"Vision of New Industrial Structure"

- Japan's strategies for taking the lead in the Fourth Industrial Revolution -

Interim Report by New Industrial Structure Committee

April 27th, 2016

METI "Japan Revitalization Strategy" Revised in 2015 (Decided at the Cabinet Meeting on June 30th, 2015)  Innovation in IoT, Big Data and AI has been advancing more rapidly and impactfully than ever.

 It is crucial to have vision common to both the public and the private so that the private sector can make proper investment and as such the government can promptly take measures to make or modify rules that will facilitate such investment.

 In this regard the study should focus on (ⅰ) how and when the reform should be performed for IoT/Big Data/AI (i.e. the reform of industrial structure, employment structure, and economic and social system), (ⅱ) potential business opportunity, (ⅲ) task that the public and the private should engage in (e.g. regulatory and institutional reform, R&D/equipment/investment in human resource), clarifying timeframes for each task.

 The study has been so far implemented for the formulation of "Vision of New Industrial Structure" (in August 2015) by “New Industrial Structure Committee” (chaired by Motoshige Ito, professor of Tokyo University) set up within "Industrial Structure Council" in joint work with the relevant government ministries and agencies.

 The interim report was issued on April 27th, 2016.

Relevant government ministries and agencies The Cabinet Office; the Fair Trade Commission; the Financial Services Agency; the Ministry of Internal Affairs and Communications; the Ministry of Finance; the Ministry of Education, Culture, Sports, Science and Technology; the Ministry of Health, Labor and Welfare; the Ministry of Agriculture, Forestry and Fisheries; and the Ministry of Land, Infrastructure, Transport and Tourism. METI 1 Table of Contents

１. What is happening now?

２. Japan's basic strategy

３. Changes in society and conversion of industrial structures through the revolution

４. Changes in employment structures through the revolution

５. Estimates involving industrial and employment structures

６. Japan's specific strategy

i. Developing environments for promoting data utilization (establishing data platforms, creating data distribution markets, promoting utilization of personal data, developing security-related technology and ecosystems that produce skilled human resources, ideal approaches to intellectual property policies in the revolution and ideal approaches to competition policies that address the revolution)

ii. Fostering and securing human resources, improving flexibility in employment systems (establishing an educational system that meets new needs, securing human resources with a global mindset, promoting increased participation of more various sources of labor, increasing the flexibility of labor markets and employment systems)

iii. Accelerating innovation and technology development (“Society 5.0”) (establishing an open innovation system, developing innovation bases from which Japan will lead the rest of the world / establishing national projects therefor / accelerating social implementation thereof, e.g., AI, strategically promoting the management of intellectual property and international standardization)

iv. Fortifying financial functions (Fortifying equity finance toward the supply of risk capital, encouraging investment in intangible assets to address the revolution, further enhancing the functions of finance and settlement, positioning FinTech at the core)

v. Facilitating smooth conversion of industrial and employment structures (establishing a governance system in which business owners are able to swiftly and boldly make decisions, developing systems and environments in which business owners are able to revitalize and reorganize business in a swift and flexible manner)

vi. Disseminating the outcomes of the revolution to SMEs and local economies (establishing platforms on which IoT and other new technologies are introduced to and utilized within SMEs and communities)

vii. Further enhancing economic and social systems to address the revolution (ideal approaches to regulatory reform so as to address the revolution, improving administrative services through the utilization of data, enhancing the development of business overseas through strategic collaboration and cooperation between industries, ensuring the outcomes of the revolution permeate society)

METI 2 １． What is happening now?

METI 3 What is happening now? (ⅰ) - Technological breakthroughs -

 All business and information available to society in the “real world” can be freely controlled through digitized networks.

(IoT)

 Large volumes of data can be analyzed to create additional value. (Big Data)

 Self-learning machines can analyze data and situations more rapidly and objectively than human

beings. (Artificial intelligence: AI)

 Automation can be applied to more diversified and complicated tasks. (Robotics)

→ That which was previously impossible is now possible for society.

Hence the potential dramatic changes in industrial and employment structures.

Improved processing Increased volume of data Discontinuous progress of AI capability

AI technology can enhance Exponential progress can Data volumes worldwide can discontinuous progress be seen with performance be doubled every two years. with the support of deep of hardware . learning etc.

METI 4 What is happening now? (ⅱ) - Fourth Industrial Revolution -

 These technological breakthroughs includes the changes below: ① Shift from mass production/uniform services to customized production/services based on individual needs (customized medical treatment, immediate custom-made clothing, educational service depending on individual understanding) ② Free matching of society’s unused potential assets with needs of individuals (Uber, Airbnb, etc.) ③ Support or replacement for human labor, recognition/learning capability (automated driving, manufacturing/management, delivery by drone) ④ Creation of new services、shift to after-market services for products and goods (from simple sales of equipment to added services of operation/security/insurance using sensor data), significant efficiency improvement throughout the entire supply chain with data sharing (integration of production equipment and logistics/delivery/payment systems) ⑤ Technology used in the revolution is common foundational technology for innovation across all industries, and allows for addressing new needs (genome editing technology × biodata=new drug discovery, new type of farm product, bioenergy, etc.)

First Industrial Second Industrial Third Industrial Forth Industrial Revolution Revolution Revolution Revolution Autonomous optimization (AI thinks Harness fossil fuel Energy innovation Automation on its own, takes optimal action energy (electricity, internal (Computer) based on a large volumes of data. (by steam engine) combustion engine)

METI 5 Global strategy by leading overseas players

Range of cloud services expanding, Ensuring the protection of their manufacturing including information not only on the Internet industry know-how in which they specialize, and globally developing business using technology From Internet but also from real life From real world (From Internet to real world) to their advantage to the real world (From real world to Internet) to Internet (ii) Accumulating data in cloud servers, processed with Standardizing manufacturing systems established in Germany and exporting them overseas artificial intelligence (i) Sharing data related to factories and products around the world between companies, factories, and even machines

GE Google Siemens Amazon Bosch Facebook IBM etc. Intel

(iii) Giving optimum instructions to factories etc. (i) Collecting data related to factories and (iii) Optimally controlling factories products around the world

Examples from (ii) Accumulating and processing data with the manufacturing high-performance manufacturing facilities at hand

sector Equipment for factories is shifting toward affordable devices Maintaining value of high-performance equipment that receive instructions from the cloud and execute them. in factories, which is Germany’s strength

Source: FY 2014 Measures to Promote Manufacturing Technology METI 6 Companies aiming to create new society with data (ⅰ) Changes taking place for human roles and work Robot Taxi Aerosense, ALSOK, SECOM exMedio Realization of unmanned Use of drones in construction Use of AI for dermatological taxi service management of buildings, etc. diagnosis support system

Aiming to realize a futuristic, unmanned taxi service using automated driving system Drone photography of construction sites They developed free support service for technology which detects vehicle from above increase safety by allowing diagnosis of dermatological disease called surroundings and more. Services are work on high-rise building sites to be "Hifumiru" which operates with the help of expected to be available within specific checked with designs kept on Cloud photographs of afflicted body parts and section between the airport and Tokyo. services. medical patient interviews with affiliated Also it is expected that this technology will dermatologists over smartphones. contribute to retention of public transport networks including buses where there is a problematic lack of drivers.

Change how people move and live Eliminate risky work AI to assist with doctor's diagnosis

○ Challenge ○ Challenge ○ Challenge ・Provide statutory measures for Road ・Provide statutory measures for issues ・Upgrade performance of diagnosis Traffic Law, Road Transport Vehicle such as flying beyond line-of-sight, support system using AI. Law and international conventions for long-distance communication and ・Disseminate guidance prepared automatic guided driving. collision prevention, encouraging through review of diagnosis aid Source: Materials submitted by Mr.Tomiyama at the second Public-Private Dialogue usage. software. METI 7 Companies aiming to create new society with data (ⅱ)

To the world of discontinuous customization

Seiren Terumo Recruit Realization of rapid, custom Prevention of lifestyle-related Delivery of adaptive learning, production in response to disease using medical depending on student understanding consumer needs prescription/medical They developed a unique system called examination/health-related data They have developed learning platforms "Viscotecs" generating final product With the permission of employees, such as "Juken Sapuri” (Exam-taking from instant printout based on combine their daily exercise data with course), "Benkyo Sapuri” (Learning course) combined data of customer's favorite medical records focusing on obesity and which provide various web-based, self- fabric and design. to analyze health improvement effects of directed learning opportunities. Additionally, buildApplicable-to- toorder such materialsmanufacturing as walking, contributing to the furtherance a study is under way to deliver optimal aluminum, wood and ceramics. of good health/the prevention of lifestyle- recommendations on learning based on their individual manufacturing related diseases. actual learning level and less favorite individual order subjects, using AI. medical manufacturer prescription medical examination consumer build-to-order manufacturing records

individual manufacturing individual order Amount of activity manufacturer consumer Number of steps Vital data

・Align price of made-to-order ・ ・ product with price of mass Prolong healthy life expectancy Ensure effective learning with produced item with customized health service individual/optimal learning aid service

○ Challenge ○ Challenge ○ Challenge ・Ensure optimal product liability. ・Provide medical care/health information ・Pursue partnership with schools and and implement optimal utilization of other education organizations and Source: Materials submitted by Mr/Ms those services according to revised develop infrastructure for use of Tomiyama at 2nd Public-Private Dialogue Personal Information Protection Law. adaptive learning at schools. METI 8 Technology (Common Platform Technology × Industry Core Technology )× Relevant Data

Technology Relevant data Various goods and services

Financial Data on trade/distribution Credit by data on trade/settlement, technology Data on financial markets Robo-Adviser (asset management), etc.

Personalized medicines, Drug discovery Health and Personalized cosmetic technology medical data and beauty services, etc.

Common platform Bioinformatics New drug discovery, new type of technology Biological data farm product, advanced materials (AI, IoT, Genome editing manufacturing, bioenergy, etc. Robotics)

Energy load device Energy demand response, Customer data control technology monitoring services, etc.

Enhancement of safety/productivity with Production Accidents and control technology early detection of failure/fault sign, near-miss data improved insurance/rating, etc.

METI 9 Envisioned reform of leading sectors (illustrative) (1)

Manufacturing innovation, industrial Autonomous driving and mobility security, supply chain and retail ○ Directions of change ○ Directions of change ・ ・ Improved efficiency in logistics with Enabling instant response, made-to-order realization of longitudinal column travel. production with mass production factory.

・ ・ Increased utilization of full automatic guided Realizing zero waste and lead time by data vehicle system in various sectors. Start-up of linkage through production, logistics and advertising business and services to utilize sales. time spent while driving.

・ Full scale use of drone for logistics. ・ Resolution of issues regarding people vulnerable to traffic, traffic accidents, ・ Constantly monitoring the plant equipment congestion and environmental impact. to detect failure/fault sign early and issue warnings appropriately.

[ PM’s statement at the second meeting of the Public- [PM’s statement at the second meeting of the Public- Private Dialogue] Private Dialogue] • Aim to realize parcel delivery service using drone within 3 • Develop system, infrastructure and verification by 2017 for years from now if possible. autonomous driving service and transportation on expressways • To this end set up the Public-Private Council to discuss how which will be in use at 2020 Olympic & Paralympic Games. it specifically should be treated between users and the relevant government offices. A policy to establish it should be formulated at such council by summer this year.

METI 10 Envisioned reform of leading sectors (illustrative) (2)

Health, medical, and nursing care Finance (FinTech) ○ Directions of change ・ Realization of customized services of ○ Directions of change ・ health and prevention through Realization of more convenient utilization of health/medical data. settlement, remittance and funding etc. through a small amount settlement, ・ Mitigation of local burden of medical remittance and swift data-based credit care/nursing care through implementing review which will be all executed online. medical care robots with advance

recognition/control assisted by AI. ・ Realization of efficient corporate back office and household finance [PM’s statement at the second meeting of the Public- through real-time visualization of Private Dialogue] corporate management, accounting and • Publish new guidelines applicable commonly household finance. to review of diagnosis aid software by this spring so that diagnosis aid system using AI can be utilized at local medical institutions.

METI 11 Envisioned reform of leading sectors (illustrative) (3)

Smart housing, smart communities, and energy Education ○ Directions of change ○ Directions of change ・ Realization of smart communities ・ Realization of customized where supply and demand for energy are comprehensively managed including learning according to a leaner's demand side as per characteristic of each degree of proficiency and region. favorite subjects by expanding ・ Deployment of diversified services by adaptive learning etc. acquiring and utilizing various data within household and communities. let alone data on energy. ・Provision of easy access to

[PM’s statement at the third meeting of the Public- knowledge or skills needed for

Private Dialogue] each occupational activities at • Strengthen drastically incentive to conserve electricity. any time as per individual Create "Negawatt trade market" by 2017 where one trades electricity conserved by utilizing residential needs while making learning photovoltaic power and IoT. • To this end formulate trade rules for providers and materials used openly and establish telecommunications standard to remotely control energy equipment within current fiscal year. utilizing online classes.

METI 12 Envisioned reform of leading sectors (illustrative) (4)

Agriculture ○ Directions of change ・ More improved productivity by labor saving through introduction of robot and automatic guided driving system etc. and by formation Tourism of tacit knowledge on production lines ○ Directions of change ・Realization of improved quality control ・Provision of customized tourist experience to through ensuring traceability etc. by enabling meet individual interests and preferences partnership among production, process, logistics and through collection and utilization of distribution based on ICT. behavioral data of tourists.

・ Provision of farm products in response to ・Increase of options in accommodations and different consumers' needs through utilization transportation for tourists by expanding of data on sales performance etc. sharing and matching services, and entry of individual in tourist services as providers. [PM’s statement at the fourth meeting of the Public- Private Dialogue] • Introduce cutting-edge technology into agricultural sector. Commercialize automatic guided riding system for agricultural equipment on cultivated land by 2018, and create system necessary for enabling unmanned system through remote monitoring by 2020.

METI 13 (Reference) Economic value by leading sectors  Chief think tanks project significant impact of IoT on such sectors as manufacturing, distribution/retail/logistics, finance, medical/health, public service. [Economic value generated by IoT by sectors (global base)] (Aggregate economic value generated by IoT from 2013 - 2022) Manufacturingものづくり革新 innovation 3.9 (trillions of dollars)

Distribution/retail/logistics流通・小売・物流 2.3

Finance金融 1.3

Medical/health医療・健康 1.0

Smartスマートハウス、スマートコミュニティ house/smart community/ エネルギーインフラenergy infrastructure 0.9

Educational教育サービス service 0.9

メディア・コンテンツMedia content 0.6

Agriculture農業 0.2

公共サービス（含む行政）Public services (including administrative services) 4.6

[*Economic value] (Economic value of IoT as of 2025) Value on the whole including increased sales by suppliers as well as increased value on the part of users such as companies which * Mobility (automatic driving system etc.) 0.9 introduce IoT to pursue cost reduction through higher operating efficiency and increase sales through advanced marketing practices. ( Source：METI's document on categorization and integration based on Cisco, McKinsey report) METI 14 ２. Japan's basic strategy

METI 15 Two scenarios of Forth Industrial Revolution -Japan now at “turning point"- [As-is scenario] - Retaining industrial/employment structure -

 Added value taken by overseas data  Leaving walls between companies, keiretsu and platform providers industries as well as retention of self-sufficiency  Japanese industries becoming sort of subcontractors or poor  Relying on overseas data platforms  players due to such platforms Retaining immobile labor market 

Industrial Revolution Revolution Industrial 4th Collapse/bipolarization of middle class workers (loss of  Preserving exiting industries employment opportunities due to mechanization or  Continuing traditional education/training of digitization, decrease of wages) human resource  Subject to gradual innovation focusing on only hardware

[Reform scenario] - Shift and mobility of industrial/employment structure -

 Resolving social issues by creating new services/products, acquiring global markets and

 Discovering and acquiring new demand by taking added value advantage of AI technologies and data  Increasing productivity and wage to compensate →creating innovative services and products decline of population  Creating data platforms that have no  Spreading profit among SMEs and regional economy boundaries among companies and keiretsu.  Concurrently reorganizing industries and  Utilizing flexible labor market and foreigners mobilizing employment  Ensuring industrial metabolism  Realizing disruptive innovation for software etc.  Switching over to human resource education through use of data  Becoming the core of international network

(human resource, technology, funding, data)  Reform with burden or current stable situation with declining economy  It is speed with which reform is deployed.

METI 16 Basic approaches for dominant sectors

1. (ⅰ) Understand directions of global technology and industries and strategies of leading companies around the world.

(ⅱ) Analyze Japan's "strengths/weaknesses," and clarify sectors of "sectors with the greatest opportunity for improvement".

2. Share this approach with companies all over Japan and then create various strategies for the government, private sectors and research institutes.

(ⅰ) Share long-term visions for the future (society, technology, industry, employment) with public and private sectors. (ⅱ) Determine specific goals, setting interim deadlines. (ⅲ) Develop a roadmap which defines all elements required for achieving goals and implement specific, short-term reform (regulatory reform, business promotion, private business activities, etc.)

3. Based on these strategies, (ⅰ) Take the lead in driving reform for specific obstacles once their prospects are identified. (ⅱ) With respect to obstacles whose prospects are uncertain due to the possibility of different scenarios, make attempts to implement new ideas without waiting for the consensus.

METI 17 Importance of utilizing real data

 Utilization of "data" is the source of added value in respect of the Forth Industrial Revolution.

1 st stage Virtual data

Data generated from websites (search etc.) and online activities such as SNS. →These platforms are controlled by overseas IT companies (Google, Amazon, Apple, etc.)

2 nd stage Real data

Data obtained from sensors etc. detecting activities in the real world of individuals and companies, such as data on health information, travel and operation at factories and etc. →Japan has possibility of acquiring platforms for such data if Japanese companies successfully approach these data.

Real data consists of confidential data due to corporate competition and huge volume of data which should be

shared to compose big data with great advantage arising from corporate cooperation.

It is crucial to identify "cooperative domains" and "competitive domains", and to build "platforms"

which shares and utilizes data coming borderlessly from offices/companies/keiretsu METI 1818

(Reference) Basic cycle for data utilization

5 1 Societal implementation/ Obtain Industrialization data

4 2 Exchange/transmit Analyze by AI, etc. data

Practical application 3 (big data, etc.) 6 Establish business model which offers the entire basic cycle. METIMETI 19 Japan's strength/weakness for data utilization Strength：Hardware (1) (5) Weakness: Software (2) (3) (4), concepts and systems to enable connection hardware and software that integrate hardware and software

Data cycle (evaluation) ☆Strength ★Weakness ☆Global market share of robots, sensors, etc. ☆The most advanced low birth rate and 5 Societal Obtain ☆Data on quality school teachers aging population implementation/ 1 data (tacit knowledge on the local level) ☆Global market share of automobile etc. Industrialization ☆Consumers able to recognize and ★Global market share of mobile OS, assess quality products device, etc. ★Technology of 3D printing and its 2 limited utilization ☆World's cutting-edge high speed 4 Exchange/transmit Analyze with AI, etc. data data network ☆Super computer technology ★Maintenance cost of data center ★Development and utilization of AI technologies Practical application ★Development of software products (big data, etc.) ★Basic research of mathematics and medical ☆Local big data (medical care, transportation, etc.) fields, etc. 3 ★data sharing, data exchange ★Data scientists, security specialists, etc.

