The Fellowship Team Visits Japan

The Fellowship Team Visits Japan

by Aidan Rhodes

In March, the Fellowship team conducted the first of our country visits, with Prof Jim Skea and myself, Aidan Rhodes, visiting Tokyo, Japan. We are conducting a review of Japan’s innovation policies, both generically and specifically for the energy sector, in order to contrast this historically innovative nation with the others we are investigating in this research programme. We spent three days based in Tokyo, conducting an extremely intensive series of interviews with government, academic and industry stakeholders, ably organised by our colleagues in the Science and Innovation Network at the British Embassy Tokyo. A few thoughts on our visit are below – more to come as we write up and compare what we’ve learnt with other countries. 

Japan, being the third largest economy in the world and a nation with a population of over 120 million people, is a difficult country to get a handle on in just a few days. Luckily, we had the advantage that Japan has a very centralised government structure, with almost all the major public sector organisations based in and around Tokyo. This made it possible, although tiring, for us to complete ten major interviews with stakeholders in various offices around the capital in three long days.

Japan’s innovation policies are principally set by two ministries, the Ministry of Economics, Trade and Industry (METI), and the Ministry of Education, Culture, Sports, Science and Technology (MEXT). Other ministries take an active role in setting and stimulating innovation policy in their areas – for example the Ministry of the Environment (MOEJ) in the energy sector. An overall nationwide innovation policy is set by the Cabinet Office with advice from the Science Council of Japan (SCJ), but, as we found out in our interviews, this policy is somewhat broad-brush, with individual ministries having significant freedom to develop the plans in the ways they find most appropriate. The diagram below shows the movement of public funding and influence through the energy innovation system, from ministries to government agencies and from there to academia, research labs and private companies.

Japan’s system is explicitly technocratic, with the formulation of policies and research programmes guided at every level by small supervisory groups of respected academics and industrial stakeholders. Engineers, scientists and technologists have greater influence at all levels of public innovation policy than can be seen in the UK, and extensive road-mapping exercises are typically carried out when allocating R&D priorities, with time horizons typically reaching 20-30 years into the future. The innovation system is made up of fewer public bodies than the UK, and interestingly is split between science and engineering. Basic scientific research is funded by the Japan Science and Technology Agency (JST), and the Japan Society for the Promotion of Science (JSPS), while engineering is considered applied research and is funded by bodies further down the innovation chain. In addition to traditional universities, Japan also maintains a system of research laboratories. These are funded in some cases by central government, with other laboratories being funded by regional government, private or part of a corporation. In general, Japan’s corporations tend to fund a greater quantity of basic scientific research than seen in the UK private sector.

In the energy sector the main applied R&D body is the New Energy and Industrial Technology Development Organisation (NEDO), with a public budget of more than £1 billion per annum to support applied research, demonstration and pre-commercial deployment of new energy technologies. This money is used primarily to support innovation programmes, consisting of consortia of academics and private industry. Relationships between the public sector and industry appear to be cosier in Japan than would be seen in the UK, partially due to Japanese corporate culture and partially to the structure of the private sector in Japan. This consists of large diversified corporations with a relative dearth of SMEs, leading to fewer concerns surrounding intellectual property. Programmes are tendered by an open bidding process, and are once again defined by a small team of experts.

The Japanese innovation system has been criticised in recent years for favouring incremental, conservative development instead of supporting radical ideas and technologies. This can partly be put down to the structure of the industrial sector, with a few large corporate players run in a very traditional manner and developing and refining their successful products in preference to developing new disruptive technologies. In addition the traditional employment model, where new employees are hired directly from university into large corporations, discourages the formation of start-up companies to develop new technologies. This structure has meant that Japan has lost ground in rapidly-developing industries such as ICT applications and services, where innovation occurs to a great extent in clusters of SMEs driven by recent graduates. On our visit to METI, we interviewed the Director-General of a major bureau, who give us an overview of Japan’s efforts to address these issues. These include major tax breaks of up to 60% on open innovation consortia between companies and academia, the restructuring of funding management structures towards the US DARPA model, and generous grant schemes for foreign start-ups to settle in Japan. This last scheme is based on a successful Israeli model, and is designed to kick-start the knowledge and skills networks which characterise successful SME clusters.

Japan is a fascinating place to investigate innovation, both from an historical standpoint and from how they are adapting their system to meet today’s challenges. Watch out for more in-depth work on both Japan and our other case study countries and technologies coming soon!