.go.jp/jp/publications/summary/15020002.html
36 Including companies exporting both goods and services. TFP and the average wage are even higher for
such companies. 37 It is said that in services trade, the ratio of trade between affiliated companies is higher than in goods
trade. 38 Regarding the relationship between individual companies’ productivity and export behavior, refer to
Melitz (2003). 39 Regarding previous studies in Europe, refer to Breinlich and Criscuolo (2011) and Haller, Damijan,
Kaitila, Kosteve, Maliranta, Milet, Mirza and Rojec (2014). 40 The results of one study show that services trade is affected more by the distance between the exporting
and importing countries than goods trade. Van der Marel and Shepherd (2013).
412
Figure II-2-1-12 Productivity of and wages at goods and services exporters
Note: The above figure shows the difference from non-exporters (companies that do not export either
goods or services) converted to a percentage. The company size is based on the number of employees.
Figures are calculated based on pooled data from FY2009 to FY2012 (Basic Survey of Japanese
Business Structure and Activities). The results of the t-test confirmed that the differences are all
statistically significant at the 1% level.
Source: “Services Trade and Productivity" (Morikawa) (2015)
(TFP, average wage: Effects of the company size and the type of industry are excluded)
Note: The above figure shows the difference from non-exporters (companies that do not export either
goods or services) converted to a percentage. Figures are estimates based on panel data from FY2009 to
FY2012 (Basic Survey of Japanese Business Structure and Activities). Explanatory variables include
33
20.1
27.9
99.3
28.2
38.6
0
20
40
60
80
100
Company size TFP Average wage
Goods exporters Services exporters
(%)
15.2
12.2
20.6
19.0
0
5
10
15
20
25
TFP Average wage
Goods exporters Services exporters
(%)
413
dummy variables for exporters, company size (the log of the number of employees), year and three-digit
industrial classification (for the average wage, a dummy variable for the ratio of part-timers is added).
The results of the t-test confirmed that the differences are all statistically significant at the 1% level.
Source: “Services Trade and Productivity" (Morikawa) (2015)
(Reference) When companies exporting both goods and services are separated
Note: The above figure shows the difference from non-exporters (companies that do not export either
goods or services) converted to a percentage. Figures are estimates based on panel data from FY2009 to
FY2012 (Basic Survey of Japanese Business Structure and Activities). Explanatory variables include
dummy variables for exporters, company size (the log of the number of employees), year, and three-
digit industrial classification (for the average wage, a dummy variable for the ratio of part-timers is
added). The results of the t-test confirmed that the differences are all statistically significant at the 1%
level.
Source: “Services Trade and Productivity" (Morikawa) (2015)
(2) Initiatives to improve the services trade environment in countries around the world
As the liberalization of services trade is expected to improve efficiency and economic welfare
through competition as in the case of goods trade, negotiations regarding the liberalization of services
trade have continuously been conducted under the frameworks of the WTO and FTAs/EPAs, mainly
among developed countries. In order to facilitate such international negotiations, the OECD has built a
database of restrictive measures concerning services sectors in individual countries and developed the
Services Trade Restrictiveness Index (STRI), which helps to identify restrictive measures.
The STRI has identified services trade-related restrictive measures related to five policy areas,41
41 Regulatory transparency, barriers to competition, other discriminatory measures, restrictions to
movement of people and restrictions on foreign entry.
13.8
10.8
19.9
17.1
21.3
19.0
0
5
10
15
20
25
TFP Average wage
Pure goods exporters Pure services exporters Goods and services exporters
(%)
414
including market entry from abroad and movement of people, in 22 services sectors 42 in 42
countries/regions around the world consisting mainly of OECD countries4344.
A look at the STRI scores concerning individual sectors shows that non-OECD countries, mainly
emerging counties, are generally adopting stronger restrictive measures concerning services trade than
OECD countries. In particular, the gap between non-OECD countries and OECD countries in the degree
of restrictiveness is large mainly in such sectors as rail freight transport, insurance and courier services
(Figure II-2-1-13).
Figure II-2-1-13 Comparison between OECD countries and non-OECD countries in terms of
OECD Services Trade Restrictiveness Index (STRI) (2015)
42 Computer, construction, architecture, engineering, legal, accounting, telecommunication, distribution,
broadcasting, motion pictures, sound recording, commercial banking, insurance, air transport, maritime
transport, road freight transport, rail freight transport, courier, logistics (cargo handling, storage and
warehouse, freight forwarding and customs brokerage). 43 The 34 OECD countries and Brazil, China, Colombia, India, Indonesia, Latvia, Russia and South Africa. 44 Regarding the STRI, attention should be paid to the following points:
(i) The STRI in the air and road transport sectors covers only the provision of services currently provided
through local business bases and related movement of people.
(ii) In principle, the STRI is constructed as follows: the presence or absence of each of the regulations that
are components of the STRI is converted into binary scores, zero and one, and weights are assigned to the
scores based on the importance of individual regulations in each policy area so that the aggregate of the
scores takes a value between zero and one. In addition, consideration is given to the correlation between
regulations: such as that found between the presence or absence of restriction on foreign investment and the
requirements concerning company executives’ nationality and country of residence. Regarding the strength
of restrictive measures, while the STRI indicates the height of barriers on entry by foreign companies in a
certain sector as a whole, it does not indicate the strength of the individual regulations that constitute the
sector because the regulations are represented by binary data that indicate either their presence of absence,
rather than their strength.
(iii) The STRI is a composite index composed of indicators concerning regulations common across sectors
and regulations particular to individual sectors. As a result, although a certain degree of comparability
between sectors is ensured, the comparison would not be ideal because of differences between sectors in
the composition of regulations.
0
0.2
0.4
0.6Accounting
Architecture
Engineering
Legal
Motion pictures
Broadcasting
Sound recording
Telecommunications
Air transportMaritime transport
Road transport
Rail transport
Courier
Distribution
Commercial banking
Insurance
Computer
Construction
Average of OECD countries Average of non-OECD countries
415
Note: When the services are totally open for trade investments, the STRI value is 0; when they are totally
closed for trade investments, the STRI value is 1. The average of OECD countries and that of non-
OECD countries are the simple average of countries for which data is available. The data is as of 2015.