6 Establish business model which offers the entire basic cycle.

★Regulation systems to facilitate new business ★Scale and speed of industrial reorganization ★Legacy cost of IT systems elaborated for each individual company METI 20 Japan's strategies (1) - 7 policies - (Redesign of socio-economic system for the future)

(1) Develop environment for promoting data utilization • Building data platform, creating data distribution market • Facilitating utilization of personal data • Building ecosystem that produces security technology /human resource • Formulating strategies on intellectual property in the Fourth Industrial Revolution • Formulating strategies on competition policy in line with the Fourth Industrial Revolution

(2) Enhance flexibility in the development/recruitment of human resource and employment system • Building educational system in response to new needs • Acquiring talents globally • Promoting diverse types of employment, • Enhancing flexibility in labor market/employment system

(3) Accelerate innovation and technological development ("Society 5.0") • Building an open innovation system • Develop innovation bases that lead the world/Establishing national projects/accelerating societal implementation (e.g. AI), • Promoting strategically intellectual property management and international standardization

METI 2121 Japan's strategies (2) - 7 policies - (Redesign of socio-economic system for the future)

(4) Strengthen financial capabilities

• Fortifying equity finance for the supply of risk capital • Encouraging investment in intangible assets in line with the Fourth Industrial Revolution • Improving capabilities of finance and settlement focusing on FinTech

(5) Facilitate shift of industrial /employment structure

• Building a governance system to enable swift and positive decision-making • Developing systems and environments to enable swift and flexible business revitalization/reorganization, etc. • Enhancing flexibility in labor market/employment system (stated again)

(6) Spread effect of the Fourth Industrial Revolution into SMEs and regional economy

• Introducing IoT etc. into SMEs and regional economy, and building base for utilizing them

(7) Ensure sophisticated system of economy and society for the Fourth Industrial Revolution

• Ensuring optimal regulatory reform in line with the Fourth Industrial Revolution • Improving administrative services using data • Performing enhanced global deployment through strategic partnership etc. • Spreading advantage of the Fourth Industrial Revolution into the society in general

METI 22 3. Changes in society and conversion of industrial structures through the revolution

METIMETI 23 Societal needs to be realized by the Fourth Industrial Revolution

 "Societal and structural issues (e.g. customer's true needs) which go beyond our capabilities can be addressed by utilizing innovative technology/data such as AI.  Competition will be conducted as to who will discover or acquire this new frontier expected to be spread globally.

Move safely Make effective use of travel time

Societal and structural issues facing Japan and the world Live "smartly" Get "smartly"  Low birthrate and aging population  Decline of regional economies and Keep healthy, communities  Limited energy and environmental support the elderly Use convenient constrain infrastructure  Food issues  Water issues  Other Live safely and securely Enjoy entertainment

Learn effectively Share efficiently

Easily borrow fund and manage asset

METIMETI 2424 (1) Expansion of mobility industries impacting employment

 Opportunities are constantly arising for new value chains / industries by responding to societal needs.  For example progress in automatic guided driving/drone technology is giving rise to new services and products, affecting a variety of industries.

2018- around 2030 (10)Fully autonomous cars for private use Newly (9)Expansion of created role (6)Reduction of sharing service car insurance (6)Reduction of car and value premiums (8)Unmanned insurance premium transportation service (5) Service using time in (5)Service using time in the car (4)24/7 the car (7) 24/7 autonomous (Culture/entertainment) logistics (including (Culture/ ... Autonomous public roads) entertainment) driving by (2)Drone (3) (8)24/7 industries autonomous use delivery (3) Advertising Advertising by industries (2) Unmanned drone logistics (2) Drone delivery (1) (1) Platooning (1) Platooning (partial) (expanded) Platooning

Level 2/3：Combined Function Level 4：Full Autonomous driving**(Limited Level 4：Full Autonomous driving Automation/Limited Self- to expressways) (Level 4) (ordinary Driving Automation (requires road/expressway etc.) driver's support*) ** Unmanned operations * (3) Advertising, or (5) make progress across entertainment or business industries as increasing Agriculture/fishery, food, wholesale ・・・etc.

Relevant services are available range of non-manual industries utilizing former driving operations become (e.g.) time (now freed due to possible. Information service, advertisement 、casualty insurance,・・・etc. ... autonomous driving

systems). Manufacturing (Automobiles /accessories, drones,)、Automobile maintenance, passenger road transportation, freight road transportation, retail, information communications,・・・etc. • (1)(2) Improvement of • (4) Improvement of labor market • (7)(8)(9) Significant change in Impact on labor market with in a variety of industries including employment structure for employment logistics etc. logistics and agriculture. professional drivers. (example) [About 40,000 surplus • (3)(5)(6) Creation of employment • (3)(5)(9) Creation of additional ... of job offers for truck employment by creating new services. by creating new services. METI drivers] METI 25 Spread of vision “move" and its impact on society (pros and cons)

 Spread of impact from industry/employment occurs, and concurrently impact on different societies may arise in/out of Japan.

Individuals Society

○ Resolution of issues on people having difficulties in moving ○Decrease of environmental burden (CO2 etc.) by [7 million "the weak for shopping", about 40 million people realization of uncongested traffic on ordinary roads or without driver's licenses] expressways [Annual economic loss: 3.3 billion people/hours,10 trillion ○ Improvement in distribution of daily necessities for remote yen] islanders

Domestic [CO2emission by domestic transportation sector: 220 [Total population of all remote islands: 319,000] million tons (17% of total emission] ○ Safer traffic due to decrease of traffic accidents ○Faster emergency response for freight etc. in case of [Traffic fatalities: 4,117(2015)] disaster [Economic loss due to accidents: 6.3trillion yen(2009)] ●Integrated control system of traffic and drone by ○ Freer work style with effective use of commuting time connecting respective data results in significant increase of [About 20 minute (one-way) average commuting time by car] risk in case of failure

●Necessity of acquiring new work skills or more needs of ●Changes in labor market, employment system, social transition of labor force with change in employment security system etc. structure Overseas ○ [People without driver's licenses: about 6 billion ] ○[Energy consumption worldwide for transportation sector: 103 trillion Btu (20% of total)] ○ [Traffic fatalities:1.25million] [Economic loss due to accidents: over 100 billion USD (especially 1-2% loss of GNP in emerging countries)]

Source: Accenture Mr Hodo's presentation materials at 3rd New Industrial Structure Committee, "For abundant automobile society" by Japan Automobile Manufacturers Association, "Status of traffic accidents and traffic safety policy" by Cabinet Office, "Report on the weak for shopping" by Ministry of Economy, Trade and Industry, "CO2 emission for transportation sector" by Ministry of Land, Infrastructure and Transport, "Report on result of research of basic traffic situation" by Ministry of Land, Infrastructure and Transport, "Status of remote islands" by Ministry of Land, Infrastructure and Transport METIMETI 26 Multiple ways for meeting various needs of “move"

 Possible shift from traditional types of industries to industries responding to changes in social needs (e.g. from automobile manufacturing industry to mobility smart service industry)  This shift will bring about shift from reorganization within same industry to reorganization among totally different industries. As a result major changes of industrial structure will occur.

Business entities Current 2018- around 2030 Traditional axis Restructuring axis in the of reorganization (1) Gradual approach for Fourth Industrial Revolution upgrading automatic guided Mobility ○ Automobile driving manufacturer Providers ○ Drone manufacture Full automatic guided vehicle/drone ○ Information service (2)Disruptive approach for realizing automatic guided driving

○Transportation Unmanned business Unmanned transportation service transportation "Move" (bus/taxi etc.) service in limited Alternative automati Human areas cally, mobility safely,

freely ○ Sharing and service Ride sharing Expansion of sharing service inexpens provider ively

Platooning Unmanned Mobility truck of goods ○ Logistics provider (truck/railway/ Complimentary Full unmanned drone etc.) logistics Drone for last Drone for main one mile network delivery METI ※ Trial is expected for late 2020's according to Public-Private ITS Vision/Roadmap 2015. METI 27 (2) Industries flock to market related to “smart life“, impacting employment.

 Utilization of real housing data produces various new services and products, affecting various industries.

About middle of 2020's (8) Various services Current delivered through data platform Newly (5) Autonomous efficiency of retail (shopping) created role (6) Integration of (7) Shift to mass customization and value devices and advertisement (7) (4) Partnering health service and medical care (6) Optimal advertisement (5) (5) Partial autonomous efficiency of (3) More efficient home delivery based on personal behavior retail (shopping) (use of information delivery times) (8) Monitor/security of equipment (3) Further efficient regional logistics (enhancement of predicative capability) (4) Health information (2) Watch service (6) Electricity interchange with home to home (1) Display device utilization (by fulfillment of parity) (3) Incentive (9) (2) Sophisticated watch (4) Systematic use of for electricity saving (4) Systematic use of EV (electricity storage) Energy (2)Display EV (electricity storage) (3) Incentive energy (1)Wide area control of supply/ for electricity saving (1) Wide area control of supply / demand of electricity use (1) (2) Visualization demand of electricity (1) (2) Visualization (1) Control of supply/demand Smart house of wide-area electricity Phase1/2 (Current status) Phase3 (Expanded linkage of devices) Phase4 (Reciprocal data use) Prior application of home Prior application of data from security services and Expanded effect to general housing / real estate related Relevant smart meters (installed in all automatic ordering industries industries fulfillment etc. houses by 2024) (e.g.) Prior application of Retail, advertising, security, freight road transportation and medical/nursing care…etc. electricity storage use Manufacturing (storage battery, EV), information service (aggregator business, negawatt trade)・・・etc. and electricity points Manufacturing (electrical appliances, housing, household appliances), electricity/gas/water (retail), ・・・etc.

Electricity/gas (retail), electric equipment maker, construction/real estate leasing (housing), ・・・etc.

• (3)/(4) Creation of new services • (5)(6)(7)(8)(9)/(7)(8) Creation of additional • (1)/(2) Fewer meter (aggregator etc.), increase of readers employment by creating new services. Impact on employment due to increase of • employment (1) Less manpower for demand on products (EV etc.) repair, maintenance and (e.g.) • recall etc. (3) Improvement of logistics labor market due to decrease of failed deliveries to empty homes METIMETI 28 Spread of vision “smart life" and its impact on society (pros and cons)

Individuals Society

○ Realization of “smart life” friendly to environment ○ Realization of 3E+S (Energy security, Economic efficiency, [Electricity generated by residential photovoltaic power Environment, Safety) (aggregate): 8.65 million kW] ○ Improvement of efficiency of energy use at home ○ Easier working by married couples through reduction of [Energy use percentage at home: 14.4％]

Domestic household workload - clothes washing/cleaning etc. [Post marriage female employment rate: 65.3%, Post ○Realization of efficient distribution in response to needs child delivery female employment rate: 23.1%] for sufficient food [Food loss rate: 3.7％] ○ Resolution of issues of live-alone elderly under monitoring ○ Increase of recall recovery rate and recovery rate of

[Number of deaths at home of over 65 years live-alone waste household electric appliance by identifying product elderlies in 23 wards in Tokyo: 2,869] locations [Number of serious product accidents due to non- ○ Decrease in deaths at home (heat shock etc.) response to recalled products: 100 cases per year] [Number of unexpected deaths at home: 14,000] ○ Further enhancement of disaster-response capabilities ●Risk of using housing data for criminal activities ● Risk of cyber terrorism due to expanded networks

Overseas ○ Upgrade of living standard through community- ○ Contribution to achievement of goal for controlling global distributed power sources in areas with inadequate warming by improving efficiency of energy consumption

infrastructure in emerging countries [Goal: "Limit temperature increase to 2 degrees Celsius by [Number of people living where there is no electric 2050"] power : about 1.2 billion- 17%of world ○ Reduction of food loss worldwide population(2013)] [Number of people with insufficient food: about 800 million]

Source: "Statistics on food loss/household research 2014" by Ministry of Agriculture、Forestry and Fisheries, "White paper on energy usage 2015" by Agency of Natural Resources and Energy, "Walls blocking female continuous employment" by Cabinet Office, "White paper on aging society 2015 (full version)" by Cabinet Office, "Demographic survey 2014" by Ministry of Health、Labor and Welfare, "Renewable global status report 2015" by REN21, "World Food Programme “ by Hunger Statistics, "Tasks for product safety policy 2014" by Ministry of Economy、Trade and Industry

METIMETI 29 Multiple ways of meeting the various needs of “smart life"  Create new value by comprehensively utilizing integrated data inside home and in community.

 New businesses may emerge that acquire most of their value by securing a competitive advantage through providing platform of such data integration.

Current From 2017 About middle of 2020's (1)Centralized approach → Integration of data on energy and housing/

Intensive on on Intensive large scale creation of added value diversified through utilization of data

Phase1 Phase2

(area optimal) (wide area optimal) Revolution Industrial Fourth the in axis Restructuring

Energy Phase3 Distributed locally (2)Decentralized approach (Flexible and efficient to area with with area to

demand energy supply system) Phase2’

(Use of user resources) Phase4 (Information collection by Platform and reciprocal Home Phase1 Phase2 Phase3 data use e.g self-learning/optimization e.g. visualization of electricity usage e.g.control of multiple devices

Smart house Smart energy by EcoCute and air-conditioner, etc. by smart meter via HEMS

Devices such as home Phase1 Phase2 Phase3 electric (enhanced functionality within (networking of devices: (upgrade in linkage with appliances single device) visualization, remote control, etc.) other devices and services) household appliances Retail Obstacles exist for corporate

In a smart house, various upgrades occur in each device/service, integrating them into the platform. Health/medical prevention ⇒ Further advancement and resolution of issues in each domain (retail, heath etc.) partnership, Logistics data use, ... platforming. METIMETI 30 (3) (1) Industries flock to market related to “Keep healthy," impacting employment. (8)Health around 2030 (10)Person minded during 2016- alized Current community (9)Personalized guidance building medicines、 on nutrition personalized Newly created cosmetic and (6) Insurance to beauty services cope with risk of role and value (5)Personalized life style diseases health service (7) Monitoring (5)Personalized service health service (2)Digitization (4) (2)Digitization of medical medical examination (2) Digitization of of medical (4) information recommendations medical information information medical examination recommendations (3)Visualization (1)Fitness of health (1)Digitization (3)Visualization service in (1) Further (3)Visualization of fitness of health linkage with improved fitness of health information condition prevention service condition and life style

Phase1：Grasp of Phase2：Improvement of health and Phase3：Optimizing and basic needs, collection prevention based on relation platforming through AI, etc. of quality data between health and symptoms Clustering data by Industries that develop more

integrating health advanced data connection Manufacture (food, cosmetics, household appliance), Relevant related data, than data clusters (see Finance(insurance), ・・・ industries (e.g.) medical description on the left) will be first players. prescription, medical Information service/software... examination, clinical data Medical institutions, entertainment (fitness), manufacturing (health equipment, wearable devices, apparel), communication ... • (4)(5) Decrease of needs for • (6)(7)(8)(9)(10) Creation of medical/nursing care due to rise of employment due to new services Impact on independent elderlies will mitigate including "prevention and early employment tightened labor market (this will enable diagnosis/early care-" related (e.g.) focusing work force towards people personalized services. truly in need of medical/nursing care).

METIMETI 31 (3)(2) Industries flock to market related to “support he elderly" impacting employment. Employment support Communication -2030 service Robot Current Smart nursing-care facility Newly created Food intake Excretion Transport service role and value support Transfer support service Transfer support equipment support Excretion Equipment (care Equipment support receiver) (care receiver) equipment Transfer support Optimal equipment(care Optimal individual Transfer support individual Optimal giver) Equipment (caregiver) planning planning individual Digitization planning monitoring Digitization Monitoring Digitization of nursing of nursing of nursing monitoring care data service service care data care data service

(1)Efficient (2)Reduction of medical/care (3)Efficient medical/care administrative services services workload services

Efficient indirect Information service...etc. Relevant services industries Reduction of direct services workload (e.g.) Manufacture (robots), medical equipment...etc.

Information communication, optical equipment, real estate, construction (housing) ...etc.

• Efficient nursing care is • Efficient nursing care is expected by • With task of nursing care directly expected by ensuring introducing excretion support replaced by robots etc., drastic utilization of patient equipment. improvement of productivity with monitoring and digitization of nursing care service is expected, Impact on • Reducing nursing-care worker care record. allowing resources to be focused on employment turnover is expected through (e.g.) people truly in need of human care. mitigating workload by introducing robots.

→ Responding to the issues of shortage of nursing care workers, improving working conditions, and controlling taxpayer's burden. METIMETI 32 Spread of vision “keep healthy, support the elderly" and impact on society (pros and cons)

Individuals Society

○ Average life expectancy and healthy life expectancy are ○ Reduction of fiscal burden of social security becoming longer, creating an ageless society.(living until [32.7% of general account expenditure, medical expense: the final days in his/her own way) 11.4trillion yen, nursing care expense: 2.7trillion yen] [Percentage of population over 65years: 25％, Difference ○ Resolution of supply-demand gap in nursing care workers between average life expectancy and healthy life [Gap of labor market estimated in 2025: 310,000 people, expectancy is about 10 years.] estimated in 2035: 680,000 people] ○ Independence/self-control of people in need of nursing Domestic ○ Improvement of working conditions of nursing care care, progress of social participation workers through higher productivity [Number of elderly with difficulties in daily lives: 209 of [Average salary of nursing care workers at welfare 1,000 people] facilities: 218,900 yen compared to 324,000 yen average ○ Living securely until final days with nursing care salary of all industries] [Percentage of single elderly households in 2035: 37.7%] ○ With prolonged healthy life expectancy, entry into labor

○ Realization of optimal workload of medical/nursing care market in the future may be on the rise despite projected [National medical expense: 40 trillion yen, lifestyle population decrease. diseases as percentage of medical expenses: about one ●Possibility of increase of people unable to receive nursing third] care service unless industrial structure is reformed.

