Abenomics’ Third Arrow: Fostering Future Competitiveness?

Abstract

The state of Japan’s economy played a significant role in the 2017 House of Representatives election, but not in the way that it had during the almost three decades since economic growth slowed dramatically in the early 1990s. The “third arrow” of Abenomics was not a point of electoral vulnerability for the LDP, and did not see significant electoral contention. However, Japan has witnessed an impressive number of reforms. Much of the specific industrial technology targeting resembles previous historical industrial policy, but there is at least normative support for many of the underlying institutions of the Silicon Valley model in finance, human capital, university-industry-government ties, and supporting entrepreneurship.

Appendix: Selected Abenomics third arrow KPIs and progress so far

1.	Health, Medicine, and Caregiving
1.1a	By 2020, extend the “healthy life expectancy” from the 2010 level (male = 70.42, female = 73.63) by one year. (Revised in 2014 to “extend two years by 2025)	• 2013: life expectancy for males = 71.19, for females = 74.21
1.2b	By fiscal year 2020, increase the proportion of large hospitals (with over 400 beds) utilizing electronic medical records to 90%	• 2014 (October): 77.5%c
1.3	By 2020, implement 20 cases of clinical trials and studies based on registered data of patients and diseases	• 2015: 31 doctor-initiated clinical trial notificationsd
1.4b	By 2020, establish around 20 Japanese medical centers abroad (revised in 2017 from ten by 2020. There was one in 2013)	• 2016: 13e
1.5	By 2030, increase the overseas market for Japanese medical technology and services to ¥5 trillion (¥4 billion in 2010)	• 2015: the export value of pharmaceuticals was about ¥153.5 billion, and about ¥622.5 billion for medical equipment.f
1.6	By 2020, increase the market size for robotic devices in nursing care to ¥50 billion	• 2015: ¥2.47 billion
1.7	By 2030, increase the number of robotic devices for nursing case to 8000 units	• Unclear
2.	Advancement of Mobility Services, Eliminating “Mobility Disadvantaged” People, and Transforming Logistics
2.1	By 2020, increase the share of new passenger cars equipped with an automated braking system to over 90%	• 2015: share of new passenger cars equipped with automated braking system = 45.4%   **New KPI
2.2a (partial)	Increase the share of vehicles (stock) with driving safety support devices/systems to 20% by 2020, and obtain 30% of the world market	• 2015: share of vehicles equipped with safety support devices/systems = 6.5% • 2014: 40.5% of the world market
2.3	Increase the share of vehicles with driving safety support features/systems to approximately 100% of Japan’s entire domestic stock of vehicles	• 2015: new cars equipped with driving safety support features/systems = 42.4% • Domestic stock of vehicles equipped with driving safety support features/systems = 6.5%
3.	Realize Smart Supply Chains
3.1	Improve the labor productivity in manufacturing industries by more than 2% per annum	• 2013–2015: average growth rate = 1.4%
3.2b	By 2020, increase the proportion of companies that collect data in their factories and facilities to 80%, with 40% of firms using the collected data to solve concrete management issues	• 2016: 67%, 40%   **New KPI
4.	Increasing the Productivity of Infrastructure and Increase the Competitiveness of Metropolitan Areas
4.1	By 2025, improve the productivity of construction sites by 20%	**New KPI
4.2a	By 2020, enable Tokyo to achieve a top three ranking in the Global Power City Index	• 2016: 3rd
4.3	For critical/aging domestic infrastructure, use sensors, robots, and non-invasive inspection technologies, with 20% utilization by 2020 and 100% utilization by 2030	• Underwater field experiments were launched in 2016. Site verification is underway for the implementation of monitoring technologies using sensors, etc.
5.	Promoting Fintech (added 2017)
5.1	By 2020, aim for over 80 banks adopting open APIs	**New KPI
5.2	By 2027, double the ratio of electronic (cashless) payments to 40%	**New KPI
5.3	By 2022, quadruple the proportion of SMEs utilizing IT such as cloud services to increase the efficiency of their back office operations (finances, accounting, etc.), to 40%	**New KPI
5.4	By 2020, increase by 5% the efficiency of the circulation of funds in Japan’s supply chains (supply chain cash conversion cycle)	**New KPI
6.	Overcoming Resource Limitations in Energy and Environmental and Promoting Investments
6.1	On 4/1/2020, implement the legal unbundling of electricity transmission and distribution as the final stage of Japan’s electricity system reform	• “Organization for Cross-regional Coordination of Transmission Operators” established on April 1, 2015. • Passed revision of the Electric Utility Operator Law on June 17, 2015 that included unbundling of transmission capabilities. • On September 1, 2015, established the Electric Power Trading Surveillance Committee • Liberalized retail electricity sales on April 1, 2014.