The above figure is an excerpt from the 22 service fields.
Source: OECD Stat
Note: The above figure shows the values of simple average of non-OECD countries from which the
simple average of OECD countries is subtracted. A larger value means that nonrestrictive measures in
non-OECD countries have greater effects in the sector. The data is as of 2015. The above figure is an
excerpt from the 22 service fields.
Source: OECD Stat
Looking at the height45 of individual countries’ trade barriers by services sector and by policy area
(type of restriction), we can see that trade barriers are high in Indonesia, India and China, which are
included among countries regarded by Japanese companies as important destinations for overseas
expansion and export, in the telecommunications sector, which constitutes the foundation of the new
trends in services trade that have been described so far in this white paper. The high STRI scores of
these countries presumably reflect the characteristics of this sector, such as the strong tendency to
introduce restrictions on foreign investment because of the importance of the sector and the
underdevelopment of measures to promote competition in the network industry46 (Figure II-2-1-14).
45The value of zero indicates that the market is completely open to trade and investment, while the value of
1 indicates that the market is completely closed to entry by foreign service businesses. 46 OECD (2014).
0
0.05
0.1
0.15
0.2
0.25
Rai
l tr
ansp
ort
Insu
ran
ce
Co
uri
er
Tel
ecom
mu
nic
atio
ns
Co
mm
erci
al b
ankin
g
Bro
adca
stin
g
Mo
tio
n p
ictu
res
Air
tra
nsp
ort
Dis
trib
uti
on
Co
nst
ruct
ion
Acc
ou
nti
ng
Leg
al
Co
mp
ute
r
Mar
itim
e tr
ansp
ort
So
un
d r
eco
rdin
g,
Arc
hit
ectu
re
Road
tra
nsp
ort
En
gin
eeri
ng
416
Figure II-2-1-14 OECD Services Trade Restrictiveness Index (STRI) (2015)
(telecommunications)
Source: OECD Stat
The gap between non-OECD countries and OECD countries in the degree of restrictiveness is
relatively small. However, trade barriers tend to be higher in Indonesia, India and China with respect to
legal and other business services for which developed countries in particular are competitive and which
are very important for business expansion into new sectors by companies in manufacturing and other
sectors and for various aspects of corporate activities in foreign markets. Regarding the type of
restriction, it is notable that the restriction on movement of people, as well as the restriction on market
entry from abroad, is strong due to the requirement for professional qualifications (Figure II-2-1-15).
0.0
0.1
0.2
0.3
0.4
0.5
0.6
Ind
on
esiaB
razilR
ussia
Ind
iaC
hin
aS
ou
th A
fricaIcelan
dC
anad
aIsraelC
hile
RO
KM
exico
New
Zealan
dS
witzerlan
dC
olo
mbia
Tu
rkey
Au
straliaN
orw
ayS
pain
Fin
land
Czech
Polan
dJap
anS
loven
iaU
KE
ston
iaF
rance
Germ
any
ItalyN
etherlan
ds
Sw
eden
Belg
ium
Au
striaU
SL
atvia
Lu
xem
bou
rgH
un
gary
Slo
vak
iaG
reeceP
ortu
gal
Ireland
Den
mark
Regulatory transparency Barriers to competition
Other discriminatory measures Restrictions to movement of people
Restrictions on foreign entry Average
Average
417
Figure II-2-1-15 OECD Services Trade Restrictiveness Index (STRI) (2015) (legal services)
Source: OECD Stat
Restrictive measures against services trade captured as numerical data in the form of the STRI are
presumably intended primarily to restrict services import out of concern over possible effects on
domestic industries. However, an analysis conducted by the OECD47 using the STRI pointed out that
services trade barriers also affect the competitiveness of domestic industries.
According to this analysis, in several sectors, services trade barriers are affecting not only services
imports but also services export, and the impact on exports is greater than the impact on imports. The
analysis results indicate that a decline in the STRI concerning business services, including legal and
accounting services, transport services (air and maritime transportation) and computer services, would
expand not only imports but also exports in these sectors (Figure II-2-1-16).
47 OECD (2015).
0.0
0.2
0.4
0.6
0.8
1.0
Luxem
bou
rgP
olan
dIn
dia
Indon
esiaH
un
gary
Iceland
Slo
vak
iaT
urk
eyR
OK
Ch
ina
Slo
ven
iaE
ston
iaG
reeceF
rance
Sw
itzerland
Austria
Brazil
Ru
ssiaS
pain
IsraelD
enm
arkC
zechP
ortu
gal
South
Africa
Germ
any
Mex
icoB
elgiu
mJap
anN
orw
ayN
etherlan
ds
ItalyN
ew Z
ealand
Ireland
US
Sw
eden
Fin
land
UK
Ch
ileA
ustralia
Can
ada
Colo
mbia
Latv
ia
Regulatory transparency Barriers to competition
Other discriminatory measures Restrictions to movement of people
Restrictions on foreign entry Average
Average
418
Figure II-2-1-16 Impact of a reduction in the STRI by 0.05 on imports and exports
Source: “The impact of services trade restrictiveness on trade flows: first estimates” (OECD) (2015)
It was also indicated that a decline in the STRI would affect not only services export itself but also
the functions of services sectors as the foundation of other industries. For example, the lower the STRI
concerning respective sectors is, the greater the positive impact will be on the number of Internet
connection contracts, which is an indicator of the foundation of the information and communications
sector, the ratio of loans to the domestic private sector to GDP, which is an indicator of corporate
investments, and time spent on transportation, which is an indicator of the competitiveness of goods
exports.
These results suggest the possibility that impediments imposed by services trade barriers on the
competitive environment not only have the effect of protecting domestic industries but also undermine
cost reduction and other efficiency improvements and the incentive for business innovation and
expansion, thereby lowering international competitiveness48.
