Japanese companies offer innovative solutions to tomorrow’s problems

Japanese companies are taking a long view, looking two or even three decades ahead for products and strategies that will put them at the frontline in tackling global challenges.

As well as responding to the rapidly growing challenges of climate change, they are also drawing on Japan’s own experience in dealing with an aging and shrinking population, problems that many other countries are going to face 20 or 30 years out.

In doing so, they are anticipating future needs, by pioneering new healthcare services to cope with changes in the social environment and breaking ground in, among other sectors, biotechnology, crop engineering, energy efficiency and construction.

Underpinning this drive by companies to innovate, to draw on domestic experience and look to international markets, is Japan’s difficult business climate – Prime Minister Shinzo Abe’s government is struggling to revive an economy stagnant for decades and to re-energize its mostly inwards-looking society.

“The Japanese economy had difficulties with low growth for many years, but it doesn’t mean Japanese companies lost their power. We will continue to create new value, meeting the needs of society with our cutting-edge technologies,” says Fujifilm Chairman and CEO, Shigetaka Komori.

Other industry leaders agree, with some stressing the need to look abroad.

“We must consider international consumption as well as domestic. It makes sense, but is also a very big change. Probably it will take some time to shift and become global, but I think it is the right direction,” says Hiroshi Sakata, President of Sakata Seed Corporation, whose company focuses on developing improved varieties of food plants.

An aging population

Japanese companies know about the problems, and opportunities, thrown up by a combination of its aging society and population decline, issues already well over the horizon in a number of other countries.

Japan is growing older faster than anywhere else, with one-third of its population now aged 60 or over. And plenty of others are shuffling along behind it, particularly but not only in Europe. Countries such as South Korea, China, Singapore and Taiwan are experiencing a rapid workforce growth and falling birth rates, similar demographics to those seen in Japan in the 1960s to 1980s.

A 2015 United Nations study “World Population Aging” predicted that between 2015 and 2030, the number of people worldwide aged 60 years or over will grow by 56 per cent, to 1.4 billion. And by 2050, this group will more than double its 2015 size, reaching nearly 2.1 billion.

Globally, there were seven people aged 20-64 years for each person of 65 or older last year. By 2050, there will be only 3.5 working-aged people for each older person, the U.N. report said.

Japan’s population is likely to collapse unless offset by large-scale immigration, a highly emotive issue there and in many countries. One century ago Japan had about 40 million people. It took 100 years to rise to 120 million and within 100 years it could be back to 40 million.

“Labour shortages…are going to be our biggest problem in the next ten years,” says Yasunobu Ueno, President of Asunaro Aoki Construction Co.

Japan’s building sector is heavily reliant on older workers who will be retiring over the next decade, cutting the workforce by one third, he says. With insufficient young people to fill the gap, sophisticated technology, like the use of ICT and robotics in building, an area his company specializes in, will be needed.

The company is also developing ways to reinforce buildings to better withstand earthquakes, technology that could be exported to help other countries that also face the regular threat of earthquakes.

Another Japanese company adapting to aging is healthcare and education services provider Nichii Gakkan, which runs networks of residential facilities for the elderly, and provides training and ancillary services.

“What I want to emphasize is the need for workers in the labor force, especially in the sector of long-term elderly care. In 2017 we will still be lacking 120,000 people working in this sector, while in 2025 we are going to need 380,000 people,” says Nichii Gakkan Chairman, President and CEO Akihiko Terada.

Opportunities in many parts of the world in the future to companies providing these sorts of services are enormous, given demographic trends, he argues, and part of the solution lies in the hands of older people, and in training.

 “Seventy per cent of those over 65 (in Japan) are considered healthy. We need to think about how to provide work for these people. Our company provides age care facilities nationwide, and in the communities around these facilities there are healthy, elderly people who are willing to work. We would like to employ them,” says Mr. Terada.

Most Japanese companies operating abroad are manufacturers, he says, adding: “So far there has not been a company that has succeeded abroad in the human-service sector.”

Nichii Gakkan had selected China for its first stage of international expansion that later will target the U.S. and South East Asia because “we wanted to try the most difficult region in order to be more flexible and capable in the future. Out of all the areas I could think of, China was the most difficult country.”

“However, in order to expand business…we need to provide vocational education rooted in the community of each area,” says Mr. Terada.

Biotechnology and chemical engineering

Japanese companies have long been among the front-runners in biotechnology, with Scientific American Worldview Report repeatedly giving them strong scores in patents held, as well as for overall innovation.

Japan’s government is supportive, seeing biotechnology as a key driver of future economic growth. It provides some financial assistance for this, as well as supporting both domestic initiatives and global tie-ups.

 “This is the first time, under the Abe administration, that they are actually incorporating words like regenerative medicine, gene therapy, and cell therapy into their policies,” says Koichi Nakao, President of Takara Bio Inc., a company recently ranked by Fortune magazine as one of the world’s top-five biotech stocks.