6.2	By 2030, new houses and buildings will comply with energy saving standards ZEH and ZEB
6.3	By 2020, double the number of housing renovations for energy-savings
6.3.1	(supplement to above) By 2020, attain 100% compliance of new buildings with energy saving standards, and for new public buildings attain “net zero energy buildings”
6.3.2	(supplement to above) By 2020, attain 100% compliance of new houses with energy saving standards, and attain a majority of orders of new houses through house makers to be “net zero energy houses”	• 2017 (October): 6179 companies nationwide (5507 housemakers and 639 general construction shops) are registered ZEH buildersg
6.4	By 2020, attain a 100% diffusion of newly sold lighting to be energy efficient, such as LEDs	• 2015: Domestic shipment amounts for general lighting sources: LED lamps, 40% of the totalh
6.5	By 2030, attain a 50–70% ratio of next-generation automobiles for new automobiles sales	• 2016: Proportion of next-generation automobiles for new automobiles sales = 35.8%
6.5.1	(supplement to above) By 2020, increase the number of electric or plug-in hybrid vehicles in use by 1 million	• Electric car stock (BEV and PHEV): 40,580 (2012), 151,250 (2016); battery electric car stock: 29,600 (2012), 86,390 (2016) plug-in hybrid electric car stock: 10,980 (2012), 64,860 (2016)i
6.5.2	(supplement to above) By 2020, increase the number of fuel cell vehicles in use to 40,000 vehicles, and 800,000 by 2030.	• 2016: 194,710 fuel cell vehicles in use (SOFC and PEFC) in Japanj
6.6	By 2020, establish approximately 160 commercially operated hydrogen automobile fueling stations, increasing to approximately 320 by 2025	• 2017 (March): 90 hydrogen automobile fueling stations established
6.7	By 2020, gain 70% of the world market share for geothermal electricity generating turbines	• 2015: Japan ranked tenth out of the top ten countries per geothermal generating capacityk
6.8	By 2018, commercialize the world’s first floating wind turbine	• Japan is currently conducting a demonstration project off the coast of Fukushima coast, led by a ten-member consortium including Mitsubishi Heavy Industries and Hitachi. The project consists of a 2MW turbine, a 7MW turbine, a substation, and a 5-MW model.
6.9	By approximately 2025, aim to establish next generation thermal power generation technologies step by step, according to the “next generation thermal electricity generation technology roadmap”
6.10	(numerous highly technical temperature and efficiency gain targets)
6.10.1	(Supplement to above) By 2025, establish the basic technologies for integrated gasification fuel cell cycle (IGFC) power generation, and realize its practical use by 2030	• Current power generation efficiency: 39%
6.11b	By around 2020, aim for the practical use of 1700 degree level gas turbines for liquid natural gas (LNG) electricity generation (increasing the current efficiency of around 52% to around 57%)	• 2013 (August): 1600 degree level gas turbines for LNG electricity generation started operation domestically
6.12	By 2020, aim for a complete penetration of smart electricity meters to homes and businesses according to the smart meter diffusion plans of each power electric company	• 2016 (February): 39,000 smart meters installedl
6.13a	By 2017, establish a “negawatt power transaction market” in which saved energy is transacted (disappeared in 2017 as a KPI)	• Established in April 2017
6.14	By 2020, aim for Japanese firms to attain about 50% of the world market (or ¥500 billion) of advanced electricity storage batteries
6.15	By 2020, halve the cost of electricity storage batteries (less than ¥23,000/kWh)	• 2015: Storage battery for mainly domestic use: ¥22,000/kWh; Storage battery for industry use: ¥36,000/kWm
7.	Robotics Revolution/Bio and Materials Revolutions
7.1	By 2020, increase domestic robot production market size to ¥1.2 trillion in manufacturing industries and ¥1.2 trillion in non-manufacturing industries. (revised in 2016. The 2014 version read double in manufacturing, 20x in non-manufacturing)	• 2015: Approximately ¥689 billion in manufacturing industries and ¥123.9 billion in non-manufacturing industries (In 2014: ¥590.1 billion in manufacturing industries and ¥61 billion in non-manufacturing industries)
8.	Creating the Foundations for Data Utilization
8.1	By 2020, offer 100% of data in machine readable file formats according to the needs of private sector firms, based on deliberations of the private–public round table	**New KPI
8.2	By 2020, ensure that 100% of municipalities are taking action to make data open and available	** New KPI
8.3	By the end of 2018, utilize cloud technologies for government information systems to reduce the number of government information systems by 725 (halving them), and by the end of 2021, reduce the operational cost by 30%	• 1235 IT systems in 2015n
8.4	Retain Japan’s number one ranking in the OECD in offering the lower broadband fees per unit speed