On the other hand, given that services trade barriers are rooted in the circumstances of individual
countries, such as lifestyle habits, it is very important to deepen cooperation, including dialogue, among
governments and at the private sector level. In light of the STRI scores and the evaluation of the results
of the analysis based thereon, it is presumed that there is a growing need to develop a mutually beneficial
environment that enables countries to enjoy the benefits of trade facilitation through various channels,
including the frameworks of the WTO and FTAs and EPAs and dialogue between relevant countries.
3．Domestic initiatives and future challenges
As shown in Part I, Chapter 3 and elsewhere in this white paper, in view of the growing demand for
services in not only developed countries but also emerging countries and developed countries’ advantage
in services trade, Japan may have a better chance to increase services trade and income from it in the
future. On the other hand, in light of the current status of Japan’s services trade, it is necessary to promote
the expansion of exports in new sectors in addition to promoting services exports related to
manufacturers’ overseas expansion, such as charges for the use of intellectual property n.i.e, which has
been one of Japan’s strengths.
In particular, in view of the recent trends in countries which have an advantage in services trade, it
48 However, these results do not indicate whether the effects of a decline in the STRI are caused by
domestic companies’ improved efficiency or by the entry of foreign companies into the domestic market.
(a) On imports (b) On exports
419
is an urgent challenge to continuously earn income globally by promoting platform-based businesses
using the evolving information and communications technology and existing goods and services as
infrastructure, such as the industry-led platform that was mentioned in Part I, Chapter 3, Section 2. For
example, there is an urgent need to develop, and implement measures to support business models—such
as manufacturing-related services, which were mentioned in Part I, Chapter 3, Section, 1—that connect
the strengths of Japanese manufacturing industries: which have maintained a high level of
competitiveness in the world, with data obtained from goods in a strategic manner. Regarding this point,
related challenges and Japanese initiatives will be discussed in detail later in this section. Continuing to
increase services exports in the travel sector, an area which has been growing significantly in recent
years, is presumed to be a very important factor not only for the Japanese economy as a whole but also
for the survival of the main industries that could earn income externally, particularly in regions receiving
tourists. Therefore, this point will be analyzed in detail in the next section.
In addition, in Japan, where the shift to services has advanced, it is also important to invigorate
services trade in services industries themselves49, which account for around 70% of GDP, and promote
the globalization of these industries, including their overseas expansion. Below, we will look at the
current status of the globalization of Japan’s services industries as viewed through the trend in foreign
direct investment and example cases of new globalization trends.
(1) Status of outward foreign direct investment by Japan’s services industries
Outward foreign direct investment may be characterized as a mode of services export whereby
services are provided to consumers through local bases established by service providers because of the
constraint of the simultaneity of the production and consumption of a service50.
Looking at the growth in services trade and the balance of outward foreign direct investments by
services industries in OECD member countries, we can see that countries with higher growth in the
balance of such investments tend to record higher growth in the value of services exports. Outward
foreign direct investment has a strong correlation with charges for the use of intellectual property n.i.e,
among other component items of services exports, indicating that local affiliates’ sales are repatriated in
the form of royalties (part of charges for the use of intellectual property n.i.e) in services trade.
As for the trend in the relationship between the balance of outward foreign direct investments and
the value of services exports, Japan is located far below the trend line due to factors related to the growth
rate of overall services export. In other words, the growth in the value of services exports from Japan is
low relative to the growth in the balance of outward foreign direct investments by the country in the
services sector compared with the trends in other countries. Regarding the trend in the growth in charges
49 In this section, the analysis covers services industries as broadly defined. The services industries as
broadly defined correspond to the following categories in the Japan Standard Industrial Classification
(revised in November 2007): “D Construction,” “G Information and communication,” “H Transport and
Postal activities,” “I Wholesale and retail trade,” “J Finance and insurance,” “K Real estate and goods
rental leasing,” “L Scientific research, professional and technical services,” “M Accommodations, eating
and drinking,” “N Living-related and personal services and amusement services,” “Education, learning
support” and “P Medical, healthcare and welfare,” “Q Compound services” and “R Services n.e.c.” 50 This corresponds to the third mode according to the classification under the General Agreement on Trade
in Services (GATS).
420
for the use of intellectual property n.i.e relative to the growth in the balance of outward foreign direct
investments, Japan is also below the trend line, although not so much as in the case of the trend in the
growth of overall services exports (Figures II-2-1-17 and II-2-1-18).
Figure II-2-1-17 Growth rate of the value of services exports and outward foreign direct
investments in the services sector (2006-2012)
Note: Average annual growth rates from 2006 to 2012
Source: WTO Database and OECD Stat
France
Germany
Hungary
Iceland
Ireland
Italy
Japan
ROK
Luxembourg
Sweden
Turkey
UK
US
Austria
Czech
Denmark
Finland
Norway
Chile
Estonia
Slovenia
Switzerland
Poland
y = 0.1089x + 5.1351R² = 0.336
0
2
4
6
8
10
12
-10 0 10 20 30 40 50 60
Aver
age
annual
gro
wth
rate
of
the
valu
e of
serv
ices
ex
port
s
Average annual growth rate of outward foreign direct investments in the services sector
(%)
(%)
421
Figure II-2-1-18 Growth rate of the value of services exports and outward foreign direct
investments in the services sector (royalties and license fees)
Note: Average annual growth rates from 2006 to 2012
Source: WTO Database and OECD Stat
The breakdown of outward foreign direct investment by country shows that the United States has
the largest balance of investment. In the case of Japan, although the balance has been growing at a faster
pace than the balance of the United States and European countries, the absolute level of the balance is
much lower. As for the ratio of the balance of outward foreign direct investments to GDP, the ratio for
Japan is relatively low, meaning that there is large room for the country to promote the expansion of
foreign direct investments by services industries more actively to catch up with the United States and
European countries51 (Figures II-2-1-19 and II-2-1-20).
51 Because of changes in the standards of statistics related to the international balance of payments, there is
no continuity between data for 2013 and earlier and data for 2014 and thereafter.