○ Increased average life expectancy, reduction of difference ○ Optimal ratio of medical expenses Overseas between average life expectancy and healthy life [Percentage of medical expense compared to GDP: 9.3% expectancy (OECD member country average)] [Percentage of people over 65 years old worldwide : 12％ ○ Increasing need for nursing care services in Asian countries on the average, average life expectancy: 71years, difference where aging populations are on the rise, and response to between average life expectancy and healthy life increasing need for preventive care in developed countries expectancy: about 10years]

Source: Materials for the Fourth Committee about healthy life expectancy/average life expectancy：WHO 2012 Comprehensive Survey of Living Conditions 1 in 2010, Report "Workshop for nursing care service responding to future needs in nursing care service," " Projection of the number of households for Japan (nationwide projection) compiled in January 2013" by National Institute of Population and Social Security Research METIMETI 33 Multiple ways to meet various needs of “support the elderly"

Current -2030

3． Sophisticated innovation scenario Efficient direct services of nursing care ・ Alternative nursing ○ Realization of drastic streamlining care with robots and workload reduction through progressive robot technology / innovation ○ Advanced equipment / services dominating Asian markets where aging population is on the rise. Reduction of direct workload of nursing care 2． Enhanced productivity scenario ・ Utilization of excretion support equipment ・ Utilization of robot suits, etc. ○ Realization of ability to address increased needs, securing nursing care workers, control of national burden through enhanced quality/productivity Efficient indirect nursing care based on IT / sensors / robots services ○ Improved quality of nursing care ・Digitization of nursing care records ・Utilization of watch sensor service - realization of nursing care at ・PDCA, etc. on enhanced home without burden to family quality/productivity based on data members

1． Stagnant productivity scenario Labor-intensive service model ○ Increase of national burden ・paper nursing care ○ Shortage of nursing care workers records ○ Increase of nursing care worker ・Watch/patrol at turnover, etc. night, etc. METIMETI 34 (4) Industries flock to markets related to “smart procurement," impacting employment. (8) Creation of trend by Current around 2020 identifying potential (6) Expansion of needs Newly created domains of newly (6) Creation of (7) Maintenance role and value new services and created services of products / (4) Mass products and products zero downtime customization (4) Mass (5) Prolonged (3) customization product life (3) Ensuring Realization (3) Ensuring cycle sophisticated of smart (5) Prolonged sophisticated safety security product life safety cycle (2) Reduction of (1) (2) Reduction of (1) Reduction (1) Further (2) Zero waste (merchandise Reduction of waste (materials of lead time reduction of waste, zero inventory) lead time inventory) lead time inventory

Phase1/2: Phase３：Provision of Phase 4: Sophisticated projection Optimization of supply customized products by through AI chain understanding customer needs

Realization of mass Commercialize Medical care (Health), all types of industries or sectors Relevant customization that products after including waste processing industries realizes fulfillment of estimating (e.g.) individual needs needs and creating trends Logistics, distribution ...

Manufacturing, communication, information service...

• Improve working • Expected increase in demand of • Expected increase of demand of labor in conditions and labor labor in many industries due to many industries due to creation of new market for factory creation of new services and services and products workers products • Expected increase of demand of labor in Impact on domestic factory workers due to return of employment • Improvement of • Change in necessary skills / type manufacturing sites to Japan, facilitated (e.g.) logistics labor market of work for factory workers, by reduction of lead time. logistics workers, back office • Change in necessary • Change in necessary skills / type of work workers, etc. skills / type of work for required for factory workers, logistics factory workers workers, back office workers, etc. METI METI 35 Spread of “smart procurement " vision and its impact on society (pros and cons) Individuals Society

○ People may be able to purchase whatever they want, ○ Realization of zero waste during production process whenever necessary and at fair prices. (strengthen international competitiveness, reduce environmental impact) ○ Consistent level / expansion of job openings due to [Emission of CO2 from industrial sector(factory etc.): development of new demand, increased about 430 million tons (32.8% of total)] Domestic competitiveness thanks to acquisition of domestic ○ Further construction of manufacturing facilities for production sites sophisticated products in Japan (creation of new jobs, [Active opening ratio: (jobs on production line) 1.23 ripple effects for regional economies) (February 2016)] [Overseas production rate for manufacture: 24.3％ ●Need for change in worker skillsets, concerns about (2014)] reducing job openings due to decline in international ○ Control of illegal dumping of waste household electric

competitiveness appliances with increased networking of goods (e.g. ：machine → IT) [Number of collected waste household electric appliances illegally dumped: (estimated record) 74,600]

Overseas ○ People may be able to purchase whatever they want ○ Overseas deployment of smart factory system that whenever necessary and at fair prices. realizes international contribution and market deployment by Japanese companies

○ Reduction of waste worldwide [GDP ratio for manufacturing: approx. 16%] [2.1billion ton] ○ Recovery of waste material value with up-cycling, recycling and parts collection etc. [1.3 trillion USD market potential (Accenture's projection for 2030)]

Source: "Statistical data on general waste and industrial waste" by Resource Recycling Promotion Center, "Status of venous industry and challenges" by Ministry of Economy, Trade and Industry, "Statistical research on food loss and household research 2014" by Ministry of Agriculture、Forestry and Fisheries "Status of illegal dumping etc. of waste household electric appliance 2014" by Ministry of the Environment, "Status of general job reference February 2016" by Planet Aid, Accenture Mr Hodo's presentation at 3rd New Industrial Structure Committee, Ministry of Health,Labor and Welfare,"Emission amount of greenhouse effect gas 2013 (preliminary)" by Ministry of the Environment, METI "Survey of Overseas Business Activities" by Ministry of Economy, Trade and Industry, McKinsey"Manufacturing the future: The next era of global growth and innovation" METI 36 Multiple ways of meeting various needs of “smart procurement”

 Creation of new value by comprehensively utilizing integrated data on manufacturing / distribution / retail etc.  Emergence of new business entities that secure a competitive advantage by utilizing technological innovation including AI is possible. Current around 2020 -2030

manufacturing facilities Preventive Manufacturer Preventive maintenance / Players with Players maintenance / insurance service Optimization of using AI production by insurance service "visualization" and using sensor data "data use" at factories

Component /

material Commercialize provider Mass customization products by Efficient supply chain (instant customization of estimating through collaboration mass production, optimal needs and creating trends control of robots with AI) with big data Distributor and AI (Retail/Wholesale) manufacturing facilities manufacturing More efficient sales Players without without Players activities Monozukuri using distribution data (manufacturing) (POS,EDI data etc.) Venture

Provision of services IT service provider utilizing big data on customers Consumers to participate in

Consumer production process (prosumer) METI 3737 4. Changes in employment structures with the revolution

METIMETI 38 Focal point of change in employment structure (1)

 Progress of labor saving in non-routine tasks besides routine tasks with emergence of robots etc. It is highly probable that middle-skill white-collar jobs, a major portion of the workforce in Japan, will decrease significantly while such progress leads to filling the overall manpower shortage.  Changes in business processes in line with the Fourth Industrial Revolution will bring about new employment needs including middle-skill workers. Therefore it is necessary to develop human resources to respond to changes in the employment structure and to shift the labor force to growth areas.

Change of jobs in line with the Fourth Industrial Revolution

＜Upstream jobs (management / planning / product planning / marketing, R&D)＞ • Increase of high-skilled jobs due to expansion of business / markets in various industries (Occupations such as) management / strategy staff, M&A staff, data scientist, product planner for mass business, marketer / R&D staff, IT engineer to allow R&D findings to materialize) • Also increase of middle-skilled jobs to help with high-skilled workers such as data scientist etc. *This varies depending on how fast technological innovation progresses. (Occupations such as) operation staff to implement business creation process • Also increase of jobs for middle-skilled workers due to mass customization (Occupations such as) product planner / marketer who develop niche business, IT engineer to allow R&D findings to materialize

＜Manufacturing / Procurement＞ • Decrease in manufacturing jobs due to labor saving / unmanned factories with use of IoT and robots etc. (Occupations such as) production line workers, product / delivery inspectors • Decrease in procurement jobs due to automated, efficient supply chain management utilizing IoT. (Occupations such as) corporate procurement employees, shipment/delivery employees

METIMETI 39 Focal point of shift in employment structure (2) Change of jobs in line with the Fourth Industrial Revolution ＜Sales＞ • Decrease low-value-added sales jobs due to efficient, automated functionality of new technologies such as analyzing customer data and matching products /services with such data through AI and big data (Occupations such as) salespeople for low priced/regular insurance, cashiers for supermarkets • Increase in jobs for sales etc. of products/services which people buy chiefly for their safety (Occupations such as) salespeople for customized, high-value insurance, corporate salespeople with sophisticated consulting skills which will become a competitive advantage.

＜Services＞ • Decrease in jobs for simple, low-value-added services due to AI and robot replacement (jobs which robots can handle through imitation because AI can easily complete tasks based on past data or where the nature of the job is repetitive) (Occupations such as) waiter/waitress at normal restaurant, room clerk at low/middle grade hotel, call center staff, bank clerks, warehouse workers • Increase in jobs for high-value-added services for which direct human involvement enhances the quality/value of the services (Occupations such as) staff at exclusive restaurants, caregivers for expensive nursing care services, artist

＜IT＞ • Increase of jobs for not only high-skilled work that produces new business but also middle-skilled work due to mass customization (Occupations such as) manufacturing sector IoT business software developer, IT security staff

＜Back office＞ • Decrease back office jobs due to AI and global outsourcing substitutes (Occupations such as) accounting staff, human resources department payroll staff, data entry staff METIMETI 40

Envisioned reform of employment structure in line with the Fourth Industrial Revolution (illustrutive) As-is scenario Target Optimal jobs in terms of quality and quantity Losing markets with decrease of jobs and with global market in possession deteriorated quality

Jobs to create new business trend by developing AI and robot

(example) Management strategy prepared by Outflow overseas global companies, Top-level data scientists and Accumulate jobs R&D staff etc. internally and externally

Jobs to work together with AI and robot, etc. Significant decrease example) AI and robot etc. will replace ( traditional jobs including ・Planning of various business workers at low value added ・Support work to help with high-skilled data production line, scientist etc. salesperson, back office staff. (coordinator to incorporate change of business process into operation) ・Planning/marketing for customized product/ service expected to dramatically increase in the New future employment

responding to

Jobs independent from AI and robot, etc.

needs (example)Human interaction ・High value added sales/service which can bring about enhanced quality/value of service through direct human involvement

Tendency of low Jobs to be replaced by AI and robot, etc. wage/salary for many jobs

METIMETI 41 5. Projections involving industrial and employment structures

METIMETI 42 Summary of Projections (towards 2030)

Status quo scenario  Added value will flow overseas due to reliance on overseas platform providers by Japanese industries to provide business.  Inability to generate added value that can respond to societal challenges will bring about low added value and low growth rate for domestic industries.  Workforce concentrating into jobs with low added value and low growth rate that compete with industries of machine/software will produce a society where low-wage workers are the standard. Reform scenario  Ability to generate added value that can respond to social challenges will bring about acquisition of industries with high added value and high growth rate on global basis.  Enhanced productivity caused by developed services based on technological innovation and increased entry into labor market will resolve issues of decreasing workforce.  Workforce's shift to jobs which require solely human element in harmony with machine/software will let workers earn high wages/salary. [Projected result] ※2015-2030(annual rate) As-is scenario Reform scenario

Real GDP growth rate ＋0.8％ ＋2.0％

Nominal GDP growth rate ＋1.4％ ＋3.5％

Wage increase rate ＋2.2％ ＋3.7％

Nominal (2020) 547 trillion yen 592 trillion yen Fourth Industrial Revolution- driven added value: 30 trillion GDP (2030) 624 trillion yen yen 846 trillion yen METI ※This projection result requires continuous study in accordance with the reform’s ever-changing "vision." METI 43 Projected result of industrial structure

(GDP growth rate / number of workers / labor productivity) ※Comparison between 2015 and 2030

Nominal GDP growth rate Number of workers Labor productivity Optimal state envisioned (annual rate) ※ ( )denotes number of workers in 2015. (annual rate) Sector with reform scenario As-is Reform As-is Reform As-is Reform

(1) Raw materials Expected to grow in accordance with －0.81million－ 0.71million Agriculture/fishery, mining national economic growth ＋0.0% ＋2.7% ＋2.3% ＋4.7% etc. (2.78million)

(2) Process manufacturing Expected to grow with efficient production of (intermediate goods etc.) standardized products, and by deploying widely- －0.3% ＋1.9% －0.58million －0.43million ＋2.9% ＋4.2% Petroleum products, pig iron/crude used product development cycle steel, chemical fiber etc. (1.52million) (3) Customer response Expected to create new value, significantly type manufacturing increase added value and minimize decrease Automobiles, communication ＋1.9% ＋4.1% －2.14million－ 1.17million ＋4.0% ＋5.2% equipment, industrial in workers by deploying customized services and (7.75million) machinery etc. shift to new service industry etc.

(4) Service /technology provision Expected to increase added value by securing leading position in systemization/platforming of ＋1.0% ＋3.4% －2.83million －0.48million ＋2.0% ＋3.6% Construction, wholesale, (20.26million) retail, finance etc. services using customer information

(5) Information service Expected to significantly increase added value and employment as core sector for the Fourth ＋2.3% ＋4.5% －0.17million＋ 0.72million ＋2.5% ＋3.8% Information service, service for businesses Industrial Revolution, driving economic growth (6.41million)

(6) Hospitality service Expected to increase added value and employment by －0.80million＋ 0.24million expanding local markets through identification of ＋1.2% ＋3.7% ＋2.1% ＋3.5% Hotel, restaurant, entertainment etc. potential demand based on customer information (6.54million)

(7) Infrastructure network Expected to increase added value enhancing quality of entire system, efficiency of supply and entry into ＋1.6% ＋3.8% －0.53million －0.07million ＋2.6% ＋4.0% Electricity, different areas by integrating other service industries telegraph/telephone etc. (3.88million)

(8) Others Expected to have suppressed increase in ＋0.51million＋ 0.28million Medical/Nursing Care, workers due to efficient provision of social security ＋1.7% ＋3.0% ＋1.5% ＋2.9% governments, education etc. etc. with AI, robot etc. (14.21million) Total ＋1.4% ＋3.5% －7.35million －1.61million ＋2.3% ＋3.6% (63.34million) ※Each sector represents a category representing individual activities related to goods/services in accordance with industrial classification based on activities in the Input-Output Table. For example if company performs efficiently automobile manufacture by introducing IT, its activities are divided into automobile manufacture and information service, and each activity is respectively categorized into "customer response manufacturing" and METI "information service." METI 44 Changes in number of workers by occupation (increase rate) ※Comparison between 2015 and 2030

Number of workers Number of workers Optimal state envisioned with by occupation by occupation (annual rate) Occupation reform scenario As-is Reform As-is Reform

(1) Upstream jobs Expected to increase core manpower to engage in new Management strategy staff, R&D businesses including planning of management/product, －1.36million ＋0.96million －2.2 % ＋1.2 % staff etc. marketing, R&D

(2) Manufacturing/Procurement Expected to be on the decrease regardless of success Production line workers, －2.62million －2.97million －1.2 % －1.4 % corporate procurement staff of reform due to replacement by AI and robot

(3) Sales (low possibility of Expected to increase jobs for sales etc. of replacement) Salespeople for customized high- products/services with sophisticated consulting needs as a －0.62million ＋1.14million －1.2 % ＋1.7 % value insurance etc. competitive advantage.

(4) Sales (high possibility of replacement) Expected to be on the decrease regardless of success Salespeople for low priced/regular －0.62million －0.68million insurance, cashiers for of reform due to streamlining/automation with AI and －1.3 % －1.4% supermarket etc. big data (5) Services (low possibility Expected to increase jobs for high value added sales/services for of replacement) which direct human involvement creates enhanced quality/value －0.06million ＋1.79million Staff at exclusive restaurants, caregivers －0.1 % ＋1.8 % at expensive nursing care service etc. of services

(6) Services (high possibility of replacement) Expected to be on the decrease due to streamlining / automation with AI and big data ＋0.23million -0.51million Staff with typical restaurant, ＋0.1 % －0.3 % call center staff etc. ※As-is scenario shows slight increase as it serves as a source of employment. (7) IT Expected to increase jobs for IT as it meets needs from -0.03million ＋0.45million IoT business manufacturing software manufacturing as a whole which is pursuing IoT and －0.2 % ＋2.1 % developer, IT security staff etc. improved security

(8) Back office Expected to be on the decrease regardless of success of Accounting staff, personnel staff -1.45million -1.43million －0.8 % －0.8 % for salary management, data entry reform due to replacement with AI and global outsourcing staff (ⅸ) Others Expected to be on the decrease due to -0.82million -0.37million －1.1 % －0.5 % Construction workers etc. streamlining/automation with AI and big data

Total －7.35million －1.61million －0.8 % －0.2 % (Source) Compiled by METI based on "Collaborative research result on probability of computerization for occupations in Japan" by Nomura Research Institute and University of Oxford(Dr. Michael A. Osborne, Dr. Carl Benedikt Frey) METIMETI 45 (Reference) Projection of industry and employment structures

Projections regarding macro-economic trends such as 2030 GDP, income level, production value by sectors, number of workers by sectors, number of workers by occupations, while considering dramatic improvement of productivity triggered by the Fourth Industrial Revolution, smooth transfer of economic resources to growth industries, shifting employment with business process changes, all of which are derived from a combination of (１) Macro-economic model,(２) Industrial structure model, (３) Employment structure model.

(１) Macro-economic model (２) Industrial structure model (３) Employment structure model

 This model shows the supply/demand  This model, based on trends in the  Number of workers by occupation adjustment state which represents past 20 years, projects the is projected with number of short/medium-term change of GDP percentage of final demand by workers by industry sectors based on total demand including sectors in 2030, the interim multiplied by ratio of occupations consumption and investment while investment structure and labor to sectors. long-term GDP is affected by potential productivity.  Reform scenario surmises that GDP supply restrictions.  Production value by sectors is increased occupations indicate jobs  As-is scenario produces a low projected by the following: final with low possibility of replacement potential growth rate vector. demand from macro-economic model by AI/robot and decreased analyzed by percentage of final occupations indicate jobs with high  The reform scenario indicates upward demand by sectors and this calculated possibility of replacement based on potential growth due to the Fourth final demand is multiplied by inverse collaborative research by Nomura Industrial Revolution. Furthermore, matrix coefficient derived from Research Institute and University consumption/investment expands intermediate input structure. of Oxford. with subsequent potential demand  and projected increased economic Number of workers by sectors is growth rate. projected with production value by sections divided by labor productivity.

METIMETI 46 ＜Main premises of projection＞

 Size of workforce  Price increase rate Figures until 2014 are derived from actual figures. With respect to the baseline price increase rate for, as-is Regarding figures after 2015, as-is scenario used a scenario referred to “Projection on medium / long term projection based on "Zero growth/status of participation," economy / finance (January 21, 2016)" (hereinafter referred and the reform scenario used a projection based on to as "medium/long term projection") by Cabinet Office, and "Economic revitalization/progress of labor participation“ reform scenario referred to the same with respect to price using data derived from "Estimated labor supply/demand" increase index for economic revitalization case. Figures in (May 2014) by JILPT (hereinafter referred to as "estimated 2023 were used to assume figures after 2024. workforce") ※ Note: Number of workers in 2030 is affected by long-standing  Foreign exchange rate decrease of productive age population due to low birth rate/aging Figures till 2015 are derived from actual figures. Figures in population. 2015 used to assume figures after 2016.