8.5a	During 2016, attain 15 million mobile virtual network operator (MVNO) subscribers. (Deleted in 2017)	• 2016: 16.36 million subscriberso
8.6	By 2019, aim for Wi-Fi availability in around 30,000 sites of tourism and disaster prevention or recovery sites.	• 2016 (October): Wi-Fi installed in 14,000 areas (47% completion)p
8.7	By 2020, attain over 800 success cases by municipalities and regional organizations	• The “Regional IoT [Internet of Things] implementation status survey” conducted by the Ministry of Internal Affairs and Communications in March 2017 showed that out of the 773 public entities surveyed, 16.6% responded that they were actively taking measures to implement IoT solutions in their regions (in 2014 only 5.9% of entities (N = 733) responded that they were actively taking measures to implement IoT solutions in their regions).q
9.	Fostering Intellectual Property/Standardization Strategies, Ensuring an Environment of Fair Competition
9.1b	By end of 2020, increase Japan’s presence as a secretariat in international standardizations organizations by 100	• 2016: 97r
9.2	By 2020, standardize 100 excellent technologies and products from SMEs and medium-sized companies	• Five cases as of mid-2016
9.3b	By 2023, reduce the time to acquire patent rights by half, attaining an average of 14 months	• 2015: average of 15 months
9.4b	By 2019, aim for 15% of patent applications to be from SMEs	• 2015: 14%
10.	Strengthening Human Capital Growth and Effective Utilization
10.1	By 2022, aim for 1 million enrolled in adult school (professional school) programs at universities or vocational skill schools.	• 2015: approximately 490,000 enrolled   **New KPI
10.2	By 2022, aim for 5000 courses for professional or specialized skills	• 2017: 2417 courses   **New KPI
10.3	By 2020, raise the proportion of teachers who can utilize IT tools in the classroom to 100% (Fiscal 2014 was 61.4%)	• 2015: 73.5% (71.4% in 2014)
10.4	By 2020, aim for 100% of prefectures and municipalities having an IT environment improvement plan	• 2014: 31.9%s
10.5	By 2020, aim for 100% of regular classrooms with wireless local area network (WLAN) access	• 2015: 29.8% (27.2% in 2014)
10.6	By 2020, increase the number of full time teachers for domestic schools below the age of 40 by 10%	• 2016: 43,600 teachers (a decrease from 43,800 in 2013)t
10.7	By 2020, increase the number of researchers who move jobs within the domestic sector by 20%	• In 2015 the number of researchers who moved jobs within the domestic sector was 11,192, up from 9,856 in 2013u
10.8a	By 2020, increase the employment of the young (20–34 years old) to 78% (74% in 2012)	• 2016: 78%
10.9	By 2018, reduce the number of long-term unemployed (more than six months) by 20%	• 2013: 142,000 • 2015: 109,000
10.10b	By 2018, increase new employment transfers (mid-career hires of general employees, excluding part-time work) by 9%	• 2016: 2,936,700 transfers (8%)v
10.11a	By 2017, increase the number of job changes without unemployment to 2 million workers. (In 2013, was 1 million workers)	• 2016: 3.3 millionw
10.12	By 2017, have 100% of private job training operators that are subcontracted by public sector job training operators take job training service guideline courses
10.13	By 2019, establish schemes to evaluate and improve job training in all 47 prefectures
10.14b	By 2020, increase the employment rate of ages 20–64 to 81%	• 2016: 79%
10.15	By the end of fiscal year 2020, reduce the proportion of involuntary non-regular workers to below 10%	• 2016: 15.6%x
10.16	By fiscal year 2020, double the number of Japanese college students studying abroad (60,000 to 120,000)	• 2016: 96,641
10.17b	By fiscal year 2020, double the number of foreign students studying in Japan (140,000 to 300,000)	• 2017 (May): 267,042 foreign studentsy
10.18	By 2017, increase the proportion of English language teachers who score higher than approximately 80 on the Test of English as a Foreign Language (TOEFL) from 28% to 50% for junior high schools and from 52% to 75% for high schools	• 2015: 30.2% for junior high, 57.3% for high schoolz
10.19	By fiscal year 2018, increase the number of schools accredited as International Baccalaureate to 200	• 2017: 51
10.20	By 2023, aim to have more than ten Japanese colleges/universities ranked in the top 100 of university rankings	• Two Japanese universities (Tokyo University, Kyoto University) in top ten according to the Times Higher Education ranking in 2017aa
10.21a	By fiscal year 2020, increase the employment rate for women aged 25–44 to 73% (68% in FY2010)	• 2016: 73%
10.22	By 2020, increase the proportion of male workers taking childcare leave to 13% (2.6% in 2011)	• 2015: 2.65%
10.23	By 2020, increase the male workers taking paternity leave immediately after wives’ deliveries	• A research project carried out by the Cabinet Office showed that in 2015, 55.9% of new fathers had taken time off after their wives’ deliveriesab
10.24	By 2020, increase the proportion of women in leadership positions to 30%	• 2015: 9.8%
