Kaoru Yano, Chairman of NEC, outlines the transformative power of Abenomics, how NEC is capitalizing on the opportunities it is providing, and why now is the best time to invest in Japan in the past 20 years.
Japan is truly going through an exciting time at the moment. In a period of global economic recession, Japan is making the difficult choices to reorient its economy for a more globalized world with the paradigm of Abenomics. But we are trying to understand the perspective of the private sector in this transformation. What would you say has been the impact on NEC?
First of all, I should say that the Tokyo stock price has increased by threefold and the yen-dollar currency rate is 50% cheaper.
In that sense, Abenomics has brought us a very good business environment to grow in the global market. Abenomics is trying to do many things simultaneously.
Innovation is key in Abenomics, and NEC is an innovation company. We have been doing business with high-tech innovations, and now, we have transformed our company to a social solutions provider.
That is a necessary change for the course of the company because, as you know, Japan is suffering from the effects of an aging population.
At NEC we are on the front lines to solve social issues that are expected to arise in other countries in the near future as well.
The population of Japan is decreasing now, and in Korea the aging of society is happening faster than in Japan. Singapore is in the same situation.
We are one of the frontrunners to face these social issues. Information and communication technology (ICT) companies can help to solve social issues at a reasonable cost for both developed and emerging countries.
We believe NEC is at the center of this innovation.
It is true that innovation is the key for a better future. But what do you think about labor forces to realize the innovation?
As you may know, human resources are not fully utilized in Japan. Increasing women’s participation in the workforce, for example, is a key for the future of Japan.
Also, we need to try to bring aging people into the labor market.
We have huge labor resources here, so we still have the chance to grow, even inside Japan.
But also, there are many emerging countries, especially in Asia, that have a huge population. If we grow with them, we will have big opportunities to grow in the next 10-20 years.
We are not trying to compete with other economies in the area of mass production, or commodity products.
We are trying to provide value-added solutions by use of ICT. We have very good technologies, experience, and solutions.
ICT will help us to cover the impact of the changing needs of the world.
Trust and confidence are keys to the success of Abenomics and this is exactly what we are trying to convey with our campaign. Taking this opportunity to reach to out all the heads of state and business leaders at the G20, World Islamic Economic Forum, and Global African Investment Summit, what would you say to the international community who may still be hesitant about investing in Japan or partnering with leading Japanese companies such as NEC? Why is this the perfect time to do business with you?
Japan is changing because of Abenomics, but we are self-motivated to change our society in order to cope with future issues.
The government clearly understands the need for drastic reform of various regulations as part of solving these issues.
They have already started decreasing corporate taxes, changing employment rules, corporate governance reform, establishing national innovation systems, etc.
Just in the past 15 years, we have seen major change. For example, NEC and many Japanese companies are getting energized by increasing their international workforce and the government has started with regulatory reform trying to reach a positive cycle for the economy.
The earlier the timing, the better the opportunity for investment.
It speaks to the private sector’s role to have these government policies such as Abenomics. But it is the private sector that is leading this change of institutions such as NEC, who are actually implementing these practices. I am sure Prime Minister Abe would be very happy to hear you talking passionately about this.
We believe that the best way to bring NEC back to the center of the world stage is to change ourselves, and to transform into a more globalized company.
That is the reason why we are trying to diversify our workforce as much as possible, and we are implementing more transparent processes inside the company.
We know it is a long road, but we have started. Maybe 10 years ago, or even five years ago, Japan was almost forgotten by the world, but NEC has transformed itself into a social solution provider to create real value for society.
President Obama was recently given fast track authority over the signing of the Trans-Pacific Partnership (TPP), which now seems imminent. The TPP, comprising 12 countries, 40% of the world’s GDP and 1/3 of its trade, will be the largest trade deal in history. What opportunities do you see with this new agreement for NEC in not only in the US considering you already have a significant presence there, but also the rest of the Asia-Pacific region?
In the area of ICT, the tariffs are already very low in almost all countries, so we will not see many changes in that area. However, when talking about the protection of intellectual property and opening up government procurement, we will see many changes and benefits. We can move high-skilled workers across borders. We will have freedom and flexibility with actual business activities.
We believe that the TPP will bring us new opportunities throughout the free trade area. For example, we have our regional headquarters in Singapore.
We have the development center for the retail business in Malaysia. We will be able to move staff from the headquarters and the center to other countries to implement the systems of retail stores, etc.
This is not only convenient, but also efficient. The TPP will make us more efficient by enabling us to move skilled workers across borders.