 Structural / frictional unemployment  Finance 2.8％ - used as assumption based on relationship of past With respect to each item of national expenditure, general unemployment and vacancy rate (job openings to potential government fixed capital formation is expected to increase number of employees) with domestic corporate goods price index in the "medium /

long term projection" and other expenditures (excluding  Working hours social security) increase with the consumer price index Average working hours - calculated using "numbers of (virtually no change). Social security expenditure is expected working hours by gender / age in 2014 "from " Basic to increase with nominal GDP growth and wage increase Survey on Wage Structure" by Ministry of Health, Labor rates. and Welfare and "numbers of workers by gender / age

from "estimated workforce."  Consumption tax

It is assumed that consumption tax will be raised to 10％ in  Fixed capital consumption rate / Capacity utilization 2017. index 8.6％ or less - used as assumption based on relationship of past capital investment and private corporate capital stock. For capacity utilization index, figures in 2014 were used as assumption. METIMETI 47 ６．Japan’s detailed strategies i. Environmental development for promoting data utilization

METI 48 (1)Development of data platforms and creation of a secondary market for data Challenges

• If data remains enclosed within each companies as it is now, data platforms, which is the basis of global data utilization, will have to rely on foreign countries. • On top of such development of data platforms, it is important to simultaneously promote data exchange based on the market’s mechanism by vitalizing negotiation-based transaction and create a market place where data can be openly traded with third parties, etc.

Basic Direction of Efforts

• Promote the development of global data platforms in areas where Japan’s strengths can be leveraged. Internationalize such efforts by creating successful cases as soon as possible. • In the future, data producers and data users need to be matched up and a system (secondary market for data) where data flows and is mutually used and applied needs to be established. Rights, responsibilities, and transaction rules between the producers and users of data need to be clearly stipulated and discussions towards the development of technical aspects and actual systems for the development of a secondary market of data is to take place.

Short Term Efforts • Development of data platforms (Smart factories, industrial safety, automatic driving map, healthcare/medical, etc. ) • Improve environment for future platform development (Environment for verification, creation of rules and systems, promotion of international standardization, etc.) • Confirm current contracts regarding data use and application. Create templates for contracts and model provisions. • Promote precedent cases working towards the creation of a secondary market for data. • Switch from the conventional face to face and written operation to promoting the use of IT as a rule. METI 49 Clarification of competitive area and cooperative area ～e.g.(1) Cooperative area in the manufacturing scene

For manufacturing sites to connect with each other between companies (large corporations and SMEs) and organizations, it is important to carefully [Cloud] determine how to collect what type of data for Data Cooperation collaboration↓ Data Cooperation (2)Distribution  A public-private working group for related companies was created (July 2015) and is (3)Sales (1)Procurement working on model cases, information sharing, and standardization such as the IEC and ISO.

Creation of Platform [Instruction by the Prime Minister based on the 5th Public-private

Dialogue]

•Create advanced systems to share and use data from the

[Edge] manufacturing scene collected by sensors amongst factories and

Data in Data possible companies at 50 locations throughout the nation by 2020.

Competitive to be share •Collaborate with Germany, with which Japan shares a strong

Area manufacturing industry, in international standardization.

(*Attended by a broad range of manufacturing related companies) Data in the Production Scene ○Control/network equipment manufacturers (Mitsubishi Electric, Hitachi, etc.) ○IT vendors (Fujitsu, NEC, etc.) ○Users (MHI, Toyota Motors, Nissan Motors, etc.) METI ○Others, trading companies, think tanks, etc. 50 Clarification of competitive area and cooperative area—e.g.(2) Cooperative area in industrial safety.  Efforts in industrial safety are similar amongst companies and have high potential of progress in data sharing as well as its effectiveness.  Start on the organization of data that can be shared as well as on the verification of the effectiveness of data sharing by collaboration amongst companies in the same industrial complex.  Reflect the results of the verification process in new regulation systems and promote continuous monitoring utilizing IoT etc. Support insurance development and other efforts, too. ＜Examples of topics to be verified＞ ＜Regulation system for high level Self- (1) Parts management for common controlled Safety＞ equipment

(Packing & sealing for rotating Super Certified machinery, etc.) Companies Privileges in regulations Certification Criteria (Additional) Organic collaboration depending on ability to ・Utilization of IoT, Big Data, etc. of verification and ・High level risk assessment maintain safety. regulations systems. ・Evaluation of saftey capability by third party, etc. • Allow use of new (2) Continuous monitoring of operation inspection methods status (early detection of anomaly/signs) • Allow lower frequency of inspection to ・Alert “unusual situation” ・Alert “Anomaly” Certified ・Shorten detection lead time enable long term Past ・Long detection lead time New → Minimal impact on Companies → Large impact on production continuous operation production Certification Criteria • Allow broader minor ・Creation of an organization changes of facility by Signs Normal specializing on safety. “filing a report” only, Upper limit alarm ・Implementation of PDCA etc. ・Ensure sufficient education and training etc. Index for status management Companies Early detection Lower limit alarm

Time flow METI 51 Clarification of competitive area and cooperative area ―e.g.(3) Cooperative area related to autonomous driving maps

 Various autonomous driving related data exist

 Of those data, economies of scale can be expected by inter-company collaboration in 3D map information etc.

 In Europe, 3 German automobile manufacturers have jointly bought a map company.

《Dynamic Information(＜1sec) 》 Autonomous driving related data Scope of Cooperative Area and area of ITS’s predictive information (vehicle linkage competition needs to be determined. information in the vicinity, pedestrian information, traffic light information.

《Quasi-dynamic Information(＜１min) 》 Accident information, traffic information, small-area weather [PM's statement at the 5th Public- information, etc. Private Dialogue] 《Quasi-static Information＜１ｈour)》 • Make autonomous driving maps ready Traffic regulation information, road construction work information, large for practical use as early as 2018. area weather information • Gather automobile manufacturers and map companies to create a cross- 《Static Information(＜１month)》 company unified specification and Road surface information, traffic lane create a proposal for international information, 3D structure information, standardization by the end of FY 2016. etc. Base

METI 52 (Clarification of competitive Area and cooperative area ―e.g.(4) Cooperative area related to healthcare and medicine.  Utilize the massive amount of treatment and examination data, etc. compiled (to create big data) for drug development and R&D of treatment methods, etc.

Optimal根拠に基づく treatment based最適 onな evidence治療 Solid line ≒ named data Dotted line ≒ anonymous data Medical医療機関 institution 離島・僻地診療所Island / rural clinic

人工知能を適用Development した医療システム of AI-applied medical system 開発 Medical医療機器メーカー device maker Clinical research, Hospital 臨床研究 病院 Collecting epidemio- 収集機関 ・疫学研究 Scientific新技術、 discovery body logical 用データ of 科学的発見new technology research 医療情報を預かりInstitutions that can properly、 Medical医育機関 education manage and anonymize data 適切medicalな data管理のもとで 匿名加工等が可能な機関 新薬 新技術 健康サービス提供者Health service Efficient/ R&D for providers 開発の効率化drug discovery Pharma製薬企業

新サービス、 Clinics Development of new 診療所 Determine先制的な行政 health services商品の開発 and products データPolicy onに基づいた the basis of pre-emptive 健康関連企業 効果① 医療サービス、医療行政 医療政策の決定 Health-related companies Effect 1 Medical services and administration Public administration administrative data Effect効果② 2 Clinical新技術 research,/臨床研究、疫学研究、人工知能等 epidemiological research, AI, etc. 行政 効果③ 新産業 個人の為の健康サービス等 Effect 3 New industry/health/ services for individuals etc. (Source： Excerpts with partial changes to material from the Council for Next Generation Medical ICT Platforms.

[PM's statement at the 5th Public-Private Dialogue] In order to utilize data for new drug and treatment development, legislation to create an organization that engages in simple and easy collection of large amount of treatment/ examination data, anonymizes and safely manages the data is to be developed by the end of next year. METI 53 (Clarification of competitive area and Cooperative area ―i.e.(5) Cooperative area related to healthcare and medicine.

 Promote the utilization of receipts, health check-ups, and healthcare related data, with the consent of the data source individual, by creating a “Healthcare Data Consortium”, capable of data analysis, from entities, mainly “health conscious” companies, that accumulate and utilize their employees’ and other data.

Company/insurer Verification image of utilizing medical receipt, health check-up and healthcare related data to prevent the aggravation of lifestyle related diseases Medical receipt data related Healthcare related Healthcare related Healthcare related Healthcare

Health level Feedback健 loop information information information information

Health check 康 Health check

Health check-up data

Recovery [PM's statement at the 5th Public-

Intervene at an Private Dialogue] Instruction appropriate timing

on exercise Integrate medical Must • Start verification project compiling

Healthcare related data - - and analyzing receipt, health up up

(steps walked, pulse, consult temperature, weight,

institution check-up, and healthcare data blood pressure, sleep…) held by medical institutions, companies and insurers by the

Medical institution Doctor/public end of this F Y.

health nurse Make symptom • Start efforts that provide stronger Examination data etc. Worried about Alert if symptom transparent to

本人 a symptom worsens ensure continuous incentives to medical insurers to treatment contribute to prevention and health promotion, including the (Source: Reference material from Ministry of Economy, Trade, and Industry, Next- above effort. Generation Healthcare Industry Council, Health Investment Working Group (10th meeting)) METI 54 (2) Promotion of personal data utilization Challenges • Clarification of rules on obtaining consent from the data source individual and on the anonymization process is insufficient. Social recognition on the merits of personal data utilization is insufficient. • There are cases where useful data remain scattered, not compiled to a sufficient size. • There are cases where companies and administrative bodies possess large amounts of personal data which are kept idle and remain both unutilized by themselves and not supplied to third parties. Basic Direction of Efforts • Keeping in mind the balance with ensuring protection of privacy, accelerate clarification of rules on obtaining consent from the data source individual and on the anonymization process, and publicize the rules. • Develop an organization that engages in simple and easy collection of large amounts of treatment/ examination data, anonymizes and safely manages the data (by the end of next year). • Look into creating an organization that records personal data with the involvement of the data source individual and compiles the data for uniform management in order to provide various companies with the data. Short Term Efforts • International standardization of guideline to obtain consent from data source individuals. • Create guideline for anonymization process (To be developed by certified personal information protection organizations of each industry) • Materialize the plan of creating a proxy organization that does not require consent of the data source individual in the healthcare and medical field, etc. • Consider a framework of utilizing personal data with the involvement of the data source individual. METI 55 (Reference)Efforts in the UK ～midata～ (参考)英国の対応

 The UK is running a public-private joint project “midata” since 2011, which is a framework that enables consumers to freely access their own personal data obtained by private companies, also making it possible for the data to be provided to third party companies as needed.

UK: How midata works

Financial Electric power Institutions Mobile fields providers (banks, credit Communications cards, etc.) carriers

(1) Request data disclosure (2) Obtain data real time (machine readable format)

(3) Provide data Participants: British government, consumer organizations, regulators (ICO, OfCom, Third part company OfGem), private companies (Google, British (4) Data analysis Gas, Lloyds TSB, 02, etc.) (5) Advice, Individual recommendations

(Reference) EU Data Protection Regulation Draft Article 18 (Rights to data portability) 2 The data subject holds the right to obtain those data he/she provided the controller in a structured and commonly used electronic format, and also holds the right to transfer data from one electronic processing system to and into another, without being prevented from doing so by the controller. Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (7th meeting) METI 56 (3) Development of ecosystem that produces security technologies and human resource for security Challenges

• In order to strengthen cyber security, the government needs to take leadership and collaborate with players from the industrial side to create an eco-system where an industry is created around security.

Basic Direction of Efforts

• Develop an eco-system where actual incident management, analysis of new attack information, R&D based on such information, and development of human resource based on such practice collaborate and look into creating a system where security countermeasure needs are created in the industrial side. • Clarify standards related to security countermeasures and introduce a system of evaluation in by market. • Further, consider utilizing frameworks of regulation in fields where the maintenance of a certain standard of service and security is needed according to industry law.

Short Term Efforts • Spread the Cyber Security Management Guideline. • Accelerate the development of technology and human resource that will lead to strengthening cyber security countermeasures. • Strengthen security countermeasures at important infrastructure companies. • Strengthen recruitment of human resource for security (develop human resource for security through the creation of national qualifications and other measures and promote the recruitment of qualified human resource) METI 57

(Reference) Cyber attack update

○Many incidents of leakage of important information have occurred by targeted cyber attacks to governmental organizations and companies.

○On top of information leakage, there is an increased risk of cyber attacks that result in physical damage targeting social infrastructures and IoT systems. With the 2020 Tokyo Olympics and Paralymic games ahead, the risk will grow further.

[Percentage of Targeted Attacks with Confirmed Information Leakage、 etc] [ Cyber Attack to IoT System]

25% 23.8％  July 2015, a security researcher proved that Chrysler’s 19.6% 20% 17.2% “Connected Car” system (a system which enables the 15% driver to start the engine and understand the current position of the vehicle using GPS through a smartphone) 10% had vulnerabilities through which it can be hacked.  5% Specifically, he pointed out that a third party could stop the engine or control the brakes by remote operation 0% using a smartphone. 2011年度 2012年度 2013年度  Chrysler recalled 1.4 million vehicles.

Source：Wired Magazine (Source)Drafted by the Ministry of Economy, Trade, and Industry based on the IPA “Information Security Incidents Damage Situation Survey” 2011, 2012, 2013.

[Attacks to Public and Industrial Infrastructure Overseas]

Large scale blackout in Ukraine (2015) Damage to blast furnace of a steel refinery (German, 2014) Fraudulent manipulation of control system was gained by Fraudulent manipulation of control system was gained by targeted attack. Resulted in a large scale blackout effecting targeted attack. Resulted in damage of blast furnace. millions of homes in western Ukraine for 3 to 6 hours. Source: Ministry of Economy, Trade and Industry, Industrial Structure Council, New Industrial Structure Committee (7th meeting) METI 58 (4) Intellectual property policies in the face of Forth Industrial Revolution

Challenges

• A new system for intellectual property encompassing new informational assets such as creations using artificial intelligence and databases compiled by sensors, etc. is needed.

Basic Direction of Efforts

• Clarify how to handle creations using artificial intelligence etc. as intellectual property. • Prevent free rides on related technologies and databases. • Secure appropriate compensation when technology or data is shared with a third party. • In order to promote innovation by smooth utilization of data, develop a new system for existing intellectual property, taking the balance of protection and utilization into consideration.

Short Term Efforts

• Consider how future intellectual property protection should be established regarding new informational assets such as creations using AI, databases, etc. as well as related technologies. • Develop plans to promote the collaborative utilization of intellectual property. • Develop a new copyright system (a rights limitation system with a certain level of flexibility, etc.)

METI 59 (Reference) Protection of database comparison of systems by nation

 Japan, US, and the UK all protect databases with creativity by copyright laws.  On the other hand, there are no systems that grant rights to databases deemed not creative in Japan and the US, while the EU protects their right by granting a “special right”. ※Databases deemed not creative can be protected as “trade secret” if it is not made public. Certain protection may apply through conduct control by tort law, etc..

EU Japan USA Creative

Protected by Copyright Law

Not Creative Not Sui generis right(Special Right)

Content: Right to prohibit actions of extracting (None) (None) substantial parts of the database’s content or the secondary use of the content.

Source: Reference material for the Ministry of Economy, Trade Industrial Structure Council New Industrial Structure Committee (7th meeting), Mr. Miyake’s reference material at the Study Group on Cross-sectional Systems toward the Forth Industrial Revolution. METI 60 (5)Modality of new rules of competition corresponding to Forth Industrial Revolution Challenges

• In order to develop a fair environment for competition and to promote innovation, parts of platformers not encompassed by existing laws need to be enumerated and the need of new policies, including not only aspects pertaining to competition related policies, for new problems that arise where existing laws do not or may not effectively cover need to be evaluated. • In the event that the Fair Trade Commission confirms incidents where fair competition is being inhibited or incidents against the Anti-monopoly law, quick and strict legal action must to be taken.

Basic Direction of Efforts

• Collaborate with related governmental agencies to understand the competitive environment in the digital market and scrutinize key issues and challenges. • Clarify what cannot be encompassed by existing laws and consider how Japan should deal with parts not covered and consider the need of new methodologies in a broad range of existing systems. • Streamline the environment for enforcing the Anti-monopoly act and the Fair Trade Commission will take quick and strict legal action if it confirms any violation.

Short Term Efforts

• Reorganize ideas on how to correspond to platforms and consider what measures need to be taken.

METI 61 (Reference) Statement of objection sent to Google (April 20th, 2016)

On April 20th, the European Commission sent a Statement of Objection to Google stating the company is forcing manufacturers of smart phones and other mobile devices to pre- install its application and set as default, leading to close off ways for other company’s applications from the market and stifling competition. Google’s Comment (Statement by Concerns of the European Commission(Press Release) Executive Vice President on same day)

 Google requires to pre-install Google Search (search app), Google Chrome (browser) and  Since its release in 2007, Android has served other apps as default as a condition to license Google Play (Application Store) to Android as the engine for both mobile software and devices. hardware innovation, empowering many →Points out the following three effects manufacturers of smartphones, etc. and has (1) Makes it difficult for Google’s competitors to have their search apps and allowed developers of all sizes to reach browsers installed as default to smartphones and other mobile devices. consumers. As the result, users enjoy (2) Lowers incentive for manufacturers of smartphones and other mobile devices to extraordinary choices of apps and devices at set search apps and browsers that compete with Google Search and Google Chrome as default. ever-lower prices. (3) Lowers incentive for consumers to download competing search apps and browsers.  Google takes the European Commission’s concerns seriously but also believes that its  Android is an open-source system meaning that it can be freely used and modified. business model is giving consumers OS with However, Google, as a condition to pre-install Google Play and Google Search to a modified unprecedented performance while keeping operating system (Android fork), requires a manufacturer to enter into an “Anti- manufacturers’ costs low and flexibility high. Fragmentation Agreement” that commits to not to sell devices running on Android forks. →Denies consumers’ access to innovative smart device services enabled by superior OS (Android fork)

 Google grants significant financial incentives to manufacturers of smartphones, etc. on condition that they exclusively pre-install Google Search as search apps on their devices. ※Statement of Objection • Statement of Objection is one of the procedures preceding the European Commission’s decision on a cease and desist order or penalty, and outlines objections raised against the party and its supporting evidence. • Companies receiving the statement have 12 weeks to present their argument in writing and to submit supporting evidence, and may also request an oral hearing. • The sending of the statement of objection does not prejudge the final outcome of the investigation and European Commission will take decision after receiving counterarguments from related parties. • There is no legal deadline for the Commission to make decisions. METI (Source)European Commission’s press release, Google’s blog 62 ６. Japan’s specific strategy ii. Fostering and securing human resources, improving flexibility in employment systems

METI 63 (1)Development of an educational system encompassing new needs Challenges • With the introduction of artificial intelligence etc. to the workplace, skills required, job descriptions and businesses themselves have greatly changed. In order to nurture capabilities to open doors to new generations and create new values, the existing educational system and learning system needs to further evolve. Basic Direction of Efforts

• Reform content and methodology of education through active collaboration with private entities and by effectively utilizing IC T, such as making programming education a compulsory subject in elementary and secondary education. • Develop and recruit top class human resource that can lead global competition in the forth industrial revolution and create new business trends through reform of higher education. • Convert content of higher education and continuous learning by workers to an educational content that matches the society’s needs for the forth industrial revolution. Short Term Efforts

• Make programming education a compulsory subject, evolving in tandem with children’s development, which will serve to nurture logical thinking abilities etc. in elementary and secondary education. Provide related assistance such as in the development of teaching materials and dispatching of human resource. • Develop content and utilize human resource from the private sector through collaboration of the public education world and the industrial sector. • Strengthen learning by the individual’s proficiency level by utilizing IT (Verification of using adaptive learning, etc.) • Draft action plan based on the Government, University, Industry Research Roundtable on the Development of Human Resource in the Science and Technological Area (surveys to understand actual conditions, matching science and technology related human resource with jobs etc. ) • Work on the details of creating higher education organizations offering practical vocational training. (IT data, tourism, design, etc.) • Create a “Forth Industrial Revolution Ministerial Meeting for Human Resource Development (tentative)” to discuss “industrial policies”, “employment policies”, “education and human resource policies” all in one.