10.25	…more related to childcare
10.26	By 2020, aim to recognize 10,000 highly skilled foreign professionals, and by 2022 an additional 20,000	• Between May 2012 and December 2016, 6669 highly skilled foreign professionals were recognized
11.	A Positive Feedback Loop to Foster Innovative Startups
11.1	By the end of FY2020, aim to increase the number of patents granted to universities by 50%	• 2012: 4831 university TLO patents grantedac • 2016: 3685 university TLO patents grantedad
11.2	Between fiscal year 2016 and fiscal year 2021, aim to allocate resources to strategic reform initiatives for strengthening each university and maintain the operation cost subsidies at around 40%	**New KPI
11.3	By the end of fiscal year 2017, attain a number one ranking in the innovation ranking (technology section, published by the World Economic Forum)	• 2017–2018: eighth
11.4	By 2025, aim to triple the investments from corporations into universities and national research institutes	• 2015: ¥120.9 billion
11.5b	By fiscal year 2020, increase the ratio of R&D investment, including both public and private sectors, to 4% of GDP	• 2015: 3.56%
11.6b	By the end of fiscal year 2020, double the number of large-scale joint research project between corporations and universities/research institutes	• 2015: 1004 joint research projects reported (a 50% increase)ae
11.7	By FY2016, increase both the new business establishment rate and exit rate to an equivalent level of the USA and UK (in the 10% range), with net positive levels of entry (the 2004–2009 average was 4.9%)	• 2015: business establishment rate for Japan was 5.2%, exit rate was 3.8%af
11.7.1	(supplement to above) By 2025, double Japan’s position on the entrepreneurial activity index (the percentage of respondents in a survey of entrepreneurial mentality who answered that they are “entrepreneurs or prospective entrepreneurs”	• 2018: Japan ranks 28th on the Global Entrepreneurship Index, with a score of 51.5 (the USA, ranked number one, scored 83.6)
11.8	By 2022, aim to double the proportion of venture capital investments into startups as a proportion of nominal GDP	• 2013–2015: average of 0.029%
12.	Regulatory Reform, Simplification of Administrative Procedures, Integrated Facilitation of IT Adoption
12.1	By March 2020, aim to reduce administrative procedure costs in priority fields by more than 20% (fields include national tax, local tax, enabling of electronic tax submission)	**New KPI
12.2	By 2020, make Japan a top three country in the World Bank’s “Business Environment Report”	• 2016 (October): 26th (two ranks down from previous year)
13. Drastic Regulatory Reforms in National Strategic Special Economic Zones
13.1 Cyber Security
13.1.1	By 2020, aim for over 30,000 registered IT security support providers	• 2017 (April): 4172 registered providers
13.2“ Sharing Economy”
13.2.1	During 2017, establish a minimum of 30 local public or municipal examples of sharing economy utilization	**New KPI
13.2.2	For vitalization and productivity enhancements of SMEs, middle sized enterprises, and small enterprises
13.2.3	By 2021, create consortia of industry–academia–government-financial sector collaboration to provide support to 200 pioneering technological development projects utilizing locally developed technologies every year, with approximately 1000 projects over five years
13.3.4	By 2020, increase the number of profitable SMEs and small businesses from 700,000 (in 2013) to 1.4 million	• 2015: 923,037 businesses (859,753 businesses in 2014)
13.3.5b	By 2020, aim to raise labor productivity growth rate in services industries to 2% (from 0.8% in 2013)	• 2015: 1.3% growth rate (1.0% in 2014)
13.3.6	By fiscal year 2017, realize initial overseas expansion of 10,000 companies	• 2013–2015 (July): overseas expansion of 6500 realizedag
14.	Aggressive Agriculture and Fisheries Industries Development
14.1a	By 2023, reduce the cost of rice production by 40% (¥16,001/60kg in 2011)	• 2015: production cost for individual enterprise ¥11,397/60kg (29% reduction); corporate enterprise ¥11,996/60kg (25% reduction)
14.2	By 2025, double the cost efficiency of animal feed rice	• Will be evaluatedah
14.3	By 2025, quadruple the number of corporate farmers to 50,000	• 2016: 20,800 corporate farmers
14.4	By 2025, almost all farmers will utilize data in their agricultural operations	• 2016: 54%
14.5b	By 2019, increase the export of agricultural, forestry, and fishery products and food produce to ¥1 trillion	• 2016: ¥750.2 billion

1. Source: http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/miraitousi2017_t.pdf, some translations by author. Originally compiled by Takeo Hoshi and research assistants
2. ^aAchieved
3. ^bOn track if extrapolated linearly
4. ^c https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/health/dai1/siryou2.pdf
5. ^d http://www.jmacct.med.or.jp/about/h28/files/act20170204_3.pdf
6. ^e http://www.kantei.go.jp/jp/singi/kenkouiryou/suisin/suisin_dai19/siryou1_2.pdf
7. ^f ibid.
