FT SPECIAL REPORT Japan Technology & Innovation Tuesday December 3 2013 www.ft.com/reports | @ftreports Asia’s testbed strives to adapt Inside Stem cell first Scientist hopes to restore patients’ The imperative to pharmacies’ hold over more than two vision but profits dozen popular medicines, in some may be elusive cases permanently. “If Mr Abe cannot modernise presents decide on this, he cannot decide on Page 2 anything,” he said. dilemmas, writes Another eternal complaint about Japanese industry is that too many Robots hit by Jennifer Thompson companies make the same things. Their executives complain of profit- hard times squeezing competition yet are loathe Automatons need he outlook for Japan’s engi- to leave money-losing businesses or neers and entrepreneurs is merge their companies with rivals. to earn keep with the brightest for 20 years – There has been progress this year. serious engineering on the face of it. Panasonic, for instance, has said it Prime minister Shinzo will abandon smartphones, while tele- Page 2 TAbe’s three-pronged strategy to revive vision makers across the board have the economy – known as Abenomics – trimmed production. But experts aims to help both ventures starting agree more consolidation is needed. out and conglomerates that have Part of the government’s grand plan existed for decades. to haul the economy out of more than Tokyo kicked off the year with fis- a decade of low growth and 15 years cal stimulus followed by an unprece- of deflation is to encourage businesses dented monetary loosening from the to collaborate in the hope that reduc- Bank of Japan. Following that was ing the number of players in a single the promise of additional reform sector will relieve downward pressure Beyond bullets measures, such as special zones in on profits, wages and prices. urban commercial centres where Excess capacity plagues virtually New high­speed deregulation will go further than at every industry, particularly food, trains will ‘levitate’ the national level. To add to all that retail, chemicals and construction came the apparent removal of funding where the top five businesses have as – but can they barriers for entrepreneurs. little as a 30-40 per cent share between boost growth? For those budding enterprises that them. do make the grade, a stock market Changing corporate law is one part Page 3 rally instigated by a new flush of of the solution. Mr Abe’s administra- investor optimism about the world’s tion is pushing for tax breaks to third-largest economy is boosting the reward companies that carve out over- Merger shy chances of successful initial public lapping operations and combine them offerings, should the enterprises wish in a new entity. Companies pushed to raise further capital. Some areas are already witnessing to join forces to Japanese companies compete hard growing innovation. to remain technological frontrunners Japanese engineers at Toyota and trim bloated in traditional areas of strengths such Tokyo university this year created a sectors as the automotive industry. Nissan robot capable of holding a conversa- and Toyota want vehicles with self- tion about everyday events. Not an Page 3 driving technology to start rolling off answer to mankind’s most pressing their mass production lines by the needs, perhaps, but certainly a useful end of the decade. addition to the International Space Making a splash But businesses in other traditional Station, where the robot, Kirobo, acts areas, notably consumer electronics, as a companion and instructor to a Manufacturers of continue to struggle. Japanese astronaut. high­tech toilets Last month Sony slashed its full- Robot dreams: Kirobo travels to the manufacturers in Japan, focusing on the ear of the prime minister as a “I believe robots will be the next year net profit forecast by 40 per cent International Space Station to support restructuring rather than novelty. member of a council advising on legis- smartphone, just like Google believes hope to increase as the consumer electronics company a Japanese astronaut “The electronics industry is changing lation to boost Japan’s growth, threat- Google Glass will be the next smart- sales abroad fell back into the red for its second drastically and it has become vital to ened to quit after questioning the gov- phone,” predicts the robot’s designer, quarter. build systems to provide high value- ernment’s commitment to reviving Tomotaka Takahashi. Page 4 Much rides on whether the group added products as quickly and as effi- the economy through deregulation. Other breakthroughs will reach will make good on a promise that its ciently as possible,” says Yoshihiro Mr Mikitani was acting in response wider audiences. Xperia smartphone range and Play- Nishida, a manager at Murata Manu- to a draft pharmaceuticals