NEC’s mid-term management plan 2015 strives to transform NEC into a “social value innovator” by focusing on solutions for society. I think in this regard NEC is again ahead of the trend because you have decided that the future of NEC is to provide solutions for some of the world’s most important problems, such as aging societies, food security, water security, and alleviating climate change. Can you outline some of these smart technologies that you are most excited about that are going to be solving not only Japan’s problems but also the world’s problems?
NEC will bring together some of the world’s leading technologies, including cloud computing, big data, the Internet of Things, public safety solutions and smart energy.
If we talk about big data for example, although we can use high-performance and affordable computers, we still need some sort of intelligence there.
And in that sense, we have accumulated various technologies to analyze big data.
One good example is our early warning system for a nuclear power plant operated by the Chugoku Electric Power Co., Inc. Prior to the introduction of NEC’s big data solution for 3,000 sensors in the nuclear power plant, maintenance people could detect a problem only 30 minutes before an actual failure.
By applying our machine-based big data solution, they can now detect a problem eight hours in advance. They have enough time to repair problems before actual failures.
This technology can increase the plant’s operating time while significantly reducing operating costs.
This is just one example. We can apply the same kind of technology to any kind of production plants worldwide.
Your revolutionary AFIS program in South Africa is a perfect example of the enormous economic benefit NEC can provide to emerging economies. Why is NEC an ideal partner for these countries to continue to grow and develop economically?
In the course of NEC’s 60 years of international business, we have built strong brand recognition with our customers, especially in the government sector, and we are well known for our advanced technologies.
As a global, multinational company, for example, NEC recently established a Global Safety Division in Singapore, where teams of international members cooperate in seeking resolutions for shared challenges all over the world.
The most important thing for sustainable business is to have good partners in the market, especially employees, which helps stimulate economic growth and prosperity.
In this world, you are literally bridging the gap between America and Japan with your Submarine Cable Program. This is revolutionary. What impact do you think this will have on US-Japan relations?
Submarine cables enable 99% of the internet traffic crossing our oceans. Google owns a part of a new US-Japan submarine cable in the Pacific Ocean that is bridging nations and promoting better mutual understanding every day.
NEC is proud of the fact that we produced and built this cable. Yet, most people do not know about the behind-the-scenes efforts of NEC.
We provide a wide range of infrastructure for society, including the world’s largest scale national ID system, disaster prevention systems and surveillance systems for promoting safety and security, which may not enter the consumers’ line of vision, but maybe someday, NEC will be recognized as a top brand in innovation.
Regarding your brand recognition, what are the most important elements to build the strong international brand that NEC enjoys? How can other Japanese companies build the strong international brand that NEC operates with?
I don’t think NEC has established a strong enough brand globally. But I think the Japan brand is very strong around the world.
Most people around the world know the name of at least a few Japanese companies. One way Japanese companies are increasing their profile is through the recruitment of international students in Japan.
We hire hundreds of new graduates from domestic universities every year, 20% of them are international students.
Communication is another key. Traditionally, Japanese have not been comfortable when communicating in English.
Nowadays, however, people speak English worldwide with varying accents. There is no need for the Japanese to be timid with our accent in English.
We should try to communicate more proactively. With the Tokyo 2020 Olympic and Paralympic Games, it is very important for everyone to come out of their shells and to highlight the capabilities of Japan.
Are you focused on most of the emerging world? What are your pro-strategies? What is the future of NEC like?
We are trying to grow in emerging markets, but still, we have been doing business in the US and Europe, and they are advanced markets, like Japan.
We have found new business opportunities to upgrade social infrastructure by applying sophisticated technologies in these markets. One example is water leakage detection.
NEC and Texas State University are collaborating on social infrastructure projects. NEC is conducting a series of water leakage detection trials with a range of US cities.
More generally, NEC has research laboratories in the US as well as Germany, China, Singapore and Japan. NEC is a multinational company.
US and Japanese laboratories have collaborated to accumulate machine learning technology over the past 30 years. One of those technologies is face recognition.
The National Institute of Science and Technology in the US has put us in first place three times in a row in their benchmark tests.
The importance for countries to brand themselves in this globalized world can never be overstated. So, as Japan leaves behind two decades of poor economic growth and deflation, how would you like the international community to perceive Japan? What is the new brand of Japan?
Japan has an open-minded mentality that accepts a wide range of ideas and philosophies. That said, we must be more diversified as a society.
As part of this, we are seeking to implement greater diversity in the company. The diversification of the Board of Directors, for example, will create more innovative ideas for the company’s growth.
Please come and see Japan and talk with Japanese people. To see is the best way to understand. The best time to invest in Japan is today.