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File folders and other items are seen scattered on the floor of the Hirono town office after a strong quake in Hirono, Japan, 13 February 2021 (Photo: Reuters/Kyodo).

Author: Hiroshi Ono, Hitotsubashi University

A city clerk in the western prefecture of Yamaguchi carries a floppy disk containing account information for 463 residents to a local bank. He has every intention of transferring payments to the residents. But somewhere between the clerk’s instructions and the bank’s processing of the transaction, there is a miscommunication.

Instead of 463 residents receiving their payments, one resident alone receives a lump sum payment for 463 residents. Such a mishap may be understandable had it occurred in the 1980s, when personal computers and memory devices were just popping up. But this took place in Japan in 2022.

Incidents like that are reminders of the state of digital disfunction in Japan. Once known as a technological powerhouse, Japan has lagged in the global wave of digital transformation.

Japan still maintains technological competitiveness in certain areas such as robotics, batteries and some high value-added intermediate inputs and machinery. Japan also has a rich human capital base with high literacy rates. But among wealthy countries it ranks below average in digital competitiveness, e-government and e-learning. The delay in digital transformation has been felt acutely during COVID-19 because much of Japan’s public health administration still relies on outdated record keeping methods that could not keep up with cases.

There are supply and demand-side explanators of why digital transformation has not taken off in Japan.

A survey of Japanese companies conducted for a 2021 white paper by the Ministry of Internal Affairs and Communication (MIC) highlighted personnel shortages in the information and communication technology (ICT) sector as a key factor behind the lag in digital transformation advancement. This is a supply-side problem. In 2018, the shortage of ICT personnel in Japan totalled approximately 220,000. The Ministry of Economy, Trade …continue reading