Germany
Hungary
JapanROK
Luxembourg
Sweden
UK US
Austria
Czech
DenmarkNorway
Chile
EstoniaSwitzerl…
Poland
y = 0.6651x + 4.2598R² = 0.4505
-10
0
10
20
30
40
50
60
-10 0 10 20 30 40 50 60
Aver
age
annual
gro
wth
rate
of
the
valu
e of
serv
ices
ex
port
s (r
oyalt
ies
and l
icen
se f
ees)
Average annual growth rate of outward foreign direct investments in the services sector
(%)
(%)
422
Figure II-2-1-19 Changes in the balance of outward foreign direct investments (services
industries)
Note: Due to changes to the BPM6, the data for 2013 and 2014 is not continuous with the data for 2012
and before.
Source: OECD Stat
Figure II-2-1-20 Changes in the balance of outward foreign direct investments (services
industries) (ratio to GDP)
Source: OECD Stat
17.8
4.5
7.4
25.0
1.2
11.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2006
2012
2014
2006
2012
2013
2006
2012
2014
2006
2012
2013
2006
2012
2013
2006
2012
2014
Japan Germany France ROK UK US
Services industries Average annual growth rate (2006-2012)
(Billion dollars) (%)
(Year)
3.52.8
12.6
4.4
1.5
8.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
10
20
30
40
50
60
2006 2012 2006 2012 2006 2012 2006 2012 2006 2012 2006 2012
Japan Germany France ROK UK US
Services industries Growth from 2006 to 2012
(%) (%)
423
A look at the share of industries in the balance of investments shows that the financial services
industry52 and other services industries from the United States, the United Kingdom and France have
been active in expanding abroad. On the other hand, in the case of Japan, the shares of industries related
to goods exports, such as manufacturing and wholesale and retail trade, are large, while services
industries other than financial services have not been active in foreign investments (Figure II-2-1-21).
Figure II-2-1-21 Shares of industries in the balance of outward foreign direct investments
(2014)
Note: As for Germany, the ROK and the UK, the data is as of 2013. Investments in activities of parent
companies are excluded.
Source: OECD Stat
Next, with respect to the return from outward foreign direct investments by services industries, the
United States is ranked first in terms of both the value and rate of return. Japan is ranked third in terms
of the rate of return, after the United States and the United Kingdom, although its value of return is not
large (Figure II-2-1-22).
52 Investments in holding companies in the financial industry and investments in local subsidiaries in other
services industries are excluded from the share because data on such investments that is classified by
industry is not available.
28.8
30.4
46.2
48.0
21.4
25.9
23.5
7.6
19.2
5.3
25.7
32.5
3.9
4.1
2.6
4.9
12.2
11.2
0 20 40 60 80 100
France
Germany
Japan
ROK
UK
US
Mining Manufacturing
Wholesale and retail trade Transport and storage
Information and communication Finance and insurance
Real estate Other services industries
Others
(%)
424
Figure II-2-1-22 Value of return from outward foreign direct investments and rate of return
(value of return/balance) (services industries)
Source: OECD Stat
Looking at the shares of industries in the value of return, we can see that outward foreign direct
investments by the United States and Europe are made mainly in non-manufacturing industries unlike
investments by Japan and the ROK, which are made mainly in manufacturing industries. As in the case
of the value of investments, the shares of industries related to goods exports, such as manufacturing and
wholesale and retail trade, in the value of return are large in Japan while the shares of services industries
other than financial services are small (Figure II-2-1-23).
5.6
2.4
3.8
6.6
8.8
0
1
2
3
4
5
6
7
8
9
10
0
50
100
150
200
250
300
350
400
2014 2011 2013 2013 2014
Japan France ROK UK US
Value of return Rate of return
(%)(Billion dollars)
425
Figure II-2-1-23 Shares of industries in the value of return from outward foreign direct
investments (2014)
Note: The data for France is as of 2011, and for the ROK and the UK 2013.
Source: OECD Stat
Regarding the rate of return by industry, the rate of return is high for most industries in the United
Kingdom and the United States, whereas in Japan, the rate of return is low for sectors growing through
new innovations, such as information and communications and other services, indicating that there is
large room for growth in terms of both the balance of and return from outward foreign direct investments
(Figure II-2-1-24).
34.5
52.7
78.2
19.4
15.2
9.4
13.9
37.1
2.5
7.0
18.6
15.0
31.4
59.9
5.3
2.7
2.1
18.0
7.6
-20 0 20 40 60 80 100 120
France
Japan
ROK
UK
US
Mining Total of the manufacturing industry
Wholesale and retail trade Transport and storage
Information and communication Finance and insurance
Real estate Other services industries
Others
(%)
426
Figure II-2-1-24 Rate of return from outward foreign direct investments (value of
return/balance)
Note: The data for France is as of 2011, and for the ROK and the UK 2013.
Source: OECD Stat
(2) New trends in and challenges for Japan’s services trade
(A) Japan’s services trade starting to broaden in scope
Regarding overseas expansion by Japan’s services industries as seen from the viewpoint of outward
foreign direct investment, financial services have been relatively active in such expansion, and a closer
look by sector shows new trends in various sectors (Table II-2-1-25).
Table II-2-1-25 New trends in Japan’s services trade
Industry Example
Finance
Not only the mega banks but also local banks and shinkin banks are increasing
the number of their overseas branches in line with the globalization of local
companies. Some of them have started financing business, too. The life
insurance industry is expanding its share by introducing the “salesladies”
model from Japan.
Food and
drinks
With a Japanese food boom ongoing, an increasing number of companies are
expanding their business to overseas, mainly to Asian countries. The scope of
-2
0
2
4
6
8
10
12
14
Over
all
Tota
l of
man
ufa
cturi
ng i
ndust
ries
Tota
l of
serv
ices
indust
ries
Whole
sale
and r
etai
l tr
ade
Tra
nsp
ort
and s
tora
ge
Info
rmat
ion a
nd c
om
mun
icat
ion
Fin
ance
and i
nsu
rance
Rea
l es
tate
Oth
er s
ervic
es in
dust
ries
France Japan ROK UK US
(%)
427
their business is not limited to serving Japanese food, but also includes
integrated provision of healthy foods and services and retail of Japanese food
products.
