00:00Global geopolitical and economic shifts are creating new challenges.
00:04So how is Japan using strategic investment to strengthen resilience at home and abroad?
00:09We talked to a panel of experts at the Euronews Hub at the World Economic Forum to find out.
00:15And here are some highlights of what we heard.
00:24Mr. Yoshito, I would like to start with you, if that's okay.
00:27Can you begin by giving us some context about the state of the economy in Japan, please?
00:33Let me talk about the economy by three points.
00:36One is about the stock markets first.
00:39The stock market has risen to 54,000 Nikkei, which is twice in three years, double in three years, and triple in five years.
00:48Second is about unemployment and wages.
00:52Unemployment right now is about 2.6%, which is very low.
00:55And the wage is up by 5%, so therefore you can tell.
01:00And we have been, Japan has been suffering for deflation for about 30 years.
01:04But now we have, finally, BOJ is raising interest rate.
01:08And right now, official rate is 0.75%.
01:12So we can tell that the economy is booming.
01:16Thirdly, let me talk about primary balance, income balance.
01:20We have more than $500 billion income balance in terms of dividends and also interest and capital gain coming per year,
01:31which is 130% of our current trade surplus.
01:35And that means like, even though we lost a lot in terms of trade,
01:40we have the largest credit nation, and therefore we can tell that we are rich in terms of the economy.
01:46Japan has identified 17 strategic fields to secure growth and economic security, as we heard.
01:52And it's a very volatile world.
01:54So at Davos, where competitiveness and resilience are top of mind,
01:58what makes Japan's approach distinct from other advanced economies who are pursuing industrial strategy?
02:06The approach of Japan is quite different from the U.S. or China.
02:11In case of the U.S. or China, it's more about top-down approach and pinpoint and winners.
02:16And they support, subsidize them.
02:18In case of Japan, it's more about a bottom-up approach and more consensus and ecosystem approach.
02:23Let me explain about what it is.
02:25The approach is most like a build consortium of leaders.
02:30And then let them share information.
02:33And let them divide the scope of work in terms of research.
02:36It's not just picking the winners.
02:38It's more about picking the industry that Java should support.
02:43And at the same time, trying to foster the industries.
02:46So it might take longer than other countries.
02:49But in the end, the ecosystem will be built.
02:52And therefore, the stronger fundamental technology and those industries will be built.
02:56Kumiko, what feels genuinely new about this strategy compared with Japan's past industrial policies?
03:05It is so notable that Prime Minister Takaiichi has positioned these economic security measures
03:12or strategic investment fields as growth opportunities.
03:18Growth investment is easy to understand.
03:20You can focus on your winning area and grow it more.
03:24But crisis management investment, according to her, is that Japan can be a leader in the leader position
03:31to countermeasure for the potential risks that not only Japan, but also the other countries globally would face.
03:40The economic security challenges, food challenge, food security, energy security, and all these health and agriculture securities.
03:47So we wanted to tackle these challenges with our cutting-edge technologies,
03:52cooperation between public and private, so that Japan can be a leader leading the initiative
03:59and show to the other countries how we can complement each other to respond to our vulnerability
04:06from the economic security point of view and make it as a growth engine.
04:10I'm with the Klingendal Institute in The Hague, and we focus on the geoeconomic landscape.
04:21And I'm sorry to have to say here that the positive outlook for the Japanese economy that we heard
04:29is even more impressive when you look at the outside world, where we see a revisionist China
04:37that has been coercing Japan and Europe, weaponizing trade and economics.
04:43We've seen a revisionist Russia as well, invading Ukraine and threatening NATO and its allies.
04:52And unfortunately, now also it seems that we are faced with a revisionist U.S. administration
04:58that is pulling out of the multilateral system.
05:01Given all that, with the U.S. leading both Japan and Europe basically into an era of globalization,
05:09we're now being led back from that era.
05:11And that is quite a challenge for both our regions.
05:15What does that mean for our economic security and resilience?
05:18I think both Japan and Europe are in the same pickle.
05:24And that pickle is that our economic interdependencies now have proven to be vulnerabilities.
05:29And I see basically three avenues out of there where both Japan and Europe are going to go on.
05:35The first is keep promoting and leading the free trade system through the WTO,
05:41but also by signing new trade agreements with like-minded partners.
05:45The second is we really have to consider more forcefully to also protect our domestic markets
05:52against economic coercion and also against the vulnerability against overcapacity in strategic industries.
06:00And then the third and perhaps the most ambitious avenue is seeking security through strategic investment.
06:08Jolt, how resilient is manufacturing in Japan and Europe in the wake of the recent global shocks that we've seen?
06:17Donald Trump has imposed massive tariffs on all over the world.
06:21And the news is full of reporting that China recorded the highest export ever.
06:28But if you look at Japan and Europe, they are similar and they are doing very strong.
06:34I mean, we just looked at the latest November 25 data for Japan.
06:39And export as a share of GDP, again, we have a roughly monster GDP approximation,
06:45was highest in November last year than compared to the previous year.
06:48If you look at Europe, you see the similar tendency.
06:53So exports to the United States declined, obviously.
06:57But overall exports is still doing very well.
07:00From a research and analysis perspective,
07:03how is Japan's strategy fitting in with the US and China tensions that we're seeing?
07:10I have to always talk about economic security viewpoint.
07:13It all comes down to the strategic autonomy and also strategic indispensability.
07:19When you think about Japan, actually Japan is really a resource-poor country.
