Much of the debate about the Japanese NII has been framed around the potential revenues and jobs it would generate for many of Japan’s electronics industries by incubating a domestic market base for future exports. Such a concept is not new, of course, but instead has been the underlying rationale for Japanese high-tech industrial policy throughout the past 35 years.45
What was new during the 1993-1994 period was the unaccustomed difficulties faced by various Japanese industries, which were pinched since the bursting of the “bubble economy” led to recession and an end to four decades of almost uninterrupted economic growth. Adding to weak domestic demand, exports of Japanese-made goods were threatened by continuing endaka, or the strong yen. This meant that large Japanese electronics firms were cutting back production in the home islands, moving manufacturing to China and Southeast Asia and searching desperately for new products to manufacture in Japan to sustain both the health of their companies and, by providing jobs, their standing in Japanese political debates.
It is no coincidence that the “catch up” panic came in 1993, in the middle of a 10% two-year decline in Japan’s industrial production. (Figure 1.)
[Insert Figure 1 here.]
Advocates of NII investment have used job creation as a justification: take the oft-cited report by the MPT’s Telecommunications Council, which includes a table that explicitly equates NII with jobs [emphasis in the original]:
(annual revenues in 2010)
New markets related to the fiber-optic network ¥56 trillion
Existing multimedia markets ¥67 trillion
Total ¥123 trillion
Jobs created through the construction of the fiber-optic network
Approximately 2.43 million
Source: Telecommunications Council, 1994c, p. 14
As Stern (1994) noted, however, this employment figure would constitute a greater percentage of the labor force than the present-day auto and consumer electronics industries — combined.
Such an emphasis on domestic job creation is consistent with Japan’s postwar economic policies, but sustaining this attitude into the 1990s could potentially cause two sources of trade friction. At the high end, Japanese industries are at par with U.S. rivals in several key technologies such as large-scale telecommunications switches. But they have been behind in other network technologies such as hubs and routers, and in software. So the implication that all the jobs created by Japan’s NII will be in Japan suggests a continuing policy of favoring Japanese products over imports —which would, in turn, would create new sources of potential trade friction with the United States.
At the low end, both Japan and the U.S. are at an economic disadvantage compared to low-cost producers in the rest of East Asia, so it is natural to assume that (absent explicit governmental policy) many of the jobs involved in manufacturing mass-market consumer electronics products will be created in other East Asian nations, and not in Japan. As the wealthiest country in East Asia, Japan’s potential for political leadership in the region lies in using that wealth to promote regional economic growth. Some Asian specialists believe to continue economic growth in the region, Japan must act as a consumer market for manufactured exports from other Asian countries, the way the U.S. has for decades. Such a step would also improve the quality of life of Japanese consumers. But the tone of the NII debate shows that any shift from a producer-driven economy to a consumer-driven economy has yet to begin.
The Vision: An Information/Communications-Based Economy
Japan’s vision of the NII is still evolving, with different versions coming from various players such as MPT, NTT and MITI. The most influential government document so far has been MPT’s 1994 document “Reforms Toward the Intellectually Creative Society of the 21st century.” NTT’s NII vision is spelled out in the 1994 publication “NTT’s Basic Concept and Current Activities for the Coming Multimedia Age.” In addition the Management Coordination Agency of the Prime Minister’s office has published a plan for government computerization (MCA, 1994), and think tanks such as the Nomura Research Institute have developed their own visions of Japan’s NII (see Murakami, 1993).
The term “information/communications” is the focal point of both MPT’s and NTT’s NII visions. MPT (Telecommunications Council 1994b) speaks of a the transition from the existing socio-economic system to a different system founded on a new paradigm. That new paradigm is defined as an “intellectually creative society based on info-communications.” Likewise, NTT (1994) argues that “the information communications industry contributes to the enrichment of people’s lives and the activation of industry activities.” Each of the visions emphasizes the role of the NII in promoting future economic growth and enriching the lives of citizens.
While the notions of realizing a comfortable lifestyle and promoting mutual understanding are emphasized in MPT’s vision, those goals have been reiterated in various government visions for two decades. Why then has NII suddenly taken on such urgency in the past few years? Al Gore might be a proximate cause, but a more fundamental issue is revealed in the MPT report.
The international competitive environment is changing in step with the progress of yen appreciation and the growth of the newly industrializing countries, and Japan is increasingly shifting its production facilities overseas, especially in the manufacturing industries where competitiveness has been declining . . . (T)he shift of production overseas is continuing at a fast pace, giving rise to fears of a hollowing-out of industry. For this reason, too, it is imperative that Japan switch to a new highly productive framework for industry and employment, a framework centered on areas with high intellectual added value (Telecommunications Council 1994b, p. 2).
As this paragraph illustrates, NII in Japan is primarily a response to the declining competitiveness of Japanese industry. Building the NII would respond to the challenges of endaka and hollowing-out in two critical ways. First, it would create new economic activities to replace activities that will inevitably continue to move offshore in response to endaka. The new activities would include production of intellectual property, such as software, information content, entertainment and information services. They would also include production of new multimedia and telecommunications equipment in which Japan could leverage its existing strengths in hardware technology to create a competitive advantage.
Second, the creation of an advanced national information infrastructure would help make existing industries more productive and competitive through the application of network technologies within and among corporations. A specific concern expressed in Japan is that the U.S. NII will give American companies a competitive advantage, and it is clearly expected that Japanese companies need access to a comparable infrastructure to compete.
The elements of Japan’s NII vision focus on creating an information/communications-based economy, and the benefits expected to spring from such an effort. They include: producing new multimedia products and services; installing a nationwide broadband, fiber-optic telecommunications infrastructure; creating hardware products that can be manufactured domestically; developing software capabilities; and improving productivity of the economy through application of information and communications technologies.