Retail
・Convenience stores established overseas are starting to provide more diverse
services, such as restaurant and logistics services.
・The convenience store industry and JETRO have established a council to
promote their coordination for overseas expansion of convenience stores
utilizing the TPP and for support for the sale of small and medium-sized
companies’ products in overseas stores.
Medical,
nursing and
healthcare
Companies are establishing business bases for providing nursing care and
health checkup services in emerging countries. Some companies have also
launched coordination services for medical tourism projects in Japan, etc.
Education
Due to the declining birth rate in Japan, there are increasing incentives for
companies to expand their business to overseas markets. Moreover, in response
to the education fever in Southeast Asia, not only large companies but also
medium-sized local cram schools are expanding their business to overseas.
Contents
Distribution of contents aiming at the synergy effects with the countryside
tourism industry is developing. The character industry has started to out-
license the sale of goods. In order to facilitate such business, companies are
also developing platforms for selling their contents.
Construction
With unique construction technologies utilizing ICTs, companies have started
to provide solutions for optimizing production plans based on data obtained
from construction machinery.
Agriculture
・Based on the analysis of such data as the growth status of crops and weather
conditions, companies have started to provide solutions for optimizing food
and agricultural value chains, such as maximized harvesting, optimal
production plans and leveling of the operation ratio of processing plants.
・Local production and sale of high-quality vegetables produced in highly
efficient plant factories
Source: Companies’ press releases
In the food sector, which has been attracting strong attention in recent years, the high standard of
Japanese foods (in terms of deliciousness) is recognized around the world. It is also said that supporting
industries that facilitate the overseas expansion of Japanese companies engaging in the restaurant
business are well developed in Southeast Asia in particular53. Moreover, there are expectations that the
popularity of Japanese foods will have spillover effects on other sectors, such as providing the
motivation for visit to Japan or promoting exports of goods related to Japanese foods.
In addition, the advance of information and communications technology in recent years has not only
53 Kawabata (2016).
428
improved the tradability of IT services but is also starting to trigger new trends, such as the creation of
new solution businesses using data obtained from products in such sectors as construction and
agriculture and overseas expansion activities that promptly reflect the local needs of IT users abroad,
including overseas expansion by small and medium-size restaurant operators using new technologies
that include free-of-charge communication via web camera and machine translation.
Furthermore, as demand is expected to grow in such sectors as healthcare, education and the
environment in line with economic growth, Japan has a strong chance to contribute to resolving
challenges faced by emerging countries in the sectors. It is possible that Japanese services industries
will increase their superiority abroad in sectors where they can exploit Japan’s reputation for the safety
of its products and services by quickly developing platforms to provide highly unique services ahead of
their foreign counterparts.
Column 10 Exports by Japan’s contents industry
Of the charges for the use of intellectual property n.i.e., which lead Japan’s service trade surplus,
charges for the use of copyrights, including charges for the use of video, music, etc. and charges for the
use of screening and broadcasting rights account for only around 6% (charges for the use of industrial
property rights account for the remaining 94%) (Column Figure 10-1)54.
Column Figure 10-1 Breakdown of royalties and license fees (2013)
Note: The data is as of 2013.
Source: “Balance of Payments” (Ministry of Finance)
Under the Trans Pacific Partnership (TPP) agreement, which was signed in February this year,
appropriate protection of intellectual property will be provided and countermeasures against counterfeit
54 Regarding the details, refer to “Part II, Chapter 2, Section 1, 1. Japan’s strengths and weaknesses as
viewed through the services trade balance.”
Charges for the use of
industrial property rights
94%
Charges for
the use of
copyrights
6%
429
and pirated products will be strengthened in member countries. Furthermore, it is expected that as a
result of relaxation of restrictions on foreign investments in theaters and easing of the requirement for
preferential treatment of domestic movies, the environment for exports of Japanese contents will be
improved, for example.
In this situation, Japan’s contents industry, which creates and distributes video (movies, animated
films and TV programs), music and games, is held in high regard abroad as a source of “Cool Japan”
culture, so it is a promising industry expected to increase income from abroad through overseas
expansion.
As for trends in the global contents market, while the market is estimated to have been growing since
2013, Japan’s contents industry has a share of only around 2.5%, so capturing global demand for
contents is a challenge (Column Figures 10-2 and 10-3).
Column Figure 10-2 Size of the contents markets in major foreign countries
1. The market size is calculated based on the final consumption expenditures, except that the size of
the advertising business is calculated based on the payments from advertising agencies.
2. Animated films are excluded from the categories of “movies” and “broadcasting.” “Comics”
include American and other foreign comics. “Sale of character goods” refers to the sale of goods
produced based on movies, broadcasting programs, animated films, comics, etc. and those produced
based on licensing agreements (however, products that fall under other categories, such as “comics”
and “games,” products related to clothes and accessories and novelty goods are excluded).
3. Total of Europe includes the Middle East and Africa. Total of Asia includes Oceania (except Japan).
Total of overseas countries does not include Japan.
Source: “Study on the Facts Concerning the Management and Utilization of Trademarks, Copyrights,
etc. in the Contents Field” (A.T. Kearney)
(Legend) Movies2 Broadcasting2 Animated films Comics2 Music Games
Sale of character goods2 CAGR (2013-2020)
(Unit: billion dollars)
Total of North America
Total of Latin America
Total of Europe3
Total of Asia3
Total of overseas countries3
United States
France
United Kingdom Germany
China
South Korea
430
Column Figure 10-3 Size of the overseas contents market and the share of Japanese contents in
sales
Source: “Study on the Facts Concerning the Management and Utilization of Trademarks, Copyrights,
etc. in the Contents Field” (A.T. Kearney)
The contents industry’s overseas expansion may have positive effects in other sectors, such as by
promoting exports of related goods and encouraging visits to Japan by people interested in Japanese
contents.
