Will a Change in Leadership Slow Down Japan’s Digitalisation Efforts?

Will a Change in Leadership Slow Down Japan’s Digitalisation Efforts?

Since the surprise resignation of Japanese Prime Minister Yoshihide Suga earlier this year, the ruling LDP party has been thrown into a leadership election that will ultimately choose the next prime minister. This election has the potential to be a political inflection point for Japan—and the LDP—and will ultimately show whether recent political developments will continue to transform Japanese politics or if policy inertia and factional politics within the LDP will stall digitization efforts and hamper the development of Japan’s newly established Digital Agency.

Established during the COVID-19 pandemic to help solve Japan’s struggles on 31 different policy issues including electronic medical records, virtual learning environments, relief payments, and now vaccine tracking efforts, the appointment of Digital Agency head will be an important role to fill when the LDP chooses its next leader on September 29.

It is very difficult to predict who will win in the election. However, at this moment, among the four candidates in the bid for leadership, Mr. Kono Taro’s experience in driving administrative reforms, local governments, and “e-government” makes him the prime candidate to lead Japan and accelerate the country’s digitization efforts. Installing the Digital Agency alone is not going to solve Japan’s digitalization woes. There must be a strong leadership to back the Digital Agency and support the enactment of policies across Japan’s complex and stove-piped bureaucracy.

At present, the Digital Agency does not hold the authority to direct other ministries on how to conduct their digital policies, which could lead to implementation challenges. Full-scale structural reforms, including deregulation and flattening the Japanese government hierarchical structure is critical. Take the education sector as an example. Implementing changes at the Ministry of Education itself will be difficult due to the complex teachers’ licensing process and varying preferences among local and prefectural governments. Therefore, if other candidates with less experience in introducing reforms becomes the new Prime Minister, they may not lend the level of experience needed to help the Digital Agency live up to its potential.

Besides the issue of leadership, the Digital Agency may also face the challenge of a lack of digital talents, especially in the public sector. The Digital Agency has implemented an innovative policy to bring in 100 private sector professionals into the Digital Agency to address this human capital deficit and potentially innovate policy solutions. However, these new hires may face resistance from the 400 government workers who will populate the rest of the agency. The new government must also act to ensure the Digital Agency can retain the best digital talents so that the Digital Agency does not fall short on human resources while implementing their policy objectives.

Former Prime Minister Abe famously called for Data Free Flow with Trust in his efforts to make Japan a world leader on digital policy and digital trade, and the new Prime Minister, and Digital Agency, must be up to this challenge as well. Mr. Kono’s experience as in the defense and foreign affairs ministries makes him the best candidate to assert Japan’s leadership on the world stage. To spearhead the interests of Japan’s digital economy, Japan must continue to engage global leaders on digital issues, including digital trade, cybersecurity, and emerging technologies. Building on Abe’s Data Free Flow with Trust, Japan must continue to work with like-minded countries and push for greater cooperation and trade.

At the end of the day, the next Japanese Prime Minister will ultimately have the final say in matters relative to the Digital Agency and all of Japan’s digitalization efforts, especially on key issues such as 5G deployment, rural connectivity, privacy, and questions such as potential carbon taxing schemes. Domestically, the Prime Minister will face challenges in pushing for digitalization across the Japanese bureaucracy and the ongoing threats of COVID-19. On the global stage, the US’s lack of commitment in the Asia Pacific region and China’s interest in the CPTPP, may mean the new leader will have to manage the complex dynamics between these superpowers.

The next Prime Minister will play a crucial role in either accelerating or decelerating Japan’s digital progress. Hence, observers should take note of where the LDP leadership candidates stand on digital issues and tease out their plans to enable Japan to reap greater benefits from the digital economy. Being ranked 27th globally in digital competitiveness, despite Japan being an advanced and highly educated market, will only hinder the country in reaching its full potential.

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