[PM’s statement at the 26th Council for Industrial Competitiveness] • Make programming education a compulsory subject from elementary and secondary education. • Make full use of IT to assist in each student studying at their varying levels of proficiency. METI 64 Programming education around the world --A trend of becoming a compulsory subject  In order to develop human resource that meet the needs of a forth industrial revolution, countries around the world are making programming education a compulsory subject.  In Japan, programming is only included in junior high school industrial arts and homemaking class in its measurement and control unit, and as an elective in high school IT information courses.  Israel  Programming education is a compulsory subject in high school since 2000.  UK  Programming education is a compulsory subject for children between age 5 and 16 as “computing class” since September 2014. (Source)Department for Education Web (UK)  USA  The “Every Student Succeeds A c t ”, including computer science in its curriculum, was enacted on December 10th, 2015. Computer Science will now become a compulsory subject throughout the US in the future.  Finland  Programming education has become a compulsory subject (Source)White House Web (USA) for children between age 7 and 16 with its curriculum revision of 2016. METI 65 “Comprehensive Human Resource Development Initiative Toward the Forth Industrial Revolution” ～Efforts at the Elementary/Secondary Education Stage～ Source：26th Council for Industrial Competitiveness Reference material submit by the Minister of Education, Culture, Sports, Science and Technology “The Next Generation School” (A new education program will start from 2020)

Develop Information Utilization Skills Integral to the Next Generation Creation of a “Next Generation School”, Catering to the Needs of AL and Individual Learning

In order to open new horizons for the new generation, skills needed For the comprehensive development of basic knowledge and skills such as to utilize necessary information to create new values and skills to vocabulary and reading comprehension, as well as creative problem solving identify and solve problems utilizing ICT will be developed, according skills, teaching will be improved from a perspective of proactive deep to the developmental stage of children. learning through dialogues (active learning).

The disparity in academic abilities, stemming from gaps in vocabulary and reading comprehension skills which start from lower grades of elementary school will be resolved, and increased evolutionary learning and other measures will ensure children are taught according to the needs of the individual. Secure opportunities for children to learn and experience in a variety of fields in science, arts, and culture. ICT will be effectively leveraged in the process of identifying and solving problems, etc. for each and all subjects, in lines with the characteristic of the subject.

Programming education will become a compulsory subject, With the best mix of enhanced teaching by teachers in the classroom and according to the developmental stage of children. Opportunities to capitalizing on the merits of diversity, each child will be taught carefully learn programming through experience will be secured in according to their individual understanding level and problem solving skills will elementary school, programming education regarding contents will be developed. be included in junior high school, and information class will Team schools and the “Headquarter for the collaboration of schools in the become an all-high school wide compulsory course. area” will be utilized to provide diverse learning and experience opportunities outside of the education program for children.

In order to develop capabilities and skills needed for the next generation and to create valuable learning achievements, informatization of schools centering on contents created by effectively mixing knowhow and human resource from the private sector and the knowledge accumulated by teachers and schools is integral.

The public sector and private sector will collaborate to create an “education program with doors opened to society”

The Ministry of Education, Culture, Science and Technology, Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communication will collaborate to create a public-private consortium consisting of school officials, ICT related companies, and start-ups and will start working on the development and sharing of good educational contents and dispatch instructors to schools. Efforts to make schools ICT-ready to support leading edge education will be accelerated. An “Acceleration of Information of Education Plan” will be drawn up to promote the creation of environment for the informatization of schools centering on contents, and support industry-government-academia collaboration towards effective utilization of ICT according to the actual situations of ICT environment at each school. *The Ministry of Economy, Trade, Industry will especially support in the promotion of contents development in collaboration with ICT companies and securing instructors. The Ministry of Internal Affairs and Communication will support from the aspects of utilization of the cloud, equipping with Wi-Fi, and nationwide road tours. METI 66 (2)Recruiting global human resource Challenges

•During a time of transition, shifting workforce to growth areas, human resource from overseas needs to be recruited in specialized and technical areas not only at the top level but for middle skill level as well.

Basic Direction of Efforts

• In order to change “unclear job descriptions”, ”long work hours”, “compensation system that doesn’t correlate with performance”, “little career paths at headquarters”, “Japanese language barrier” in Japanese corporations, a workstyle revolution will be promoted through the formation of pressure from the labor market as well as capital market. • Create a better environment, such as cutting down on the time needed to apply for permanent residence.

Short Term Efforts

• Create the “Japanese Version Green Card for Highly Skilled Human Resource from Overseas” which will offer one of the world’s fastest application. (Shorten the required period of stay before applying for permanent residence for highly skilled human resource from overseas )

[PM’s statement at the 26th Council for Industrial Competitiveness] • Introduce the “Japanese Version Green Card for Highly Skilled Human Resource from Overseas” which will have one of the shortest period of stay requirement before applying for permanent residence.

METI 67 International comparison of permission for permanent residence/green card

• The UK and US clearly state categories for permanent residence application such as entrepreneurs, corporate employers with a certain income or above for the UK and large scale investors, managers/board members of multinational companies, special skilled workers/knowledge workers for the US.

• Permission for permanent residence in Japan requires a longer period of stay to apply compared to the US, etc., and there is no clear statement of type of human resource, such as entrepreneurs, investors, researchers, etc., that the government is looking for.

Period of Stay Required Application by Mail Employment by Type of Permanent Resident Sought for Application for or Internet Company by Government Permanent Residence Japan １０ years as a general Directly submit to Required (Incl. (1)Good behavior and conduct rule Immigration Counter self-employment) (2)Asset and skill to maintain a living 5 years exception: (3)Matches the benefits of Japan (No - “Contributors to Japan” criminal record, tax records, period of - “Highly Skilled Professionals” stay) 5 years as a general rule Internet from Depends on  Entrepreneurs/investors UK  - 3 years for some overseas, mail Category Corporate employers with a certain entrepreneurs domestically Not required for income or above investors No requirement Internet from Depends on  Investors US  Green overseas, mail Category Managers/board members of Card domestically Not required for multinational companies investors  Special skilled workers/knowledge workers Korea 5 years as a general rule Not available for new Required  Entrepreneurs/investors - Advanced Science & applications, available  Researchers in advanced science Technology Area for renewals. and technology PhD: 1 Year or longer  Human resource in specialized BS: 3 Year or longer profession - Point System: 3 Years  Expatriates of multinational 68 or longer companies METI (3)Promotion of a diverse workforce

Challenges • In order to battle and succeed in fast-changing global competition, it is critical to make the most out of diverse human resource, regardless of nationality, sex, and age, and optimize recruiting and placement.

Basic Direction of Efforts

• Promote “Workstyle Revolution” by the formation of pressure from the labor market and capital market. • Similarly, utilize pressure from the labor and capital markets to create an employment environment where all can take part, so that women and the elderly can take part in the workforce.

Short Term Efforts • Promote “Workstyle Revolution” • Create opportunities for dialogues between companies promoting diversity as a management goal and the capital market (on the modality of human resource strategy, etc. )

METI 69 (Reference) Diversity in Japan (women/foreigners)  Compared to the percentage of women in the workforce, the percentage of women in managerial positions is, in an international comparison, low.

 Both the percentage of total population for the number of foreigners and working foreigners are low. Diversity of nationality at the top level of companies is also low.

[International Comparison of Foreigner Population and Number of Working Foreigners [International Comparison of percentage of women in managerial positions and board members] Japan Korea Singapore Germany UK

Total Population 12,741 4,926 541 8,272 6,313 (2013, Unit: million) Managerial Position Board Member Workers in general Foreigner 50.0 population (Ratio) (Unit: million, US 212(1.7％) 149(3.0％) 149(28.1％) 721(9.0％) 479(7.5％) 45.0 42.3 2011, Japan 2014, 40.0 Others 2012) Working foreigners 35.0 79(1.2％) 76(2.9％) 245(6.1％) 264(8.8％) (Ratio) (Unit: 124(37.0％) 30.0 2014 2013 2014 2013 million) 2012 25.0 20.0 15.0 11.2 10.0 5.0 2.1 0.0

METI 70 (4) Improve flexibility of the labor market and employment system

Challenges • Japan continues to have a membership style (workers ascribe themselves to companies and the companies invest in human resource) employment system. • Need to transform into an employment framework which can smoothly react to global and speedy changes in business.

Basic Direction of Efforts • Consider plans to improve mobility in the labor market by providing assistance to shift workforce with small risk. Further, there is a need to develop a system to promote reorganization of companies and industries as well as promote active regeneration of businesses. • Change to a labor law system that stands on the precondition that evaluation and management will be based on the individual’s performance. • Look into changing the social security system based on the majority of population being employed by a single company for a long term.

Short Term Efforts

• Add the “improve productivity” and “enhance competitiveness” point of views to “equal pay for equal work” • Create a “Forth Industrial Revolution Ministerial Meeting for Human Resource Development (tentative)” to discuss “industrial policies”, “employment policies”, “education and human resource policies” all in one. METI 71 (Reference) Improvement of workforce mobility

 The largest inhibitor of changing domains that make up a business portfolio or pulling out of a business domain is said to be the “disposition of employees”  As it is crucial to shift the workforce to growing industries and businesses, improvement of mobility within the labor market through assistance for shifting the workforce with small risk as well as developing a system to promote active regeneration of businesses may be needed.

[Top Inhibitor of Closure of Business Domain] n=4,377 [HR & Labor Related Concerns for M&As n=895] Number Percentage of Times 400 380 Difficulty in the disposition 1,379 31.5% of employees in the domain 350 Relationship with supplier 765 17.5% and customer 300 274 Fear of damaging corporate 700 16.0% 250 image 200 Historical and personnel 590 13.5% 150 related background of 150 domain Cost of pulling out of 476 10.9% 100 business 53 50 38 Competitors continue the 33 0.8% business 0 Legal and other institutional 6 0.1% Unifying Difficult to Losing Difficult to Other background working reduce talented agree with (出所)ＲＩＥＴＩ森川副所長レポート conditions number of human labor union Others 『日本企業の構造変化：経営戦略・内部組織・企業行動』 428 9.8% employees resource (Source) General Research and Study 2013, “Research and study on creating fair fules in the M&A market” (Study on the relationship etc. between listed companies and their shareholders) Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (7th meeting) METI 72 (Reference) To a mutually independent partnership between “company” and “individual” (1) Crowdsourcing as the initial stage

 Croudsourcing, an online system to match up outsourcing contracts, is starting to gain grounds in Japan.

 Currently, work such as system development, web page production, and writing are the main types of work handled. However, the types and amount of work may grow and the quality may become more sophisticated in the future.

Efforts in Japan (Lancers, Crowd Works) Created a business matching mainly IT related contract work for clients, including large companies, with individual workers. A track record of number of orders and evaluations by clients determine the workers’ market value, creating a clearer correlation between the individual’s “track record and skill” and “compensation table” than the real world.

※Registered users: Lancers- over 700,000 (undisclosed/estimate), Crowd Works – 8 million (as of December 2015) (Reference) Crowdsourcicng Association website

Efforts in the US InnoCentive ・Crowdsourcing company created in the US to solve scientific problems in Upwork research and development. Sophisticated topics such as starting a ・Largest crowdsourcing company in the US. Covers skilled work such business, chemistry, computer science, engineering, food/agriculture, as programming, writing, translation, and designing to simple work life science, math/statistics, physics are handled. such as clerical paperwork, bringing together a diverse crowd of workers from around the world. (Registered users: 9.3 million) ・Used by large companies and the government, etc. As the topics handled are more sophisticated ・The individual freelancer’s track than conventional crowdsourcing, record and evaluation is the time frame per contract is transparent through ratings by long (1 to 2 months) and the clients. compensation is high (USD 2,000 (Reference) InnoCentive website (Reference) Upwork website to millions) METI 73 (Reference) To a mutually independent partnership between “company” and “individual” (2) Diverse workstyle as a transition  In order for the individual to be able to attain their individual workstyle of preference, a diverse forms of workstyle such as double work, human resource loans, regular employee dispatch, etc. have started. en Factory: Active Support of Double Work  Highlights “No Mono-work” in its human resource policy and actively encourages engaging in a business besides one’s main occupation. En Factory calls this “parallel work” and approximately half of its employees actually “parallel work”.  In a bi-annual internal study group, parallel workers report their achievements to all employees.

 Examples of “Parallel Work”  At en Factory: Service Supervision / Parallel work: BCP Consultant  At en Factory: SE / Parallel work: Regional vitalization coordinator (Reference)en Factory website Survey on Efforts Related to Side Businesses and Double work 2014 (Small and Medium Enterprise Agency)

Panasonic: Regular Employee Dispatch  Rolled out a regular employee dispatch operation for highly skilled engineers who wish to develop their career as a specialist and not as management.  Engineers enrolled in this system will have the opportunity to continuously be involved with high level projects, thus keep up or improve his/her skill level and market value.

(Reference) Panasonic website METI 74 ６．Japan’s specific strategy

iii. Accelerating innovation and technology development (“Society 5.0”)

METI 75 (1)Development of an open innovation system Challenges

• R&D at companies, universities and R&D entities close doors from each other leading to insufficient inter-organizational mobility in funding, human resource, technology and data amongst them. • We have yet to see Japanese start-ups that have the capability to compete on a global scale and Japan remains left out from global networks of entrepreneurs and their supporters.

Basic Direction of Efforts • Regarding academic-industrial collaboration, triple the size of investment to universities and R&D entities in the next ten years. • Strengthen support systems to connect start-ups from the local market to the global market. Become a hub of the global network of entrepreneurs and their supporters. Strengthen strategic collaboration between large corporations and start-ups. Short Term Efforts • Strengthen efforts for the promotion of serious academic-industrial collaboration in research (develop an academic- industrial collaboration system involving the entire organization at universities. Strengthen intellectual property management, etc.). • Provide support and create environment for the promotion of open innovation between large corporations and start-ups. (support research & development, create templates for contracts, etc.) • Create environment to promote active investment to mid to long term innovative R&D at companies that lead to innovation. • Create a governmental organization consortium to carry out all policies related to start-ups that connect local areas in Japan with the world. • Strengthen functions to provide financing to start-ups (vitalize corporate venture capitals, etc.)

[PM's statement at the 5th Public-Private Dialogue] • Strengthen the academic-industrial collaboration system and target tripling corporate investment into universities and re R&D entities within the next ten years. METI 76 (Reference)Japan’s current innovation eco-system (1/3) (technology)

 Half of all companies see no progress in open innovation compared to 10 years ago.

 Of all technologies, 61% are developed by a single company and 64% remain idle without being commercialized which indicates that open innovation, both spin-ins and spin-outs, have not progressed. Especially, collaboration with start- ups are especially slow to progress for both spin-ins and spin-outs.

Spin In Spin Out ＜Percentage of independent development and ＜Disposition of technology/ideas not commercialized＞ ＜Has open innovation collaborative development with external organizations＞ become more active (％) (％) compared to 10 years ago?＞ Independently 61.4 Keep idle 63 Group company 8.4 Commercialize at a group Domestic competitor 10 2.7 company More active Less active (horizontal cooperation) 3% Try to utilize at a different No change Domestic company in the 6 Less active company value chain (vertical 5.6 Spin-off of cooperation) employees/organization 2 More active Other domestic company (start-up) (collaboration with different 3.9 Continue discussions industry) More active behind the scene 20 47% Domestic University 8.6 No change Domestic public organization 3.1 50% Domestic start-up 0.9 Overseas University 1.2 Overseas public organization 0.3 Overseas company (n=97) 1.5 (excluding start-ups) Overseas start-ups 0.4 (n=111) Commissioned from other 2.1 companies, etc. (Source) Industrial Structure Council, 3rd Small METI Committee on R&D and Innovation (n=97) 77 (Reference)Japan’s Current Innovation Eco-system (2/3) (Human Resource)  Extremely low mobility amongst human resource in research, and more dynamic interchange of talent across organizational borders is needed. ■Mobility of human resource in research by organization type as of 2013.

Companies Universities Approx. 1,200

Human resource in research Human resource in research Approx. 389,000 Approx. 666,000 Approx. 200

Approx. 500

Approx. 7,400

Public research Organizations, etc. Approx. 15,200 Approx. 5,200 Human resource in Research Approx. 86,000 Overseas

*For movement between domestic organizations, the figure represents the number of “researchers that have joined from external organizations”. *Source for the number of researchers at domestic universities, incoming and outgoing researchers (mid-long term) is the Ministry of Education, Culture, Science and Technology “General conditions of international research and development”. Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (7th meeting) METI 78 (Reference) Japan’s current innovation eco-system (3) (Funding)

 “Organization” to “organization” academic and industrial collaboration is slow to evolve, as seen in the fact that when compared to overseas, the rate of funding provided to researches at Universities from companies is low and that the average budget per research is low, etc.