Therefore, Japan has divided the process of capturing foreign demand under the Cool Japan Strategy
into three stages—(i) creating a Japan boom abroad by communicating Japan’s attractions; (ii) selling
contents-related products and services in foreign markets; and (iii) attracting foreign visitors interested
in Japan and encouraging consumption in Japan in collaboration with tourism policy measures—and
is implementing support measures in each stage (Column Figure 10-4).
Column Figure 10-4 Three stages for capturing foreign demand under the Cool Japan Strategy
Communicating Japan’s attractions
Developing platforms for earning income in foreign markets
Attracting foreign visitors and encouraging consumption in Japan
(i) Creating a Japan boom abroad by communicating Japan’s attractions
In order to create opportunities to increase interest in Japan, the government provides support for
overseas expansion of Japanese contents, including localizing of contents such as subtitling and dubbing
and disseminates information abroad through domestic events which are well recognized internationally.
Specifically, the government is providing a comprehensive set of support measures, including
subsidizing expenditures for localizing of contents such as subtitling and dubbing and promotional
(1) Creation of a Japan boom
(2) Earning income in foreign markets
(3) Consumption in Japan
431
expenditures, including the cost of exhibiting in international trade fairs.
As for domestic events, Japan hosts Tokyo International Film Festival, Tokyo Game Show, Anime
Japan, etc. as official events of CoFesta, the largest integrated contents festival in the world which is a
collaboration of various events related to the contents industries and industries with a high degree of
affinity with contents, such as fashion and design (Column Figure 10-5).
Column Figure 10-5 28th Tokyo International Film Festival
<Logo for the 28th Tokyo International Film Festival>
<Economy, Trade and Industry Minister Hayashi attended the Festival>
(ii) Selling contents-related products and services in foreign markets
In order to secure TV channels dedicated to Japanese contents and promote sales of contents-related
products at commercial facilities, the government will help to develop platforms for earning income in
foreign markets through the dispatch of producers and such activities as matching with local companies
and test-marketing for the purpose of product development. By providing risk money through the Cool
Japan Fund, the government is also supporting the development of business bases and distribution
networks that form the infrastructure for capturing foreign demand.
(iii) Attracting foreign visitors interested in Japan and encouraging consumption in Japan in
collaboration with tourism policy measures
The government aims to attract foreign tourists and business travelers and encourage consumption
in Japan through the Visit Japan and other initiatives. The government actively disseminates information
to other countries by holding the abovementioned events in Japan, among other activities.
The government aims to capture robust foreign demand in emerging countries and elsewhere and
boost economic growth in Japan (companies’ successful business performance and creation of jobs) by
turning the attractiveness of Japanese cultures and lifestyles, including contents such as animation, TV
dramas and music as well as fashion and food, into value added through these support measures.
(B) Challenges for expanding services trade
While the scope of Japan’s services trade is starting to broaden, the expansion of services trade may
require factors different from those necessary for expanding trade in other industries because services
are intangible and how services are evaluated in a certain country is presumed to be based largely on the
country’s culture and lifestyle habits.
432
For example, it may be considered to be important to conduct marketing and develop business
models for maximizing profits in a manner tailored to individual export destination countries. In the
United States, consulting business to provide services related to such activities is actively being
conducted. In Silicon Valley and Seattle, where U.S. IT companies are clustered, business eco systems
are well developed. In these regions, it is said that the concentration of companies providing such
professional services as advertising, legal services, technical consulting, distribution and repair work is
helping IT companies concentrate on their core operations55.
On the other hand, in Japan, a lack of marketing investment and insufficient use of business services
that enable companies to concentrate on their core operations (BPO: business process outsourcing) has
been pointed out56.
In addition to marketing, according to a certain analysis based on an international comparison in
terms of investment in intangible assets 57 , including brands and human resources, the value of
investments made by Japan is small compared with investments made by other developed countries, and
in particular, Japanese investments in human resources in services industries are decreasing (Figures II-
2-1-26 to 29).
Figure II-2-1-26 Ratio of investment in brands, human resources and organizations to GDP in
major countries (cited from 2013 White Paper on International Economy and Trade)
55 Moretti (2013). 56 Ministry of Economy, Trade and Industry (2014). 57 Intangible assets comprise the following three categories of assets (Miyagawa, Edamura, Ozaki, Kin,
Takizawa, Tonogi and Harada (2015):
(i) Information assets: investments in software and databases
(ii) Innovative assets: expenditures on scientific and non-scientific research and development, expenditures
on resource development rights, and expenditures on copyrights and licensing contracts and expenditures on
new designs.
(iii) Economic competitiveness: brand assets, human resources particular to companies and costs of
organizational reforms
0
1
2
3
4
5
6
7
US
Neth
erland
s
UK
Sw
eden
Fin
land
Can
ada
Portu
gal
Fran
ce
Den
mark
Au
stralia
Germ
any
Japan
Au
stria
Italy
Spain
(%
433
Notes: The data for Japan, Canada, Portugal, Sweden, and Finland is as of 2005. The data for other
countries is as of 2006.
Source: "Science, Technology and Industry Scoreboard 2011" (OECD)
Figure II-2-1-27 International comparison of intangible assets/GDP
Source: “Investment in Intangible Assets and Economic Growth of Japan” (Miyagawa, Edamura,
Ozaki, Kim, Takizawa, Tonogi, Harada) (2015)
Figure II-2-1-28 Changes in companies’ investments in human resource development in Japan
(excluding OJT)
0
500
1,000
1,500
2,000
2,500
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
(Billion yen)
Manufacturing industries Services industries
(Year)
434
Source: Estimates by Professor Miyagawa at Gakushuin University based on the ratio of education and
training costs (off-JT) to personnel expenditures provided by the General Survey on Working Conditions
and the amount of compensation for employees provided by RIETI Japan Industrial Productivity (JIP)
Database
Figure II-2-1-29 International comparison of investment in human resource development
(excluding OJT) (ratio to GDP)
Source: Figures for Japan are based on RIETI Japan Industrial Productivity (JIP) Database. Figures for
other countries are based on “INTAN-Invest intangible investment data website.” Material provided by
Professor Miyagawa at Gakushuin University.