One of the hot issues at the G7 Summit in May was the spread globally of superbugs resistant to all known antibiotics,  and worries that the world is entering a post-antibiotic age where even the most common infections are untreatable.

“If we do nothing about this there will be a cumulative hit to the world economy of $100 trillion, and it is potentially the end of modern medicine as we know it,” U.K. Prime Minister David Cameron said at the Summit.

Mr. Nakao’s company appreciates the urgency of developing new therapies and medicines, in his company’s case, by manipulating cells.

It already exports reagents for use in scientific research from its facilities in China, and recently started manufacturing in India. In line with Takara Bio’s look-ahead strategy, it has also acquired California-based Clontech, giving the company greater expertise in gene discovery.

“We are working to address medical needs that have not been fulfilled. We are coming with treatments that are going to affect human health and welfare,” says Mr. Nakao.

“When we are working with gene therapy, we are not working for short-term profit. We do it to make treatments available to patients who cannot be cured by present treatments.”

Future needs for sophisticated and innovative technologies is motivating a Japanese chemical company looking abroad for success.

“We would like to be the number one in textile chemicals in Asia, but not in terms of quantity,” says Yasumasa Emori, President of Nicca Chemical Co., which operates in sectors ranging from fiber, metal and cleaning to cosmetics.

“If the customer has problems, I want them to think of Nicca as the first company to call for help... if they want to design something new or very innovative.

“We want to tailor our products to our customers, and create a total solution for their needs. That is what we are aiming to do.

“Our products will go to countries around the world. Not only Japan or Asia, but also to Africa, Europe, and the U.S.”

Climate Change

Japan has long been associated with international coordination to combat climate change, most notably as the host for the 1997 Kyoto Protocol.

It is also home of the Innovation for Cool Earth Forum (ICEF), whose third annual meeting will be held in October. It was launched by Mr. Abe in 2014 to provide a platform for discussion and cooperation between industry, academia and policymakers to see how innovations in energy and environmental technologies can produce climate change solutions.

The world’s agricultural outlook is being transformed by shifting long-term weather patterns, as well as urbanization, presenting a raft of possibilities for far-seeing companies.

One consequence of the steady rise of Earth’s temperature as greenhouse gases accumulate and trap more and more heat is desertification and reduced food output in some regions, and a need to plant more hardy crops.

Each of the first five months of 2016 were the warmest on record, according to data from the U.S. National Oceanic and Atmospheric Administration.

Adapting to changes in weather and temperature may involve frequent shifts in crop and seed selection, an area in which Japanese companies are trying to find solutions.

Well established in the search for new and more nutritious types of crops and seeds is Sakata Seed Corporation.

“We estimate the worldwide value of vegetable seeds’ wholesale market at 5.0-5.5 billion dollars. Every year, this demand is expanding because of population increases, and a shift away from the use of open-pollinated varieties of seeds to higher-value hybrid varieties,” says Mr. Sakata.

“We contribute to the betterment of life and culture of the people around the world with value created through our innovative vegetable and flower varieties,” he adds.

Opportunities to be harvested are huge, he believes, citing Sakata Seed America division’s efforts to develop products in so-called wet, or fruit crop seed, like tomato, cucumber, watermelon, melon and squash.

Seed companies keep trying to breed highly-adaptable varieties that can withstand diverse weather conditions, but there’s a limitation if there are extreme climate events, he notes.

Apart from agricultural solutions to climate change, Japan is well placed to export renewable and energy-efficiency technologies that can reduce greenhouse gas emissions.

Japan’s energy use per unit of GDP is currently about 30 percent less than the average of other G7 nations, making it one of the top performers globally, and it is targeting a further 35 percent improvement in energy efficiency by 2030.

While car manufacturers like Toyota are well known for introducing environmentally friendly hybrid cars to the mass market, there are other lesser known Japanese companies developing green technologies that help companies and homeowners to make huge savings on their energy bills, as well as to reduce their carbon footprint.

Miura Co. makes high-efficiency industrial boilers that use up to 15% less energy than standard boilers.  

These boilers are widely used in hospitals, schools, homes, shopping centers and industrial plants throughout Japan, but the company would like their products to be widely used around world, particularly to the U.S., where standard boilers are still commonplace, according to President and CEO, Daisuke Miyauchi.

“The configuration of our boilers is totally different from others; it is truly unique. This configuration is what helps us to save energy,” says Mr. Miyauchi, who believes this kind of innovative green technology bearing the “Made in Japan” tag is a source of pride that gives Japanese companies a competitive advantage in the international market.

Mr. Miyauchi also wants to support China in its efforts to shift from coal to gas-fired boilers. “This is a big opportunity for us and as soon as the shift occurs, we want to be there ready to provide for their needs,” he explains.

This focus on innovative technology designed to meet future needs could, some argue, help Japan replicate successes of the past made by cutting-edge companies like Sony, Toshiba and Honda.

“We would really like the world to see that after the two lost decades and disasters, we have come back,” says Asunaro Aoki Construction Co. President Mr. Ueno.