bill, one of Japan’s prototype levitating train, Station 4 game console, for which it facturing, a Kyoto-based supplier of the first reforms promised by Mr Abe in development for years, broke the On FT.com » has set an initial sales target of 5m, components to Apple and Samsung. after his election late last year. 500kph barrier in testing this summer. will help Sony return to profitability. The challenges of introducing struc- Bricks-and-mortar pharmacies JR Central is aiming to start a Sharp, which this time last year Companies complain of tural reforms and fostering entrepre- oppose the bill’s removal of a ban on Maglev service on a line between Self­driving cars warned of doubt about its survival, is neurship remain. internet sales of non-prescription Tokyo and Nagoya in 2027. Some have Automakers keen fighting back after two years of multi- competition yet are loath One recent row is a case in point. drugs. called for construction plans to be billion-dollar losses. Last month Hiroshi Mikitani, the Yet Mr Mikitani was dismayed to speeded up so the service can start to stress safety It is making a $1.4bn share offering to merge with rivals chief executive of Rakuten, Japan’s discover that the planned legislation and various equity agreements with largest e-commerce company, who has contained caveats that would prolong Continued on Page 2 over excitement Start­up seeks to profit from ageing population to plan. The venture was an for people caring for elderly Entrepreneurship agency that specialised in relatives recently dis- finding accommodation for charged from hospital; an Those ventures that elderly people, complete online community for care succeed can expect with suitable facilities and workers and managers, and available care. However, another site promoting pro- to reap rewards, when Japan’s long-term fessional qualifications for care insurance system came those employed in the sec- writes Gavin Blair into operation in 2000, com- tor, collecting commissions petition increased and fees from schools when its mem- As an undergraduate in the dropped, rendering the busi- bers sign up for courses. late 1990s, Shuhei Morofuji ness unprofitable. With 80 per cent of was facing the traditional Fear of this type of failure Japan’s numerous elderly- Potential: elderly Japanese people take exercise Getty and laborious process of partly explains the lack of care companies consisting applying for jobs at leading entrepreneurs in Japan in of independent, often fami- Japanese corporations. recent decades, according to ly-run, concerns, SMS cre- Y10bn (£62m) for the first world. Japan has a 20-year With established compa- Mr Morofuji – something he ated a dedicated, computer- time in the year to March head start on this. nies at the time beginning believes must change if the ised management system, 2013, while net profits for “The person who figures to merge, lay off staff and economy is to grow. which is now used by more the quarter ending Septem- out how to address this even go bankrupt, however, Undaunted, Mr Morofuji than 15,000 of them. ber jumped 35.5 per cent on issue – and it’s going to be he concluded that life as then founded SMS in 2003, The overlapping nature of the previous year to through ideas and technol- a white-collar salaryman with the aim of providing the various services mean Y1.08bn. ogy – is going to do very was no longer a stable “information infrastruc- many of the businesses feed As the populations of well. That is going to be option. ture” for the elderly care into each other, while big Japan’s Asian neighbours exportable to many coun- “I thought that it would market and its associated data analysis has helped are expected to age rapidly tries very soon.” be better to take charge of industries. His first step identify needs and develop in the future, SMS is posi- Having run SMS for a my career and form a com- was to take the advertising new offerings, according to tioning itself to take advan- decade, Mr Morofuji, who pany at my own risk,” says related to elderly care, Mr Morofuji. tage. The first generation of still owns 31 per cent of the Mr Morofuji. After a couple including personnel recruit- parents from China’s one company, has decided the of years spent working in ment, and shift it from leaf- child policy will retire over time has come to step aside sales, he set his sights on lets and newspapers to an the next few decades, skew- and let another chief execu- one of the few parts of the online model. With revenue ‘This will soon be ing the demographics of its tive take the reins. He domestic economy that was from the success of this a problem for vast population even more believes that companies almost guaranteed to see venture, SMS was able to than that of Japan. SMS has that continue to be run by future growth.