Generally speaking, in services industries, human resources undertaking planning, development and
provision of services are viewed as a wellspring of value added58, so there is presumably a growing need
to promote human resource development by increasing human resource investments to a level
comparable to investments made by the United States and Europe and also take measures to correct
Japan’s weaknesses, such as developing an environment that enables human resources to exercise their
potential (developing a system to provide funds and an employment system that enables a variety of
working styles, including remote working, expanding the BPO services market, etc.).
(3) Japan’s initiatives to overcome challenges
(A) Impact of the Fourth Industrial Revolution
The changes caused by IoT, big data, robotics, artificial intelligence and other advanced technologies
are proceeding at an unprecedented speed and with an unprecedented intensity. Amid these changes,
Japan Revitalization Strategy (Revised in 2015) (Cabinet decision on June 30, 2015) indicated the need
for a vision shared by the public and private sectors that will serve as a compass for the private sector
58 Ministry of Economy, Trade and Industry (2014).
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
France Germany Italy UK US Japan
1995-2000 2001-2010
(%)
435
to make appropriate investments in a timely manner and for the government to promptly improve and
revise rules in order to encourage and accelerate such investments. Based on the strategy, in August
2015, the Ministry of Economy, Trade and Industry established the New Industrial Structure Committee
under the Industrial Structure Council (chairman: Motoshige Itoh, professor, University of Tokyo).
Through this committee, the Ministry of Economy, Trade and Industry is working with other relevant
ministries and agencies to conduct a study on the changes brought about by IoT, big data, robotics and
artificial intelligence (changes in the industrial structure, employment structure and economic and social
systems) and on what actions the public and private sectors should take and when the actions should be
taken.
(a) The current situation of and challenges for Japan in the face of the Fourth Industrial
Revolution
Technological innovations brought about by IoT, big data, robotics and artificial intelligence are
causing a dramatic change that may be called the Fourth Industrial Revolution. Through the Fourth
Industrial Revolution, it has become possible to obtain, analyze and utilize a huge volume of data.
Connecting data with business has overcome information constraints and physical constraints, raising
the possibility that (i) innovative products and services will be created (change on the demand side) and
(ii) supply efficiency will rise dramatically (change on the supply side). In other words, in all industries,
new values may be created through disruptive innovations on both supply and demand sides.
The shift of the source of value to data intensifies the competition to form expectations for future
business expansion in relation to data connection points and data utilization. Expectations for future
business expansion attract funds from around the world, leading to the exponential intensification of
competition in scale and speed, and creating a world where speed is the key to success. Indeed, abroad,
companies across industries, from traditional manufacturers such as GE and Siemens to emerging IT
companies like Google and Amazon, are actively expanding in the field of the Fourth Industrial
Revolution, so now is the time to take action.
As a result of the creation of new values from data, the existing walls between industries will break
down, causing changes in the industrial structure and the employment structure with a broad range of
players involved. Furthermore, it is possible that this may lead to changes across economic and social
systems that are so rapid and drastic that they will be extremely difficult to predict at the social level,
the company level and the personal level.
(b) Social and structural challenges faced by Japan
Japan is facing a variety of social and structural challenges, including prolonged stagnation of the
potential growth rate, an aging society coupled with a low birthrate, population shrinkage and a labor
supply constraint. The Fourth Industrial Revolution has the potential to resolve such social and structural
challenges: for example, robots and artificial intelligence may make up for the labor shortage and
support the daily lives of elderly people. On the other hand, if Japan fails to seize this global trend, it
will not only lose competitiveness in the global economy but also miss the chance to resolve those social
and structural challenges, putting the sustainability of Japanese society itself at risk. Therefore, Japan
must strengthen the competitiveness of its economy and resolve the social and structural challenges at
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the same time by leading the world in the Fourth Industrial Revolution.
(c) Japan’s strategy
If Japan is to appropriately respond to the Fourth Industrial Revolution, it is necessary to first
develop a public-private strategy intended to enable Japanese companies to survive this revolution. In
other words, in order for Japan to gain a competitive advantage in the Fourth Industrial Revolution,
Japan needs to connect data with its own business strengths and develop business models speedily on a
global scale, making it clear whether they are open or closed models, and the government must support
such activity. In the field of virtual data, which is generated through web browsing (e.g. search), SNS
communications and other activities conducted in the cyberspace, foreign IT companies have a huge
advantage. Therefore, in the future, the key to success will be how to gather and utilize real data that is
obtained through sensors or other devices with respect to activities of individuals and companies in the
real world, including health information, driving data and data concerning the use of products.
At the same time, in order to respond to the Fourth Industrial Revolution, it will become necessary
at the global level to boldly change the design concept of economic and social systems and redesign the
systems so that they can flexibly respond to rapid changes that are difficult to foresee. In the face of this
drastic global change, Japan will need to regard its situation of facing various challenges earlier than
other countries as an opportunity and redesign economic and social systems in a forward-looking way
from the viewpoint of securing its national interests while leading the world. In doing so, it is important
to develop “flexible” industrial and employment structures that create various new initiatives one after
another and promote active economic and social rejuvenation based on disruptive innovation, rather
than the conventional “solid” industrial and employment structures whose emphasis is on stability based
on incremental and continuous innovations.
From this perspective, in April 2016, the New Industrial Structure Committee compiled an interim
report which proposes the long-term policy directions and measures that should be taken for the
immediate future in order to respond to the Fourth Industrial Revolution with respect to such activities
as promoting data utilization, human resource development, acceleration of innovation and technology
development, facilitation of shift of industrial and employment structure, and development of advanced
cross-sectoral systems and rules.