■Percentage of total research budgets of ■Joint research budget per research at companies contributed as research funds of Japanese and other Universities. Universities. 10 million yen per Above 10 Nation 2008(％) 2012(％) research is the prevalent million yen budget size at 5 to 10 4% Universities overseas. million yen Japan 0.44 0.46 3 to 5 million yen % US 1.06 0.91 9% Less than 1 million yen Germany 3.65 3.65 39%

UK 1.96 1.71 1 to 3 million yen Korea 1.78 1.34 43% The average budget is China 3.99 3.32 approx. 2 million yen at Japanese Universities Source：Drafted by the Ministry of Economy, Trade and Industry based on the OECD「Research and Development Statistics」

Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (7th meeting) METI 79 (2)Creation of world’s leading innovation centers, development of national projects, acceleration of implementation to real life (Artificial intelligence, etc.) Challenges

• Japan has been left out of the global innovation network in all aspects such as human resource, technology, and funding. • In order to create innovations that can lead the forth industrial revolution, a new large scale national project is needed, something similar to efforts on artificial intelligence in the US and Europe. • Japan lacks sufficient environment, systems, locations where top global researchers can freely engage in leading edge research encompassing all the way to implementation in real society. Basic Direction of Efforts • Strengthen technology intelligence across government related organizations. Take global trends into consideration and draft and implement a technology strategy in important fields (integrated research of artificial intelligence, which is a generic technology, and robotics, bio, energy/environmental technologies, etc.). • Attract top class human resource from around the world and develop five universities and R&D entities into leading edge strategic research centers. • Strengthen functions of universities and R&D entities, collaborate with Innovation Network Japan, and strategically implement achievements to real society.

Short Term Efforts • Create “Strategic Conference for Artificial Intelligence Technology” through the collaboration of public research organizations which will serve as the commander in the promotion of artificial intelligence R&D. Draft a technical roadmap for R&D goals and its commercialization (by the end of this fiscal year). Work on launching an AI national project that can lead the world. • Take a unified approach for the promotion of technology development utilizing deep learning and introduction to the working scene and its verification. Accelerate innovation and implementation to real society. • Attract top class human resource in a variety of fields and organize the environment (compensation rules, regulation systems, etc.) to develop a global open innovation center to promote open innovation. • For national projects in general, take global trends into consideration, and drastically cut down on the number of project in order to select and concentrate. • Further strengthen the function of implementing R &D achievements to real society at universities and R&D entities. (Fraunhofer Model)

[PM's statement at the fifth meeting of the Public-Private Dialogue] • Create at least five academic-industrial cooperation strategic research centers with the world’s top class professors and research facilities for companies by the end of the next fiscal year. METI 80 (Reference) Isolation from global networks (1/3)(technology)

 The number of international joint authorships of papers have greatly increased around the world between 2003 and 2013. While joint authorships between European nations and the US have increased, the increase for Japan is relatively small.

Sweden Belgium Belgium Switzerland Sweden Poland Poland Switzerland Netherlands Netherlands Turkey Russia Turkey Italy Italy Russia Iran Iran Germany UK Spain Spain Germany UK France South Korea South Korea France Japan Japan Taiwan Taiwan Canada Canada US China China US

Australia

Australia India Brazil India Brazil

*Size of the circle of each nation represent the number of scientific articles (articles carried in academic journals and articles included in proceedings at international conferences) *The lines connecting nations represent the number of international joint authorship articles, and larger the number the thicker the line.

Source: Drafted by the National Institute of Science and Technology Policy based on “Scopus” by Elsevier

Source: Central Education Council, Excerpt from Summary of Deliberations “Graduate School Education Reform Playing a Leading Role into the Future” METI 81 (Reference) Isolation from global networks (2/3)(Human resources)

 Looking at the movement of researchers worldwide, the US is at the core of international research networks. On the other hand, Japan is left out of international research networks.

or more

*The thickness of the arrows are based on the number of researchers moving between the two nations (1996 to 2011). Source of the number of moving researchers is the “Number of researchers” in OECD reference material “International flows of scientific authors, 1996-2011”. *Data represented in this chart is only for the two nations between which over a total of 2,000 researchers moved during the designated time.

Source: Drafted by the Ministry of Education Culture, Science, and Technology based on OECD’s “Science, Technology and Industry Scoreboard 2013” METI Source: Central Education Council, Excerpt from Summary of Deliberations “Graduate School Education Reform Playing a Leading Role into the Future” 82 (Reference) Isolation from global networks (3/3)(Funding)

 Although funds from overseas are increasingly making up a larger percentage of total research funds used in Japan, the percentage continues to be much lower than that of other major nations.

-- : Companies -- : Universities -- : Public organizations Percentage of overseas funding

Percentageresearch of from fund overseas in major nations’ research funds (data from 2012) Amount of research fund (million yen)(million

Japan US Germany France UK China

(%) Source: Ministry of Education, Culture, Science, and

Technology, Science and Technology Policy Bureau, Science Technology Catalog 2014

Research funds・・・ Personnel expenses, raw material, purchase of tangible fixed assets, lease obligation, etc. (Source)Ministry of Internal Affairs and Communications 2013 Science Technology Research Survey METI 83 Develop a system for research on artificial intelligence

 Create the “Conference for Artificial Intelligence Strategy” under the direction of the PM. Starting this fiscal year, this conference will be the commander in facilitating collaboration in AI technology R&D amongst the Ministry of Internal Affairs and Communications, Ministry of Education, Culture, Sports, Science and Technology and Ministry of Economy, Trade and Industry.  Draft a roadmap for R&D goals and its commercialization (by the end of this fiscal year)

Conference for Artificial Intelligence Strategy

○Commander of the 3 Ministry collaboration for artificial intelligence R&D and innovation policies (Chairman, advisor (CSTI), industrial sector, academia, executives in supervisory roles from 5 companies, bureau directors from 3 Ministries) (Secretariat to be co-hosted by the 3 Ministries)

Conference for Research Collaboration Conference for Industrial Collaboration (Director’s Meeting) ○Overall coordination on the collaboration of R&D and Collaboration industries (human resource development, standardization, ○Overall coordination of research (approve on detailed road maps, technology, intellectual property trend analysis, theme for collaborative research) regulation reform analysis, etc.)

National Institute of National Institute of RIKEN Advanced Industrial Science Task Force Information and AIP Center and Technology Communications ○Work on the actual promotion of tasks by setting task forces (MEXT) AI Research Center Technology(MIC) by issue, for example, on the drafting of a road map. Director: Masashi Sugiyama (METI) Director of CiNet Center: Toshio Yanagida Director: Junichi Tsujii

Deploy Achievements

Government/companies, etc. in the Field of Exit

[PM's statement at the 5th Public-Private Dialogue] • Integrate industry-government-academia and create the “Conference for Artificial Intelligence Strategy” which will preside over related government agencies. Draft a roadmap for R&D goals and its commercialization (by the end of this fiscal year) METI 84 Artificial intelligence and deep learning

Education Secretary Deep learning and its impact on industries Assistance to white collar jobs Translation Home choirs, nursing careEC for foreign countries Understanding others Large scale Automatic operation logistics Substitute emotional labor comprehension of knowledge Automation of agriculture Optimization of production equipment Comprehension of language Crime prevention & surveillance Security Environment Marketing recognition Diagnostic imaging Robust autonomous and behavior Advertisements behavior in the face of according to change of environment context Behavior prediction Technology to Abnormality “touch softly” detection Improvement of image recognition accuracy USA & Canada take the lead 2006 2015 2020 2025 2030 (1) Image (2) Multi-modal (3) Behavior (4) (5) (6) Recognition Recognition Interaction Symbol Grounding Knowledge Acquisition

Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (2nd meeting) Presentation material by Associate Professor Yutaka Matsuo 85 METI Next generation R&D for artificial intelligence-direction of R&D and sample projects-

 AI is a technology that can be integrated with a variety of fields. Taking into consideration the strengths of Japan, below are the main fields with which integration should be promoted. --Manufacturing: Integrate with Japan’s strong manufacturing capabilities, the world’s top class industrial robots and automobiles to create an unmatched manufacturing industry. --Human Life: Integrate with Japan’s high quality service industry, medical/nursing care service, logistics, etc. to provide a rich prosperous lifestyle. --Science / Engineering: Integrate with the world’s top class fundamental science to promote the development of science and technology.  Indicate the direction to which R&D is to evolve, attract leading edge technology and human resource from overseas research organizations and universities, and engage in R&D with both public and private sectors, who will become users, taking part. Further, align R&D achievements with challenges and data at the exit, and provide total support using tools to implement achievements to real life, such as human resource development, standardization strategies, etc. so that all efforts will find a way out.

AI for Future Image to be Accomplished by Projects (examples)

ex)Improve productivity in manufacturing through work assistance for small quantity Manufacturing large variety production using teachingless industrial robots, failure prediction (AI × Robotics) during assembly work, etc.

Human Life ex) Support to various industries through consumer behavior analysis will bring various added values to services, leading to the improvement of life satisfaction. (AI × IoT)

ex) In life science, clinical medicine, material science and engineering, etc., new Science/Engineering hypothesis and theories etc. will be automatically generated based on a variety of (AI × Big Data) experimental data, leading to the acceleration of fundamental research.

Planning to look into flagship projects integrating multiple fields (Ex. :Fundamental technologies for ultra high speed development of advanced materials project) METI 86 (3) Strategically promoting the management of intellectual property and international standardization Challenges

• Lack system to propose high quality international standardization as an “all Japan” effort after confirming areas of competition and collaboration. • Human resource that can strategically secure international standardization and work on intellectual property management while connecting them to management strategies and collaboration with R&D efforts eyeing international standardization are needed.

Basic Direction of Efforts

• The government will provide one-stop support from intellectual management, development of human resource that can work on international standardization, formulation of standardization strategies at companies, to the creation, proposal, and negotiation of international standardization drafts. • In government lead R&D initiatives, make up projects that eye strategic acquisition of rights and international standardization from the beginning.

Short Term Efforts • Reinforce international standardization activities by the National Research and Development Agency (involvement through project management, etc.). • Increase standardization education at universities, etc. (in both humanities and science courses) and newly create a qualification system related to standardization. • In order to incorporate standardization as part of business and management strategies at companies, promote the creation of Chief Standardization Officer positions. • Support of global business development through creating a leading patent review system etc. • Take a comprehensive look at the modality of industrial property rights taking into consideration changes in industrial structure and subsequent changes in corporate patent strategies. METI 87 (Reference) Types of international standardization and case studies

Combination of Standard and Case Study Type of Standardization *Excerpts from ”Analysis of Strategic Cases Related to Intellectual Property and Patent(Typical patterns) Standardization (2014 edition)” (Ministry of Economy, Trade, and Industry) Standardize including Blue-ray Disc 〔Panasonic/SONY, etc.〕 company’s patent. (1) ・Internationally standardized the specifications for Blue-ray Discs Standardization of Standard ・Patents needed to conform with the standard is licensed for low cost to all Product Specification parties without discrimination. Patents License

Standardized peripheral QR Code 〔Denso〕 QR Code was interface to company’s patent standardized ・Standardized the basic specification of QR and made codes and provided it at no cost. available at no cost (2) Standard ・Reading technology for QR codes remains Standardization of in a black box and reading devices and Interface Specification software are sold for profit. Secure profit Patents by reading etc. device ⇒Attained top share in Japan as reading device manufacturer. Standardized the evaluation Crystal Device 〔Quartz Crystal Industry Association of Japan〕 method of product including ・The industry as a whole created an Created a grade for high quality crystals that company’s patent. only Japanese companies can produce. IEC quality evaluation standard (3) Patents for crystal devices. Standardization of etc. Performance Criteria ・Manufacturing technologies /Evaluation Method Evaluation remained a black box thus Standard competitiveness maintained.

Source: Ministry of Economy, Trade and Industry Industrial Structure Council New Industrial Structure Committee (6th meeting) METI 88 (Reference) US and Europe take the lead in international standardization

President: Junji Nomura Chair：Tyco Chair：Rockwell Automation

 Market Strategy Board Siemens ・Project Team “”The future of factories”  Standardization Management Board Chair： Siemens ・8th Strategic Group “Forth industrial revolution/smart manufacturing” ・Technical Committees(*) Ex. 65th Technical Committee Industrial Process Measurement and Control Devices

President: Zhang Xiaogang

Chair： Deutsche Telekom

 Technical Management Board ・Strategic Advisory Group “Forth industrial revolution”

・Technical Committees(*) Ex. 184th Technical Committee ”Automation system & integration”

Chair： Schneider Electric * Committee to draw up international standards of technical elements (Source) Reference material by Yasuyuki Nishioka, Professor at Hosei University

METI 89 ６．Japan’s specific strategy ⅳ. Fortifying financial functions

METI 90 (1)Fortifying equity finance toward the supply of risk money Challenges

• In order to vitalize innovation at start-ups and elsewhere, equity finance functions by private equity (PE funds) and venture capitals (VC) etc. need to be strengthened to supply more risk money to support bold decision making of corporate management. • Given the current background where large Western corporations are using their huge financial powers to buy out technology start-ups, a strategic approach involving both public and private entities is needed.

Basic Direction of Efforts • Stronger equity financing capabilities by diverse financial entities, namely corporate venture capitals (CVC), is needed. • Upon verification of achievements by public-private funds etc., consider further strengthening their function.

Short Term Efforts

• Create systems to increase financing to venture capitals, etc. from companies, institutional investors, etc. and grow the venture capital industry. • Consider strengthening support functions such as political investment by public-private funds that will support side by side.

METI 91 (Reference) Capturing financing for growth from the global capital market  Companies that have created strong expectations for growth of business through a virtuous cycle of data utilization have captured high levels of financing from the global capital market which lead to their speedy growth investment such as M&As.

(billion dollars) Aggregated market value market Aggregated

Aggregated market value = net profit x 10

Net profit

(Reference) Drafted by the Ministry of Economy, Trade, Industry based on Google Finance (November 23rd, 2015 closing price)(Reference material for 3rd Secretariat Meeting) METI 92 (Reference)Capital strength is the key to M&A investment to technology start-ups  R&D key to the forth industrial revolution requires a larger scale investment than conventional investments for internet start-ups (on top of human resource investment to programmers, etc., investment for facilities and machinery is needed).

 IT companies like Google and Apple utilize their huge M&A resources ,earned from their main business, for active M&As of technology startups. This size of M&A resource plays a large part in competitiveness.

*M&S Resources: Operating cash flow less investment in tangible fixed assets such as capital investment, etc.

Comparison of “M&A Resources*”(billion dollars; average for 2013-2015) Labor Knowledge

Intensive Intensive High Apple 54

Microsoft 25

Technology

Money GAFA Alphabet(Google) 13 5 Companies Start-ups +M spent AI, Bio, Material, approx.11trillion yen a year(Approx. Intensiveness) Amazon.com 3.8 Robotics, etc. 99 billion n USD)as investment resource (Degree of Capital of (Degree

Facebook 4.2 > Size of investment st needed grows Top 135 TSE 1 Manufacturer製造業 (average)(平均) 1.0 Section companies Top Companies Non-manufacturing/ spent approx. Listed in the 10trillion yen a 1st section 非製造・非金融業(平均) 0.3 Internet of the TSE** non-finance (average) year(Approx. 91 billion USD)as Start-ups Low 参考）トヨタ自動車Reference) Toyota 14 investment resource

** Companies listed in the 1st section of the TSE that have over 10 billion USD average sales

in the last three years. (73 manufacturers, 62 non-manufacturing/non-finance companies) METI Source: Analysis by Ministry of Economy, Trade and Industry based on SPEEDA 93 (Reference)Creation of Innovation Through Growth Investment

 In the last two years, Google has bought over 10 start-ups that develop and sell artificial intelligence and robotics related technology.

 Likewise, Western companies with huge funds engage in one after another growth investment (M&A, capital investment, R&D, etc.) to acquire technology and leading edge human resource, etc. for the creation of innovation.

[Companies Google has Acquired] Name of Company Main Product Date of MBO Overview First start-up at Tokyo University. Won first place prize at the DARPA SCHAFT (Japan) Humanoid robots December 2013 Robotics Challenge in 2013. Industrial robot (for logistics, automatic unloading machine for trucks, etc.). Industrial Perception Robot arms December 2013 A spin-off from Willow Garage, famous for its OS for robots A spin-off start-up from the MIT Computer Science and Artificial Intelligence Meka Robotics(US) Robotics December 2013 Laboratory. Bipedal robots, etc. Robotics Holomni (US) December 2013 Development of robotic vehicles capable of moving in various directions.

Robot shaped Advanced video filming device utilizing robot arms. Works together with Bot & Dolly (US) December 2013 camera projection mapping. Boston Dynamics(US) Robotics December 2013 Spin-off from MIT. Creates humanoid and animal shaped robots. Manufactures thermostats and fire alarms. Functions as the hub for smart- Nest (US) Home automation January 2014 homes. CEO is Tony Fadell, first developer of iPod. Artificial Developed artificial intelligence that can learn how to play various video DeepMind Technologies (UK) January 2014 intelligence games through reinforcement learning. Artificial Travel guide application applying big data analysis, image processing and Jetpac (US) August 2014 intelligence machine learning. Artificial Vision Factory (UK) October 2014 Image recognition system using deep learning. intelligence Manufactures hardware used as a hub for Connected Homes (links devices Revolv (US) Home automation October 2014 in a household) Artificial Utilizes machine learning to propose optimized behavior to users to deepen Timeful (US) May 2015 intelligence learning experiences. … METI Source: CrunchBase 94 (Reference)Size我が国の資金供給構造 of Suppliers of Capital (Flow)

 Indirect investment prevails in Japan and financial entities taking business risks do not play a large role.

 On top of increasing the sizes of PEs and VCs, there may be needs for banks to supply risk money or for complementation by government policy financing.

Indirect Financing Direct Financing

Business Investment (Risk Money) Government Corporate Bonds Banks Credit Unions Affiliated 23.7 Trillion Yen 3.9 Trillion Yen Financial 8.6 Trillion Yen Institutions 3.0 Trillion Yen Equity ＰＥ Public-Private ＶＣ 2.0 Trillion Yen 656.9 Investment Funds 1,17.1 Billion Yen 185.0 Billion Yen Billion Yen

(Source) Note: Banks/Credit unions/Government affiliated financial institutions: Bank of Banks/Credit unions/Government affiliated financial institutions: New Japan “Loans and Bills Discounted by Sector” 2014 Corporate loans as funding for equipment, less loans to local public bodies and bonds/Equity: Japan Securities Dealers Association “FACT BOOK 2015” individuals as well as international yen loans PE: “Japan Buyout Market Review--First Half 2015” Corporate Bonds: Amount raised at listed companies. Public-Private Investment Fund: "Verification Report on the Guideline for Equity: Amount raised at listed and newly listed companies Public-private Investment Fund Operations” PE: Total amount for Buyouts and PIPEs VC: Venture Enterprise Center “Venture Whitepaper 2015” Public-private fund: Actual investment amount for 2014 METI 95 (Reference)Exit strategies for start-ups(Japan/US)

 Comparing exit strategies for start-ups, Japanese start-ups have a higher ratio of IPO and lower ratio of M&A compared to the US

Change in breakdown of method of exit of companies Change in breakdown of method of exit of companies receiving VC investment in Japan (data for IPO & M&A only) receiving VC investment in the US (data for IPO & M&A only)

IPO M&A IPO M&A

(Source) Drafted by the Ministry of Economy, Trade and Industry based on the Venture Enterprise Center’s “Venture Whitepaper 2015” (Note) For IPOs and M&As in Japan, when multiple VCs invest in the same company, each investment received count as an exit. METI 96 (2)Vitalization of investment in intangible Assets toward Fourth Industrial Revolution Challenges

• In order to create new innovations making full use of innovative technologies such as artificial intelligence, etc., drastic increase needs to be made in investments for intangible assets such as R&D assets, information assets, intellectual property, human resource, etc., on top of the current investment centering on tangible fixed assets such as production facility, etc.