8. ^g http://www.meti.go.jp/committee/sougouenergy/shoene_shinene/sho_ene/pdf/016_01_02.pdf
9. ^h http://jlma.or.jp/tokei/jishu_old.htm
10. ⁱ https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
11. ^j “Dissemination of Ene-Farm” http://www.meti.go.jp/english/report/downloadfiles/2017_outline.pdf
12. ^k https://www.worldenergy.org/wp-content/uploads/2017/03/WEResources_Geothermal_2016.pdf
13. ^l http://www.meti.go.jp/committee/sougouenergy/denryoku_gas/kihonseisaku/pdf/005_03_02.pdf
14. ^m http://www.meti.go.jp/committee/kenkyukai/energy_environment/energy_resource/pdf/005_08_00.pdf
15. ⁿ http://www.itdashboard.go.jp/Statistics/system
16. ^o http://www.soumu.go.jp/main_content/000508722.pdf
17. ^p http://www.soumu.go.jp/main_content/000456095.pdf
18. ^q https://www.kantei.go.jp/jp/singi/it2/detakatsuyokihon/dai7/siryou2.pdf
19. ^r http://www.meti.go.jp/information_2/publicoffer/review2016/saishupdf/27002700METI.pdf
20. ^s http://www.mext.go.jp/b_menu/shingi/chousa/shotou/110/shiryo/__icsFiles/afieldfile/2016/11/07/1378984_8.pdf
21. ^t https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai1/siryou2.pdf
22. ^u https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai2/siryou3-1.pdf
23. ^v http://www.mhlw.go.jp/toukei/itiran/roudou/koyou/doukou/17-2/dl/gaikyou.pdf
24. ^w http://www.mhlw.go.jp/file/05-Shingikai-12602000-Seisakutoukatsukan-Sanjikanshitsu_Roudouseisakutantou/0000190839.pdf
25. ^x http://www.mhlw.go.jp/file/05-Shingikai-12602000-Seisakutoukatsukan-Sanjikanshitsu_Roudouseisakutantou/0000190839.pdf
26. ^y http://www.mext.go.jp/a_menu/koutou/ryugaku/1345878.htm
27. ^z http://www.mext.go.jp/component/a_menu/education/micro_detail/__icsFiles/afieldfile/2016/06/15/1372389_3.pdf
28. ^aa https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai1/siryou2.pdf
29. ^ab http://www.gender.go.jp/kaigi/senmon/jyuuten_houshin/sidai/pdf/jyu11-08.pdf
30. ^ac https://www.jpo.go.jp/cgi/link.cgi?url = /shiryou/toushin/nenji/nenpou2013_index.htm
31. ^ad https://www.jpo.go.jp/shiryou/toushin/nenji/nenpou2017/toukei/all.pdf
32. ^ae https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo2018/innov/dai2/siryou3-1.pdf
33. ^af http://www.chusho.meti.go.jp/pamflet/hakusyo/H29/h29/html/b2_1_1_2.html
34. ^ag http://www.meti.go.jp/committee/kenkyukai/external_economy/shin_yushutsutaikoku/pdf/003_02_00.pdf
35. ^ah http://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/suishinkaigo_dai6/siryou8.pdf