(B) IoT Acceleration Consortium
As a result of the rapid advance of Internet of things (IoT), big data and artificial intelligence (AI),
industrial and social structures are changing dramatically. Various countries organize initiatives
anticipating the coming change in their industrial and social structures, as represented by the Industrial
Internet Consortium in the United States and Industrie 4.0 in Germany. Under this situation, Japan also
established the IoT Acceleration Consortium (chairperson: Jun Murai, professor, Dean/Professor,
Faculty of Environment and Information Studies,Keio University) in October 2015 in order to ensure
that Japanese public and private sectors work together to develop such an environment as to promote
investments that promote advanced technologies related to IoT, big data and AI (Figures II-2-1-30 and
II-2-1-31).
437
Figure II-2-1-30 General conference of the IoT Acceleration Consortium
Source: METI
Figure II-2-1-31 Organization of the IoT Acceleration Consortium
Source: METI
This consortium organizes specific activities under four working groups with the aim of developing
a system under which government, industry and academia are engaged and cooperate with each other in
efforts to promote development and verification of advanced technologies related to IoT, big data and
AI and the creation of new business models.
(IoT Acceleration Lab)
In order to create new businesse models with IoT, it is necessary to share a vision for responding to
the Fourth Industrial Revolution with participants and to establish an ecosystem that encourages
participants to take on new challenges by promoting social implementation of pioneering projects in
various sectors.
IoT Acceleration Lab (chairperson: Kazuhiko Toyama, representative Director and CEO, Industrial
Growth Platform Inc.) was established as a joint organization among government, industry and academia
that implements following activities for pioneering IoT projects: (i) improving business environment to
strengthen cooperation between companies; (ii) providing financial support for IoT projects; (iii)
reforming regulations that are posing problems and formulating rules for those advanced projects to be
IoT Acceleration Consortium
Technology Development
Working Group (Smart IoT Acceleration Forum)
IoT Acceleration Lab IoT Security Working
Group
Data Distribution
Promotion Working
Group
438
promoted; and (iv) proposing recommendations related to the formulation of sector-by-sector strategies
for promoting IoT to the government (Figure II-2-1-32).
Figure II-2-1-32 First meeting of the Support Committee for the IoT Acceleration Lab
Source: METI
There is the Support Committee with members from both domestic and foreign regions (comprised
of 25 members, half of whom are representatives of foreign companies). At the first meeting of the
Support Committee, which was held in October 2015, many opinions were expressed from their global
perspectives, such as: “Although Japan has until now been excluded from the candidate sites for business
location because of the relative burdensomeness of doing business, there are relevant technologies and
social problems in Japan and it has the chance to implement pioneering projects to address those
problems”; and “Speed is by far the most important factor in the IoT business, so it is necessary to
develop the relevant environment for that.” In light of these opinions, as the first step, IoT Acceleration
Lab conducts such initiatives as IoT Lab Selection (IoT Project Selection Meeting) which looks for
pioneering IoT projects and IoT Lab Connection (Matching Event) which facilitates matching between
companies, organizations and local governments (Figure II-2-1-33).
Figure II-2-1-33 Venue of IoT Lab Connection (Matching Event)
Source: METI
439
Under the IoT Lab Selection, public and private sectors, including government-affiliated
organizations, financial institutions and venture capitals, work together to identify and support
pioneering IoT projects through financial support, mentor support and support for regulatory reforms in
order to promote the creation of the IoT business model and foster IoT platform.
At the first IoT Project Selection Meeting (February 2016), the 16 finalist projects were decided to
be supported, including the projects of Liquid which won the grand prize, Routrek Networks Inc. and
ABA: both of which won the second prize, from among the 252 entries (Figure II-2-1-34).
Figure II-2-1-34 IoT Lab Selection
Source: METI
IoT Lab Connection intends to facilitate matching among private companies, organizations and local
governments in order to formulate pioneering projects in various sectors.
A total of 814 people participated in the first matching event, whose themes were tourism and smart
factory.
4．Summary
In view of the growing demand for services not only in developed countries but also in emerging
countries and developed countries’ advantage in services trade, it may be said that Japan is expected to
further expand services trade and income from it. Indeed, as a result of the effects of structural changes
in emerging countries and the shift of priority in industry to services, Japan’s service trade deficit has
been shrinking.
On the other hand, Japan’s services trade depends on the balance relating to travel, which is
improving due to the increasing number of tourists to Japan, and charges for the use of intellectual
property associated with manufacturing industries’ overseas expansion which has until now been one of
Japan’s strengths. Regarding travel services, Japan’s growth in this sector has been due in large part to
an external factor, namely, the expansion of global demand for travel, as will be analyzed in detail in the
next section, and the ratio of the export value of travel services to GDP for Japan is still low compared
with the ratios for other major countries. Furthermore, in new global growth sectors which are growing
through innovative technology, such as information and communication sector and business service
sector, Japan’s deficit has been expanding. Therefore, it is an urgent task to develop new business models,
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such as an industry-led platform that earns income continuously on a global scale by connecting the
strengths of Japan’s manufacturing industries: which have maintained a high level of competitive in the
world, with data obtained from goods in a strategic manner.
Japan is located in the Asia-Pacific region, which is presumed to have a high growth potential as a
market because of further growth in demand for services that will come with economic growth.
Therefore, it may be said that in services sectors, there is significant room for Japan to contribute to
resolving various challenges that may arise in the Asia-Pacific region. Indeed, at the company level,
there are already green shoots of expansion of Japan’s services trade in a variety of sectors, including
healthcare/welfare, the environment and construction.
In order to grow these green shoots, there is a strong need to develop a mutually beneficial
international environment that enables countries to enjoy the benefits of facilitation of services trade
through the frameworks of the WTO and the TPP and other economic cooperation agreements and
though dialogue between relevant countries in light of the STRI and the evaluation obtained from the
analysis based thereon. There is also a growing need for Japan to invigorate services trade through the
development of a domestic environment that encourages the use of business services and investment in
human resource and thus gain a competitive advantage in the new growth sector of the so-called Fourth
Industrial Revolution: which is rapidly advancing, by exploiting its strengths.
