Why it's hard for Japan to transform digitally

When you imagine Japan, you might imagine a high-tech country where bullet trains travel through countryside and cities using futuristic systems. But all is not as it seems.

Japan has surprisingly lagged behind in digital transformation for decades. A quarter of companies are holding back on digital transformation, while 9% are avoiding it altogether. This is higher than other comparable countries and only applies to 2% of companies in Malaysia and 1% in Indonesia.

This may come as a shock, especially considering the global position of technology giants such as Sony, Toshiba or Fujitsu. However, the situation is different, and the slow approach to digitisation is typical of the constant use of faxes and floppy disks, supported by a cultural change at the core of government.

Faxing into the future

Most offices in Japan still use faxes, and two years ago it was quite common to expect organisations to answer all questions by fax. Another tradition still in use is the Hanko, or personal stamp, according to which, before COVID-19 almost all documents had to be stamped instead of signed.

Internet banking was launched almost a decade later than in many other countries as most banks still don't have apps. Most Japanese citizens still use a small bankbook when they need an overview of their spending. Online banking records have only been available for the last three months in Japan.

Reasons for Slow change

There are many reasons for slow change.

Japanese workers don't change jobs very often, which means you won't find many internal processes changing based on their previous company experience, so things stay the same. There are also not enough IT specialists due to the labor shortage. This means that companies start developing their platforms with workers who do not have the right skills or background.

There is also little outsourcing to technology companies, which means that such companies do not disseminate lessons to the wider business environment or train employees to use specific software.

Japan is also struggling with a demographic challenge which poses the reluctance to change. Its society is the oldest in the world, with a record 36.21 million people aged 65 and over in 2021, 28.9 percent of the population.

Many customers are also old and they don't want to use new systems or applications. They also have time to physically travel to offices and banks in the city during the week instead of relying on online services.

What Influences the drive to technology in Japan

Market influences also play a huge role to getting updated in latest technology's. When Chinese tourists in Japan started using cashless payment services, Japanese companies realised they were missing out on a big market, explains Haghirian. That led to SoftBank and Yahoo Japan forming a joint venture called PayPay, which now offers free payment services.

Digital usage

The paternalistic tradition is the main obstacle that makes it difficult to get rid of outdated technology. Risk-taking and infallible nature of public officials is holding back change.

The Japanese government's failure to use digital technology to respond to the pandemic has drawn criticism in Japan. During the pandemic, It took months to deliver financial assistance to citizens, and the government was unable to collect real-time patient data because hospitals and health centers use telephones and faxes to communicate. This was much different than in countries like the UK where digital transformation has really accelerated.

In summary, as for whether the government has succeeded in digitally transforming public services, Japan needs a long-term overall strategy across the country, led and implemented by IT professionals, not Japanese grandfathers.