Creativity & Innovation in Japan

Norbert Gehrke
Jun 10 · 5 min read
The 2018 Global Innovation Index had Japan moving into 13th place

Japan is on the rise. In the annual Global Innovation Index (GII), Japan had moved up the rankings for six consecutive years, taking the 13th place in 2018. Only Singapore and the Republic of Korea are ahead in Asia, with the gap to the latter closing. The 2019 edition of the survey will be due soon, and we are expecting further improvement.

We have long been interested in the question how creative and innovative Japan really is, at an absolute and relative level. An Adobe-sponsored study in 2012 found that Japan is seen as the most creative country globally. However, the Japanese see themselves differently. It is this humble and slightly pessimistic view, shaped by enduring economic setbacks, that let Oki Matsuomoto, founder of Monex, insist in a conversation last year that “many people always try to generalize on the bad things, there are lots of good people and talent, so you need to find this interesting space and focus on it.” So let us look at the good and bad in the data.

The Framework

Framework of the Global Innovation Index 2018

Compared to one-off efforts like the Adobe study, the GII helps to create an environment in which innovation factors are continually evaluated. Published since 2007, it covered 126 economies in 2018, representing 90.8% of the world’s population, and 96.3% of the world’s GDP (in current USD).

Four measures are calculated: the overall GII (the simple average of the Input and Output Sub-Index Scores), the Input and Output Sub-Indices, and the Innovation Efficiency Ratio (the ratio of the Output Sub-Index score over the Input Sub-Index Score). There is a total of 81 indices.

Innovation Efficiency

Japan ranks 12th (down by one) in the Innovation Input Sub-Index and 18th in the Innovation Output Sub-Index (up by two). This results in a 44th position in the Innovation Efficiency Ratio, putting Japan behind countries like Kenya and Madagascar. So while the overall innovation picture is improving, the efficiency of resource deployment allows for further improvement. The report states that “among high-income countries, Switzerland, the Netherlands, Sweden, Germany, Ireland, Luxembourg, and also Hungary stand out for producing many outputs for their given level of inputs. Singapore, Australia, Japan, Hong Kong (China), Canada, New Zealand, and Norway, as well as many resource-rich economies […] stand out as high-income economies that […] tend to perform worse.”

Innovation Quality

Japan leads the Innovation Quality Index among high-income countries

The top 5 high-income economies in the quality of innovation in 2018 are Japan, Switzerland, the United States of America (U.S.), Germany, and the United Kingdom (U.K.). Japan reclaims the top spot in innovation quality, the position it held in 2016 . In 2018 Japan gains ground in the quality of its universities with a higher overall score for its three best universities: the University of Tokyo, Kyoto University, and Tokyo Institute of Technology. The country also shows improvement in the quality of its publications and shares the top score in patent families among high-income economies.

Innovation Clusters

It is generally accepted that successful innovation clusters are essential for national innovation performance. However, the availability of reliable innovation data at the sub-national level is severely limited. The GII attempted to formalize an approach to resolve this for first time in the 2017 edition.

In 2018, Tokyo-Yokohama is again ranked as the #1 innovation cluster, Osaka-Kobe-Kyoto dropped slightly from #5 to #6, and Nagoya from #9 to #11, falling out of the top ten. In terms of population, the Kansai/Kanto corridor is about the size of Germany, and it features a highly homogeneous population. This provides a significant market opportunity. It might come as a surprise that San Jose-San Francisco even dropped behind Seoul to now be listed as #4 (with Shenzhen-Hong Kong at position #2).

The Good and the Bad

In 2018, Japan improved its rank in Institutions (8th, up by five), Market sophistication (10th, up two), and Creative outputs (31st, up five), where the country advances in all sub-pillars, especially thanks to major improvements in trademarks by origin and a good rank in the newly introduced indicator, mobile app creation.

Japan ranks in the top 10 economies for six sub-pillars: Political environment and Business environment (both 7th), Research and development (5th), Information and communication technologies (5th), Trade, competition, and market scale (3rd), and Knowledge absorption (8th).

Japan ranks 1st in a number of input and output indicators, including research & development financed by business, patent families in two or more offices, patents by origin, PCT patent applications, and IP receipts.

Despite these achievements, Japan moves down two spots in Human capital and research (16th), losing positions in Education (49th) and Research and development (R&D, 5th) and the indicators expenditure on education, school life expectancy, tertiary inbound mobility, researchers, and R&D expenditures.

Opportunities for further improvement are found in various areas, including in ease of starting a business (83rd), ease of getting credit (70th), FDI inflows (117), productivity growth (79th), new businesses (95th), ICT services exports (99th), and cultural and creative services exports (52nd).


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© 2019 FinMirai KK

Norbert Gehrke

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Passionate about strategy & innovation in Japan. Connector of people & ideas.

FINMIRAI

FINMIRAI

FINMIRAI is an innovation studio focused on the financial services sector. With a proven track record of bringing new business models to market, and transforming organizations, we help our clients to define THE FUTURE OF FINANCE.

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