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Japan must innovate to meet its demographic challenge

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Harnessing Japan’s history and culture of innovation can help its declining working population provide for the growing number of retirees

Last week, the Japanese Prime Minister Shinzo Abe gave a wide-ranging interview to the Financial Times (£) covering the Japanese economy, relations with the US and the wider geopolitics of South East Asia.

The TUC has a strong relationship with our Japanese sister organisation, RENGO, and in recent years we have worked together on a common agenda around decent jobs, fair pay and the protection of public services.

Having just returned from a week in Tokyo as the guest of the Japan International Labour Federation – along with colleagues from Germany, the US and the UK – it gives me an opportunity to share some thoughts.

Demographic and technological challenges

One of the biggest headaches facing Japan is its falling population and ageing society.

As the following graph shows, Japan had a population of 127m in 2016, which is expected to fall to 90m by 2060. Of that 90m, nearly two-fifths will be retired:

Japan's declining working age population presents a difficult challenge for policymakers

A second headache is the so-called ‘fourth industrial revolution’, which could see artificial intelligence, big data and other new technologies displacing existing jobs.

Whilst welcoming this technology, Japanese unions share the same concerns of those in the UK about how job substitution can be minimised and new opportunities created for those losing today’s jobs to automation.

But in Japan’s case, if this latest technology can be properly harnessed, it could help a smaller working population to provide for the needs of retired Japanese citizens.

Ensuring that Japan’s history and culture of innovation can deliver the right products in the right timescale is a big part of meeting this challenge.

Intelligent industrial policy

Two generations ago, Japan was at the forefront of technology. It produced leading edge consumer goods ranging from cameras to Hi-Fi. Toyota introduced the ‘Kanban’ system of production, which was widely copied by motor companies around the world.

Yet the world has moved on. Rather than a camera, many people now take photographs on their smartphones. They stream music through their computers. Some predict the end of car ownership too. None of today’s really innovative companies – Google, Samsung, Apple, Microsoft – are Japanese.

To be clear, Japan is still very innovative.

One highlight from my week in Japan was a visit to TEPIA, the Association for Technological Excellence Promoting Innovative Advances. There I met Paro, a therapeutic robot shaped like a baby seal, who works with dementia sufferers, helping to reduce their stress levels. Paro is part of Japan’s response to its ageing society. Also at TEPIA, face recognition computers tell the age and gender of visitors.

So there is no question that Japan has massive innovative capacity, but does it need something more to be a true world beater?

In my view, Japan, like the UK, needs to recognise the importance of an intelligent industrial policy and, sometimes, an active state. Japan’s Ministry of International Trade and Industry was vital in helping to move Japan from a developing economy to a developed one.

Marianna Mazzucato has captured the imagination of those wondering how active government can support developed economies, not just developing ones. The Japanese government, like its UK counterpart, needs to take this on board.

What lessons can the UK learn from Japan?

In Japan, the social partners put forward a social vision. Society 5.0 was developed by the Japanese government and Keidanren, a major business organisation, to integrate cyber space and physical space. Society 5.0 seeks to achieve the UN Sustainable Development Goals through such technological breakthroughs.

Unions in Japan are calling for this innovation to be developed through social partnership between unions and employers.

RENGO, meanwhile, speaks of five bridges of security, linking employment with education, family life, unemployment and pathways back to work, and retirement, as well as providing a bridge between non-regular and regular work.

The way forward

Japan doesn’t get everything right.

RENGO have raised concerns that its working hours are too long, which helps to explain its low productivity levels, and it has more to do to promote gender balance and reduce the gender pay gap. It’s no longer the world leader in technology it once was, and it has been stuck in deflation for too long.

However, as the FT reminds us, Shinzo Abe could soon become Japan’s longest serving Prime Minister and is looking to his legacy.

Showing the world the value of multilateralism based on fair trade rules, working with businesses and unions to create a fair growth model, based on the latest technology and harnessing Japan’s impressive innovative potential, wouldn’t be a bad place for Abe to take the Land of the Rising Sun.

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