07:26So for now, what we are trying to do in the current administration is we need to increase or enhance our strategic indispensability,
07:34which means Japanese products, Japanese technology, Japanese know-how is something that is needed for other countries,
07:43other territories, other companies, so that we are someone who is needed in the international scene,
07:50so that we can have this autonomy by balancing our risk between different territories or topics.
07:58You mentioned technology there, Mr. Yoshito.
08:00You know, what is the state of tech startup now, especially in the VC environment?
08:06When Prime Minister Abe came into power, he focused on entrepreneurship and more technology and startups.
08:14So since 2013, venture capital raise amount has risen 10 times since 2013.
08:24It was right now roughly about $8.4 billion in 2013.
08:28And before that, it was only about $870.
08:31So it has risen by 10 times in 10 years.
08:34It's impressive.
08:35In 1999, when I raised capital, that time, it was right after Asian financial crisis,
08:41I was able to raise about 20 billion yen, but it was only 90% came from the outside of Japan.
08:49Only 10% came from Japan.
08:51It was difficult to convince financial institutions, pension funds to invest into venture capital.
08:58The last fund we raised is four times bigger than the fund in 1999.
09:0390% of capital came from Japan, including government institutions like JIC and also GPIF.
09:12Growth is one of the top agenda of the Takaichi administration.
09:17So you can tell that there are new things happening and tech startups are coming up as well.
09:22Jolt, what EU policies do you think are in place that really foster innovation?
09:29For example, if you look at Scandinavian countries, in particular Denmark and Sweden,
09:35they have highest private research and development spending.
09:39In global innovation scores, they rank very, very top.
09:43They have a number of companies which were able to grow from being a small company to mid-size
09:48and reaching global scale.
09:50So something is known by these countries.
09:53And, you know, the secret is difficult to figure out.
09:57But certainly it's a kind of a combination of good domestic regulatory standards,
10:02including labor regulation, but also the European levels.
10:05For example, the European Research Council and Innovation Council,
10:08which largely follows a bottom-up approach.
10:10They may not top down, you know, setting centrally what are the future innovations
10:16and strategic places to go, but rather let entrepreneurs and innovators to come up with ideas
10:22and having an independent assessment of them.
10:25I think that's the most successful way to foster innovation.
10:28Kumiko, I'd like to expand a little bit on the risk elements that we've been hearing about.
10:33And from a geopolitical risk perspective,
10:36Japan's strategy seems deeply shaped by uncertainty, you know,
10:40from supply chains to regional security.
10:43How are these risks influencing corporate and investor decision-making inside of Japan?
10:51PwC Japan has been offering the service of geopolitics and economic security ever since 2016,
10:58when Brexit happened, and also the Trump administration 1.0 was there.
11:03But then the Russian invasion to Ukraine happened, and then that's really the wake-up call for...
11:10Because U.S.-China trade war was impacting certain part of Japanese business, but not all of them.
11:17But when Ukraine happened, a lot of the Japanese CEOs realized if that happens,
11:23maybe something which is much closer to us could happen in some time.
11:28And what if?
11:29So that was the wake-up call for Japanese companies,
11:32and we started to have a lot of requests to work on a project about what's going to happen in the street.
11:39We tried to talk to the companies.
11:41It's not about the crystal ball reading.
11:43It's about the scenario planning.
11:45You have to have different potential scenarios,
11:49and you have to make sure that you compare that, your strategy with the scenarios, potential scenarios, good and bad,
11:56and you have to make strategic decisions until which point you prepare to mitigate the risk,
12:02or until what kind of risks you can swallow still having the business going on.
12:09I hope you've brought your crystal ball with you for our next question.
12:13Five to ten years from now,
12:16how should the world, and also separately Japan, be measuring their success?
12:22Well, that's a tough question.
12:23Well, first of all, I think AI will come in,
12:28and that will determine about the competitiveness of the company and also country.
12:34If you talk about AI in Europe, they think about fear or uncertainty,
12:40because they're afraid about losing jobs.
12:43The same in the U.S. as well.
12:45But in Japan, it's different.
12:46You know, Japan is a measure of unemployment rates.
12:49We have a labor shortage.
12:51Labor shortage means that we need to have more foreign people come in.
12:57At the same time, we have to utilize more female and also like elderly persons as well.
13:02At the same time, we have to use AI as much as possible and robotics.
13:06And the approach of Japan in terms of AI and robotics is very different from the U.S. or Europe,
13:12because we have been used to animation or manga.
13:15So the acceptance of society into AI is quite good.
13:19At the same time, Japanese companies are kind of securing jobs.
13:23But even though we adopt new technology, we retain the employees, we educate them,
13:30so that kind of like job security is there.
13:33I'm going to ask the other panelists, if they can, in one sentence, answer,
13:40what is the single most important factor that will determine whether Japan successfully moves from strategy to strength?
13:50So, Jan, we'll start with you on the end.
13:52If I may comment it from a European angle, success would be if the Japanese ecosystems manage to successfully co-invest
14:02with European industries in the challenges of tomorrow for resilience and technology development.
14:09Thank you.
14:09I think the success would come if new innovators and new innovations will be able to bring and also challenge incumbents.
14:19In Japan, there are lots of big companies.
14:21They are doing well.
14:22But I think they also need some shake-up to be more productive.
14:26And young innovators can make that shift.
14:28I would echo what the theme of this year's Davos dialogue, dialogue and collaboration,
14:37because no one state can establish economic security stand-alone.
14:43I think for the humanity of the world, we have to move forward for discussing about climate change and also about AI regulations.
14:51We'll leave it here, but you can watch the full debate on euronews.com.
14:55Thanks for watching.
14:58We'll be right back.
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