Basic Direction of Efforts

• Consider the modality of investment in intangible assets to create sustainable corporate values as well as methods to evaluate such values in order to lead to increasing effective and substantial intangible asset investment. • Promote the accumulation of intangible assets as a nationwide effort and increase political support to vitalize innovation at companies.

Short Term Efforts

• On top of capital investment catering to the needs of the forth industrial revolution, consider beefing up incentives for investment in intangible assets which will become platforms for innovation as well as for mid to long term R&D investment, etc.

METI 97 (Reference) Corporate investment in intangible assets

 High percentage of corporate investment go to intangible assets (R&D, brand assets, investment in human resource, etc.)

Corporate Investment and Capital Investment in the GDP

Investment recognized by the company

Investment that should be reflected in GDP To be included in capital investment (R&D) Scope of investment currently reflected in GDP after the new standard is introduced in December 2016

(1) Approximately 6.8 trillion yen (2) Approximately 2.5 trillion yen (3) Approximately

1.5 to 2.0 trillion yen1.0 Approximately Tangible Fixed Assets Intangible Assets Foreign direct investment trillion trillion ･ ･ ･ Software Plant ･Buildings, Mineral Innovative Assets Information assets ･Databases Equity as investment and loans structural objects Approximately ・Foreign direct investment portion yen

･Machinery, engineering 1.9 trillion yen Approximately ･ ･ ･ facilities, etc. exploration 100 billion yen

R&D Designs , Copyrights

← ・M&As, etc. 0

Approximately . 9

trillion 1.4 trillion yen ,

Approximately etc

Economic competitivity

licenses 5.8 trillion yen . ・Brand asset, etc. Natural resources

・Human resource

yen ・Land assets unique ・Underground resources

to companies ・Fishing grounds, etc. ・Organizational Approximately structures, etc. 0.2 trillion yen (net amount for land purchase) Approximately Approximately 1.0-1.5 trillion yen 1.1 trillion yen 0.7 trillion yen Purchase of Approximately used products 0.1 trillion yen

*Used the latest data available for each item. Each number are rounded off, thus the sum total be different. (Reference) Created with JIP database of RIETI by Mizuho Research Institute (Reference material)”Are Companies Only Racking Up Cash? Deviations from GDP Statistics (February 22nd, 2016)” by Hajime Takata, Managing executive officer and chief economist of Mizuho Research Institute http://www.mizuho-ri.co.jp/publication/research/pdf/today/rt160222.pdf?ad=ml METI 98 (Reference) Investment in Intangible Assets and Innovation, a virtuous cycle toward enhanced productivity  Investment in intangible assets is important*１, as this investment supports innovation in companies, such as catering to the needs of the forth industrial revolution, creation of innovative technology, etc., reform into a corporate organization that can utilize and apply new technologies, etc. In the US, investment in intangible assets has already grown to a size larger than that of tangible assets.

US/Japan Comparison of Intangible Asset/Tangible Fixed Asset Investment

Investment Amount Amount Asset Tangible in Investment AmountInvestmentIntangible/ in Asset 1.8

1.6 Intangible Asset＞Tangible Asset

1.4

1.2 US

1.0

0.8

0.6 Japan

0.4

0.2 Tangible Asset＞Intangible Asset

0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

*１：In Corrado’s research one third of the US’s increase in productivity from the 1990’s to early 2000’s is estimated to be a result of investment in intangible assets. Corrado, Hulten, Sichel (2005), “Intangible Capital and U.S. Economic Growth.” Review of Income and Wealth 55, pp.658-660

(Source of chart)RIETI”JIP Database 2013”, INTAN Invest “intangible investment data website Aug.2014”, Cabinet Office “93ＳＮ”, US Department of Commerce “National Income and Product Accounts Tables Jan.2016” METI 99 (3) Further enhancing the functions of finance and settlement placing FinTech as the core

Challenges • FinTech brings hopes for possibilities of utilization in regional vitalization and making financial and settlement services more convenient, efficient, and close to people. Centering around this trend, advancements of financial and settlement services need to be promoted. • In doing so, it is important to design incentives such as creating an environment that makes it most convenient and carefree for FinTech, providing the most advanced services, to operate successfully.

Basic Direction of Efforts • The effect of FinTech’s innovation of financial services doesn’t only effect the finance industry itself but is extremely important from the aspects of advancement of management and improvement of productivity at SMEs, etc. as well as smooth financing, etc. It can hugely contribute to asset building of individual families, too. • With such understanding, there is a need to consider how to work on the institutional side and information system side in a integrated manner to maximize the power of FinTech. Short Term Efforts • Develop a FinTech “eco-system” (consider the modality of “Open API(note) ”, make financing of financing related IT companies easier for financial groups, create systems to introduce voluntary registration system to settlement business agencies, etc.) • Finance and settlement infrastructure reform (promotion changing all credit card authorizations to IC equipped cards, etc.) • Work on user protection and the safety of systems, etc. (Note)API(Application Programming Interface): a specification for connection for using functions such as apps. By making this public (Open API), anybody can design and provide services. METI 100 (Reference)FinTech services expanding across boarders of industries Private Company Finance Industry home budgets

CrowdfundingCrowdfunding / P2P Lending

Online / Short term small amount / Automatic Lending Settlement by Dongle Accounting Banks Asset Settlement Savings management

Prevention of Fraudulent Mobile transfer Use of Credit Cards Newcomers Settlement ＋ Operating Capital Loans Transfers Corporate Bitcoin Market Place Home accounting Loans budgets Securities Companies Virtual currencies Credit & Loans Utilizing Real Time Transaction Information From SNS and e-commerce. Small-amount Periodic Investment

Data Aggregation (Home budget information) Investment Newcomers Investment

Crowd / Automatic accounting Robo Advisor Pay-for-use Automobile Insurance Insurance companies Insurance Insurance

Telematics Information Service METI 101 ６．Japan’s specific strategy

ⅴ. Facilitating smooth conversion of industrial and employment structures

METI 102 (1) Establishing a governance system in which business owners are able to swiftly and boldly make decisions Challenges • In Japan, shuffling and closing of business domains tend to happen after the business or the company’s results fall in the red. • Japanese companies need to adapt to discontinuous and quick changes under the direction of a CEO. The modality of corporate management, such as “setting a growth target”, “strategy and methodology to attain goals”, “strong-willed decision making”, etc., need to be reviewed for change, keeping in mind that the competition is with global corporations.

Basic Direction of Efforts • As a system of corporate decision making, it is important to develop a governance system that can respond to changes in business environment, enabling quick and bold decisions, such as starting a new business domain or selling / closing a business domain. • To do so, it is important to strengthen the monitoring function of the board, including a reform of the appointment/dismissal procedures of the CEO. Specifically, board member’s meetings should take in diverse knowledge including that from outside board directors, and center its activity on reviewing and decision making on management and business strategies. At the same time, decisions regarding business execution need to be made quickly through delegation of power to top management, including the CEO. It is also important to enhance the clarity and objectivity of the polices and process regarding the appointment / dismissal of CEOs, which is an important strategic decision for the company. Short Term Efforts • Promote corporate governance reforms and strengthen its effectiveness (compile and organize information on practices both domestic and from overseas regarding enhancement of functions of the board, draft a business practice policy, etc. ) METI 103 (Reference) Shuffling of business domains at European & American companies (1)Change of business domains at GE  Shrunk finance businesses which GE had grown up to 2000 and other non- core businesses to strengthen energy, aero engine and other businesses.

$180,000m Change in Sales by Division at GE

$160,000m ＄150B Other 2011 ＄140B Sell NBC $140,000m Other 2007 Media Universal Material Sell plastic Comcast ＄130B business to (US) Material SABIC (Saudi Home electronics/ devices Media $120,000m Media Arabia) ＄117B Other 2016 2015 Home electronics/ devices Sell Home electronics/ devices Announce consumer Home electronics/ devices closure of Finance electronics $100,000m Finance GE Capital. division to Subsequen Transportation Haier tly sells (China). other Healthcare $80,000m 2005 finance Sell most of Finance related Transportation businesses. Finance re-insurance business to Healthcare $60,000m Swiss-Re Aviation Transportation 2013 Buy Avio’s Healthcare Aviation (Italy) $40,000m airplane Transportation division. Healthcare Aviation 2013 Energy $20,000m Aviation Buy energy Energy division of Energy Alstom Energy (France) $m 2000 ＄36B 2005 ＄52B 2010 ＄72B 2015 METI＄92B (Source)GE Annual Report 104 Reference) Shuffling of business domains at European & American companies (1)Change of business domains at Siemens

 Discontinued businesses with little future prospect or little synergy with main businesses. Focused on profitable businesses. €90,000m Change in Sales by Division at Siemens

€80,000m €77B €75B 2006 €77B Merge and spin out Others Others communication Finance Others network business €70,000m with Nokia €69B Transportation Finance Information and communication Transportation 2010 €60,000m Un-consolidate lighting company Healthcare Information and communication Lamp/LED Osram. Spin off in Finance 2013. Healthcare

€50,000m Transportation 2007 Sell car parts Lamp/LED business Industrials €40,000m Transportation Healthcare 2006 Industrials 2011 Buy Bayer’s Sell IT Healthcare diagnostic pharmaceutical service business. division to €30,000m EtoS(France) 2007 Buy Date Behring Industrials (US), testing machinery company €20,000m Industrials 2011 Sell nuclear power Electric power Electric power division to €10,000m Areva (France)アレ Electric power Electric power バ(仏)に原子 力事業を売却 €m 2000 2005 2010 2015 €36B €42B €61B €METI66B (Source) Siemens Annual Report 105 (2)Development of systems and environments to enable quick and flexible revival and shuffling of business domains Challenges

• Global companies need to engage in large scale M&As using a variety of methods and buy out promising start-ups, actively spin-off business arms to elevate stockholder value, and strengthen the power to promote the company’s business. • Same goes for domestic companies and each entity will need to create an environment where business domains can be flexibly and quickly reshuffled according to each company’s situation.

Basic Direction of Efforts

• All needed systems and environments need to be created so that diverse corporate needs can be met to enable quick and flexible shuffling of business portfolios.

Short Term Efforts • Consider the creation of systems and environments to enable quick and flexible revival and shuffling of business domains. • Promotion of early stage efforts for reviving businesses and succession of businesses at SMEs, promotion of investment taking the timing of succession as an opportunity.

METI 106 (Reference) Create environment to enable speedy and flexible shuffling of business domains  Looking at the top 10 M&As overseas in the last ten years, shuffling of business domains using diverse tactics such as spin-offs and TOBs with treasury stocks as consideration.  For example, TOBs with treasury stocks as considerations are popular overseas while TOBs in Japan are typically by cash.

Top 10 TOBs in the World by Transaction Amount (Past 10 years) Top 10 TOBs in Japan by Transaction Amount (Past 10 years)

Date Acquiring Company Acquired Company Transaction Percentage Considerations Friendly/Ho Date Acquiring Company Acquired Transacti Percent Considera friendly Complet (Country) (Country) Amount (million acquired by TOB (%) stile ed dollars) (％) Com (Country) Company on age tions (%) ／ plet (Country) Amount acquire hostile ed (million d by dollars) TOB (％)

１ 2007/11/ RFS ABN Amro 98,189 98.80 Cash：93 not friendly １ 2007/0 Japan Tobacco Gallaher Group(UK) 14,654 100 Cash：100 friendly 02 Holding(Netherlands) Holding(Netherlands) Equity：7 4/16 Equity：0

２ 2008/0 Takeda Pharmaceutical Millennium 5,734 100 Cash：100 friendly 5/14 Pharmaceuticals (US) Equity：0 ２ 2005/08/ Royal Dutch Shell Transport & Trading(UK) 74,559 100 Cash：0 friendly 09 Petroleum(Netherlands Equity：100 )

３ 2013/1 Bank of Tokyo-Mitsubishi UFJ Bank of Ayudhya 5,279 72.01 Cash：100 friendly 2/18 (Thailand) Equity：0 ３ 2009/3/2 Rosche Genentech(US) 46,695 47.82 Cash：100 hostile 6 Holding(Switzerland) Equity：0

４ 2013/0 Dentsu Aegis Group (UKI) 4,116 86.37 Cash：100 friendly ： ４ 2007/11/ Rio Tinto Canada Alcan (Canada) 37,630 100 Cash：100 friendly 3/26 Equity 0 14 Holding (Canada Equity：0

５ 2010/0 Astellas Pharma OSI Pharmaceuticals 4,031 100 Cash：100 friendly 6/08 (US) Equity：0

５ 2006/08/ Mittal Arcelore (Luxemburg) 32,240 93.70 Cash：29 friendly 08 Steele(Netherlands) Equity：71 ６ 2008/1 Bank of Tokyo-Mitsubishi UFJ Union Bank of 3,707 38.88 Cash：100 friendly 1/04 California (US) Equity：0

６ 2006/04/ Telefonica(Spain) ０２(UK) 31,659 100 Cash：100 friendly 19 Equity：0 ７ 2008/0 Eisai MGI Pharma (US) 3,557 100 Cash：100 friendly 1/28 Equity：0

７ 2005/06/ Telecom Italia(Italy) Telecom Italia Mobile(Italy) 28,821 44.65 Cash：66 friendly 30 Equity：34 ８ 2015/1 Otsuka Pharmaceutical Avanir 3,427 100 Cash：100 friendly /13 Pharmaceuticals(US) Equity：0

８ 2007/10/ Group of Endesa (Spain) 26,438 45.62 Cash：100 hostile 05 Investors(Italy) Equity：0 ９ 2010/1 NTT Dimension Data 3,119 100 Cash：100 friendly 2/13 (South Africa) Equity：0 ９ 2011/04/ Sanofi Aventis (France) Genzyme(US) 23,898 100 Cash：84 friendly 08 Others: 16 1 2010/1 Panasonic Panasonic Electric 3,041 32.16 Cash：100 friendly 0 0/06 Works (Japan) Equity：0 10 2007/04/ Iberdrola (Spain) Scottish Power(UK) 22,210 100 Cash：53 friendly 23 Equity：47 METI (Source) Drafted by the Ministry of Economy, Trade and Industry based on Thomson One and Press Releases from Companies 107 ６．Japan’s specific strategy

vi. Disseminating the outcomes of the revolution to SMEs and local economies

METI 108 (1) Establishing bases on which IoT and other new technologies are introduced into and utilized in SMEs and communities Challenges • The fruits of the forth industrial revolution need to be delivered from large corporations to SMEs and from national government to local municipalities. Such diffusion to SMEs and regional areas have been a challenge in other nations, including Germany. • At the actual business scene of SMEs, the development of basic platforms for the utilization of IT is a challenge. Support needs to start from the development of basic capabilities. • In the actual working level of manufacturing, agriculture, construction, etc., aging and lack of successors are serious problems. Succession of knowhow is an urgent issue. Basic Direction of Efforts • Promote the trend of IT investment at SMEs, broadening from investing in internal control operations to business activities that produce actual profit such as the manufacturing process, service, sales activity, etc. • Actively promote the introduction of robots, etc. to support automation at the working level. • In order to link the development of such basic platform systems with developing new business models, create support systems for international standardization. • Increase the value added to services and products using new artificial intelligence (deep learning, etc.) Short Term Efforts • Bill for Strengthening SME’s management. (in a “guideline by business area”, which will be drafted for each industry, sample cases of SMEs increasing their earning power through IT investment in their business activity and SMEs making IT related facility investment a policy and actively and boldly investing in IT will be supported) • In the next two years, support over 10,000 SMEs introduce IT to their company by specialists. Especially, for the manufacturing industry, centers will be created where companies can receive consultation by “Smart Manufacturing Supporter’s Squad”, consisting of specialists in IT, “Kaizen” activities, and introduction of robots. • Reduce the initial introduction cost of small-sized versatile robots by over 20%. Support the increase of human resource (system integrators) that can assist in the introduction of robots. • In order to improve productivity at SMEs that do not have sufficient workforces, promote investment for labor savings and automation through capital investment related to service robots and IoT. • Increase “Partnership organizations for the support of utilization of standardization” (regional banks, etc.) to 47 prefectures in order to support standardization at SMEs. • Promote technological development and its introduction to the working level using deep learning in various areas as an integrated approach and accelerate innovation and its implementation to actual society. • Development of a robot test field, etc. based on the Fukushima Innovation Coast Plan. METI 109 Introducing robots/Promotion of adopting IT at SMEs [PM's statement at the 5th Public-Private Dialogue] １．Assist in the Introduction of Robots (Lower introduction cost, double supporting partners ) ●Make the process more efficient through standardization of the robot introduction process and related skills. ●Develop a small-sized versatile robot (platform robot)

●Reduce the introduction cost of small-sized versatile robots by over 20% in the next 5 years and double the number of supporting businesses (Sier) to 30,000 persons. ２．Support by Specialists (support by IT Specialists and the “Smart Manufacturing Supporters’ Squad (Smart monodukuri ouentai)”) (１) Support by IT specialists ●The most serious bottleneck in the adoption of IT is not being able to take the first step due to lack of IT literacy. ●Increase the number and types of IT and other specialists at “General support centers (Yorozushien kyoten) ”. (２) Support by “Smart Manufacturing Supporter’s Squad” ●Many SMEs do not know how to improve their operations, and how to utilize new technologies such as IoT robots, etc. in doing so. ●Provide one-on-one support for not only “kaizen” but for the introduction of IoT/robots by training and dispatching human resource that can support the process.

●Specialists will support over 10,000 SMEs in the next two years to teach knowhow on IT adoption etc. ●As part of this effort, start creating locations where consultation by the “Smart Manufacturing Support Squad” is available. Training at Schools Start Creating Centers Nationwide this Year Former workers with Knowhow on the Consultation at strong production ＋ introduction of skills IoT/robots Smart Manufacturing Supporter’s Squad centers ・ “Kaizen” Human resource with Knowhow on activity at companies ・ Dispatch to SMEs knowledge on ＋ “Kaizen” in the Support introduction of IoT/ robots IoT/robots field 110 METI 110 ６．Japan’s specific strategy vii. Further enhancing economic and social systems to address the revolution

METI 111 (1) Ideal approaches to regulatory reform so as to address the revolution Challenges • With the development of the forth industrial revolution, business activities with higher levels of uncertainties have become important. • In new service areas such as the sharing economy, services not expected under conventional regulations are appearing one after another, resulting in the government measures falling behind. • For this reason, it is difficult to sufficiently react to the new needs in the private sector by reforming existing regulations and systems. Basic Direction of Efforts • Firstly, a “future vision” needs to be shared, and a concrete goal to be met within a mid-term timeframe is to be set. • Then, create a road map including all elements needed to attain the goal (reform of regulations, business promotion ideas, business development in the private sector, self-regulations, etc.), followed by the development of a mechanism where the roadmap is altered as the situation changes while carrying out short term measures.

Short Term Efforts • Introduction of a regulation reform mechanism whose goal is to create the world’s most advanced business environment through a new form of public-private collaboration. ex) Autonomous driving cars on local roads, drone operation management system, negawatt marketplace, sharing economy, etc. Creation of a regulation system integrated with hard infrastructure platforms (5G, creation of data center, etc.) • For the development of the sharing economy from which various businesses are born, support the private sector create self-regulatory standards such as user protection.

[PM’s statement at the 26th Council for Industrial Competitiveness] • A “roadmap method” where actual reform of systems are planned backward from by when what technology is to be available in society. METI 112 “Backward planning roadmap method” to conquer Forth Industrial Revolution

○ Under the forth industrial revolution, drastic and unforeseeable innovation and changes in business models may occur. ○ In order to meet the needs of an uncertain future and to conquer international competition, regulation planning backward from the long term future vision and a mechanism to review administrative procedures need to be introduced. Future Vision of Autonomous Driving Backward Counting ・Reduce traffic accidents, alleviate traffic congestion, reduce environmental load.

Goal Roadmap Method ・Utilization of autonomous driving technology in various industries (logistics, mobile service, etc.)

・Reduce driver’s load and secures free time １. Share a long term vision of the future PM’s Statement at the Public-private Dialogue on Future Investment (November 5th, 2015)

We will make mobility service by autonomous driving and autonomous cruising on highways possible at the 2020 Olympic & Paralympic Games. In order to do so, needed verification will be available, and systems and infrastructure will be created by 2017. ２．Set concrete goals with a mid-term deadline. Roadmap Example for Collaboration Area

Area of Cooperation 2016 2017 2018 2019 2020 (1) Purpose

( 2018 at Start 2020 Start autonomousdriving on local roads around

Ⅰ. Map )Purpose 1 Clarify autonomous driving highways on around autonomous purpose at earliest. the

Ⅱ. Communication the earliest the earliest

(2) Spec ()Spec Ⅲ. Social Receptivity Clarify spec of Platform map International Standardization

Ⅳ. Ergonomics (level2) ３． (level 2) Ⅴ. Functional Clarify business model

( (Subjects of the business, etc.) (1) Create a roadmap of all elements Safety, etc. (3) Business Model

)Business )Business Model 3 needed to achieve the goal (regulation Ⅵ. Security * Keep in mind Measurements reform, business promotion policies, the possibility Ⅶ. Recognition Creation of platform map to use as a data Technology Phased increase in map area private business developments, etc.) platform in later (complete highways) phases of the Creation of map system Ⅷ. Judgement

(incl. updates) (2)Carry out concrete short term reforms Technology project (phased increase in map Verification testing area, etc.) utilizing map system (Source) Autonomous cruising business review meeting “Future approaches” (March 23rd, 2016)METI 113 (2) Improving administrative services through the utilization of data Challenges • Given the existing functions of the government, it is difficult for the government to respond to society’s needs due to financial and staffing constraints and improved productivity (enhanced added value and efficiency) of the government itself is needed. • Disclosure and utilization of data held by government organs need to be further promoted as well.

Basic Direction of Efforts • The government, before the private sector, will utilize innovative technology to fundamentally change its operation processes for enhanced efficiency and the drastic improvement in the convenience of services they provide. • Disclose data held by the government for active and thorough utilization.

Short Term Efforts

• Take an integrated approach on the promotion of regulation reforms, simplification of administrative procedures, and adoption of I T, and work on reducing regulation and administrative costs, using a business operator’s point of view, with a target value and deadline. • Work quickly on enhancing productivity of administrative services and the creation of new services. ex.) Simplification of personal and corporate authentication, enhanced efficiency of administrative work by the utilization of AI (more advanced and efficient patent administration), new services utilizing the public personal authentication system (My Number), etc. • Conduct a meticulous research on the data held by government organizations (central and municipal). Actively disclose such data and promote utilization in the private sector (ensure administrative systems use API)

[PM’s statement at the 26th Council for Industrial Competitiveness] • Drastically reduce administrative costs using a business operator’s perspective. In order to do so, reform of regulations, simplification of administrative procedures and adoption of IT will be carried out as an integrated effort. METI 114 Further utilization of government held data expected

 Although currently undergoing work for further utilization, government held data have issues such as quantity and user friendliness, and hasn’t been able to sufficiently meet needs.

Problems with official statistics Issues on the utilization of public data (multiple choice) (units: number of companies) (total number of answers) データがすぐに活用できるData isn’t provided in 49 形式で提供されていないa readily usable format 公表時期が遅いDoubts on accuracy 273 提供されているデータの Content of the data is not detailed 47 インターネット上のNot readily usable 内容が詳細ではない 213 データの使い勝手が悪いon the Internet データを提供する Data format differs by organization 30 機関毎にフォーマットが異なる 精度に疑問があるDoubts on accuracy 154 必要なデータをどこで Difficult to find where the data is available 29 入手できるかがわかりにくい Insufficient手引・解説が不十分、 guides & comments , 151 提供されている can’t利用方法が分からない understand how to use Low data update frequency 25 データの更新頻度が低い 対象分野に関心はあるが、Interested in the surveyed area 135 データの検索や but 調査の存在を知らないdon’t know what surveys exist Limit to search and processing 23 加工に制限がある 項目が少なすぎるNot enough questions 関連データとの 内容が充実していない(insufficient content) 42 Cannot link with related data 21 ( ) リンクができていない Inappropriate加工方法 processing実質化、 of data (conversion( to real value, 39 利用の用途が制限されているPurpose of use is limited 15 季節調整等season adjustment,)が不適切 etc. )

公表される頻度が低いLow publication frequency 21 利用に際して費用が発生するCost is incurred for use 14

項目が多すぎるToo many questions データの著作権のRules regarding copyright 8 9 (内容が細かすぎる(too detailed)) 取扱ルールが不明確であるof data is not clear

0 50 100 150 200 250 300 その他Others 20

Source: “Toward an accurate understanding on the current situation 0 10 20 30 40 50 60 regarding official statistics and policymaking” (May 17th, 2011, Japan Source: “Infrastructure development for Japan’s society in the era of informational Federation of Economic Organizations) economy” (March 2014, Japan Users Association of Information Science/project commissioned by the Ministry of Economy Trade and Industry) METI 115 Utilization of AI for advanced and efficient patent administration

 List up each and all work from application to examination and research and analyze whether AI can be applied or not.

 Collaborate with intellectual property related agencies of other nations with high interest in AI such the US and Australia, etc. Patent Administration Work and the Application of AI While 70% of the process is Approximately 6,000 out machine processed, Grant patent of the approximately complicated procedures such 300,000 applications are as fee exemptions are handled brought to the counter. by hand by staff.

Submit Formality Examination Substantive Application (Documentation, fee payment, etc.) Examination

Reject Research related technology from the 100 million patent documents worldwide and other academic Organize documents. patent information Understand content Conventional art Decision on of invention research Patentability Create search index for applications and organize Decision on whether patent requirements are met Carefully read the application as patent information. (Main samples of requirements) document, understand the ● Whether there has been a same invention in the past. content of invention, and grasp (Novelty) the scope the application wishes ● Whether it is not easily invented. (Inventiveness) to get patented. ● Whether the content of documentation is clear. (Written description) Create a more advanced and efficient work process for patent administration METI 116 (3) Enhancing the development of business overseas through strategic collaboration and cooperation among industries Challenges • For Japan to ensure it obtains the fruits of the forth industrial revolution, it is important to actively promote stronger international collaboration, further international harmonization of related systems and connect such efforts to vitalizing innovation and gaining new overseas markets.

Basic Direction of Efforts • In order to develop a global digital market toward the forth industrial revolution, promote the organization of basic concepts surrounding the utilization of data and the creation of an internationally harmonious regulation system. • Efforts to support the internationalization of infrastructure systems that cater to the needs of the forth industrial revolution will be promoted through strategic efforts under public-private collaboration, including the upgrade financing functions as needed. • Strategic efforts will also be made on the development of open innovation and international standardization.

Short Term Efforts • Confirmation of the “free flow of data” rule, international survey on regulation systems regarding the utilization of data • Speedy and steady implementation of expansion measures for a “high quality infrastructure partnership” and further reinforcement of related efforts (promote the international standardization of “high quality infrastructure”, infrastructure planning and development of human resource capable of its evaluation, strengthen collaboration with the Asia Development Bank, faster and broader yen overseas loans, etc.). Support production at optimal locations corresponding to corporate strategies. • Consider reinforcing systems and functions of organizations that contribute to increasing the supply of risk money to support internationalizing companies. • Support the large area expansion of contents asset capitalizing on characteristics of a local area.

METI 117 (4) Permeating the outcomes of the revolution throughout society

Challenges

• Although the forth industrial revolution has the potential of bringing huge benefits to individuals, the economy , and to society, naturally, the diffusion of new assets and services would be inhibited unless recognition and understanding of the innovative technology is gained by individuals and society. • Meanwhile, the Japanese are yet to understand these innovative technologies nor the merits they will bring.

Basic Direction of Efforts • In order to gain social acceptance of the changes brought about by the forth industrial revolution, it is integral to create an environment for secure data utilization as well as attend to ethical issues the new technological revolution may present. • On top of all that, it is important to put in efforts for international collaboration as needed, and to specifically and directly communicate with society how they are integral and their merits through social verification and through dialogues.

METI 118 Word version

METI 119 1. Global economy in need of new growth engine

 There seems to be no driving force for the world economy as suggested that economy in developed countries remain stagnant for a long period after the failure of Lehman Brothers. Furthermore concerns about the future arise now that emerging economies such as China which was once boomed have weakened in recent years.  Despite this global economic situation, Japan has maintained almost full employment supported by Abenomics. In addition many companies reported high profit, and succeeded in resolving most of issues of corporate excessive capital investment.  However Japan to experience all-out economy based on population decrease will be faced with structurally suppressed growth both in supply and in demand. The failure to resolve such constrained growth might cause distinct stagnancy of economic growth, giving serious impact of long stagnancy on Japan.  To grow out of this stagnancy to shift to the new phase of growth, it is crucial to concurrently to realize :(1) improved potential growth rate through productivity revolution based on new innovation (supply side), (2) exploration of potential demand by designing new products/services that respond to social needs with innovation results (demand side).  The key to successful shift to the phase of growth is to aggressively reform economic and social system that properly identify and drive technological innovation such as IoT, big data, AI etc. which represent the Fourth Industrial Revolution regardless of developed or developing countries.

METIMETI 120 2. What is happening now? - Impact of the fourth industrial revolution -

 Competition is becoming fierce for the connection or use with data while a source of newly generated value is shifting to "data." In this competitive situation, persons able to create opportunities for business expansion in the years ahead can attract vast fund globally and swiftly and aspire for further growth by M&A etc., which eventually accelerates scale and speed of the competition. Thus we have already plunged into the word of competition of speed where "Winner takes All" is dominant.  Large scale competition involving a wide range of companies arises to all types of industries beyond their traditional boundaries. Therefore there is a possibility of drastic reform where it would be extremely difficult to predict the future for industrial/employment structure themselves. In this sort of reform its "light" and "shadow" exist with regard to smooth shift to new employment etc. while new opportunities are spreading globally. Ahead of occurrence of this reform redesigning efforts will be required for the entire system of economy and society including various legal systems.  In European countries and USA, especially global companies that are pursuing global strategies are sharply increasing in the number. In respect of global strategies USA is pursuing "from network to the real" using its strength in information domain for the utilization of "real data" at production sites whereas European countries are deploying "from the real to network" using their strength of manufacturing. However they have just begun to review economic and social system.  In order for Japan to quickly respond to these trends and to globally lead the world, it needs "compass" to show the way to overcome "market failure" coming from uncertainty of information and the way to how the public and the private can collaborate.

METIMETI 121 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure

(1) Promising areas as new growth frontier

 Newly generated goods and services with the Fourth Industrial Revolution will create possibility of acquiring new markets in developed countries as well as in emerging countries (China, Next China countries etc.) expected to grow in the future.

 Presently Japan less reliant on overseas demand has more potential for growth in overseas demand than any other developed economies (export dependency rate for Japan: 18%, 32% for world average, 28% for UK, 46% for Germany). It is crucial to acquire new markets by utilizing TPP which allows for giant free trade area.

 Moreover we see possibility of resolving global issues with technological innovation in the Fourth Industrial Revolution To follow up on this, new markets will emerge to respond to "needs for resolution of issues" that spread worldwide.

 Virtually global economy will hereafter experience the economy with decreasing population (majority of countries worldwide will be faced with the issue of decreasing population). Additionally we see the surfaced challenges of improving levels of medical/health and education, restrained energy/environment due to rise of developing countries.

 Japan is supposed to be one of the developed counties faced with these challenges. In this respect we see possibility of Japan's securing competitive advantage in world market by realizing advanced reform for individual/company basis as well as social system ahead of any other countries in the world.

 Responding to the Fourth Industrial Revolution is indispensable for both aspects of strengthening competiveness of Japan's economy for acquiring overseas demand on global basis and of resolving social/structural issues.

 On the other hand these approaches are subject to competition of speed with other countries, and losing competition leads to no chance to utilize Japan's advantageous position that Japan has endeavored to secure. METI 122 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (1) Shift to new industrial structure through facilitating needs (1/2)

 Social/structural issues (i.e. customer's true needs) which go beyond our capabilities can be essentially dealt with by utilizing innovative technology/data such as AI for the Fourth Industrial Revolution. Competition will be conducted as to who will discover or acquire this new frontier expected to be spread globally. ("Move," "Live smartly," "Keep healthy, support the elderlies, "Get smartly" etc.)  To this end source of new added value should be directed to "data." The key to secure competitive advantage relies on how speedily we can produce innovative products/services that can respond to true needs while functioning a cycle of collecting data, ensuring shift such data to big data and analyzing and utilizing them.  Some companies or industries can grow by exploring and acquiring new markets using deftly these data, but others cannot, which puts us in harsh situations.  Hereafter competition will become fiercer for such promising industrial sectors. We see possibility of totally new value to be generated where there is integration among data, technology, human resource, fund which exist within their traditional boundaries as per industry type, companies and business. So we might see reorganization between totally different industries or mutual entry instead of traditional reorganization between the same industry. As a result major changes of industrial structure will occur.

METI 123 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (1) Shift to new industrial structure through facilitating needs (2/2)

 Specifically,  (1) New value chain and new industries will emerge beyond traditional boundaries of industry types in response to "customer's true needs (e.g. move conveniently)."  (2) In this trend we see significant growth in information service sector playing focal role in data utilization and customization service using customers' data. On the other hand the sectors of raw materials and intermediate input will be put into harsh situations.  Japan is required to realize swift and flexible change in industrial structure to quickly respond to these reforms continuing globally.

METIMETI 124 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (2) Shift to new industrial structure

 We see progress of labor saving in non-regular workers besides regular workers with emergence of robot etc. This is generally expected to lead to the resolution of manpower shortage facing Japan to experience real population decline.  Additionally major reform of business processes themselves may bring about new needs of employment including jobs that create workplace where workers with good command of AI and robot etc. work together with them or jobs to focus on more value through more human communication/interaction than before.  On the other hand we see possibility of change in skills required for middle class workers who occupy core group in the entire employment. For example it is highly probable that jobs for traditional back office etc. will decrease on a large scale.  Changes in business process in line with the Fourth Industrial Revolution will bring about new needs of employment including middle skill workers. Therefore it is necessary to develop human resource in response to change in employment structure and to smooth switch over labor force to growth areas.

METIMETI 125 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (3) Specific "Vision" of reform

 As mentioned before the trend of the Fourth Industrial Revolution swiftly spreads to various fields, affecting an optimal economic/social system.  Thus it is extremely difficult to envision decisive scenario for actions for strategies in each field based on correct understanding of such reform as a whole.  Rather in this situation it is effective (1) to identify key domains in response to "global customers' true needs," (2) to envision multiple, long term scenarios as to who and how they envision new business models using technological reform, (3) to analyze impact ("light" and "shadow") on industry, employment and economy/society, (4) set specific med-term goals by identifying key turning-points, and (5) to develop road maps that describe tasks (regulatory reform, business promotion etc.) required for the public/private, going backward in time of such goals, and to perform short-term specific reforms based on road maps.

 Besides it is crucial to follow up on such "Vision" in dynamic way as it is subject to change as per time goes on.  Hereafter we need to perform deep study on various fields including "Move," "Live smartly," "Keep healthy, support the elderlies, "Get smartly" etc.

METI 126 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (4) Estimates involving industrial and employment structures

 We projected possibility as to what industries and occupations will grow or decline with economic model, making this projection help with identifying future direction of reform.  The projection was conducted for two scenarios: "As-is scenario" where reforms in line with the Fourth Industrial Reform are not mutualized continuing a state of low economic growth, and "Reform scenario" where there are dramatic improvement of productivity triggered by the Fourth Industrial Revolution, smooth transfer of economic resource to growth industries, jobs conversion as per change in business process. (For details on two scenarios see 4． described later.  ＜Entire vision /Macro economy＞  "Reform scenario" reveals that high value/high growth sectors will be generated by providing new services and products that help resolve social challenges, responding to customers' true needs. Additionally it says that workforce's shift to jobs which require solely human element in harmony with machine/software will let workers enjoy high wage/salary.

METIMETI 127 3. New growth with Fourth Industrial Revolution and reform of industrial/employment structure (2) Directions of reform of industrial/employment structure (4) Estimates involving industrial and employment structures

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 The scenario reveals significant increase in added value and number of workers in such fields as "Customer response type manufacture sector (production of final goods)" where enhanced value is expected by realizing customization to respond individual need based on customer data, and shift to new services etc., and "Information service sector" that plays core part in the Fourth Industrial Revolution and expands demand on the whole industry basis.

 In addition to these, higher growth rates than average one will be expected in such sectors as "Hospitality type service (e.g. tourism)" expected to expand market by making potential demand etc. surface using customer data, and "Infrastructure network (e.g. transportation, telecommunication) " which creates new value by entering into different sectors through integration with other service industries.

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 The scenario reveals increase of workers in such occupations as "Upstream jobs (e.g. management strategy staff, R&D staff), "Sales" of product/service with sophisticated consulting capability which becomes source of competitive advantage, and with low possibility of replacement with AI/robot etc., "Services (e.g. attendant with exclusive restaurant) with high added value and low possibility of replacement where direct human interaction leads to enhanced quality/value, and "IT" which creates more demand on the whole industry basis.

 On the other hand the scenario indicates further replacement with AI/ big data/IoT/robot and decrease of workers in such occupations as workers production line, corporate procurement management staff, salesperson with high possibility of replacement including cashier with supermarket, clerk at bank counter with high possibility of replacement and back office staff including staff of accounting/salary management.

METI 128