Digital Evolution: State & Momentum in Japan
The Fletcher School at Tufts University & Mastercard in December 2020 published a comprehensive study, “Digital in the Time of COVID”, which includes the third edition of the Digital Evolution scorecard, following up on our earlier editions in 2017 and 2014, and the second edition of the Digital Trust scorecard. For the first time, it also provides an interactive version of the Digital Intelligence Index (DII). We highly recommend you taking a look if you are interested in the topic of Digital and its different permutations (Digitalization, Digitization, Digital Transformation, etc.).
As always, we are most interested in Japan’s absolute and relative positioning. Grouped among the “Stall Out” countries in the above chart, Japan finds itself — maybe not surprisingly — in the company of many European nations. Australia and New Zealand, self-proclaimed FinTech leaders, find themselves in the same group.
Digital Evolution State
In terms of the state of digital evolution, Japan ranks #19 globally. In Asia, it is placed behind leaders Singapore (#1), Hong Kong (#3), South Korea (#11), and Taiwan (#14). It is worth noting that the distance in score between Singapore and the US at #2 is about as wide as the delta between the US and Taiwan.
Digital Evolution Momentum
In terms of the momentum of digital evolution, Japan ranks only #54 globally. In Asia, that puts it behind China (#1), Indonesia (#3), India (#4), Vietnam (#5), South Korea (#11), Malaysia (#14), Hong Kong (#15), Bangladesh (#23), Singapore (#25), Cambodia (#33), Taiwan (#40), Thailand (#44) and the Philippines (#52). Even more extreme than the scoring on the State dimension, the distance between China and Azerbaijan at #2 is about as wide as the delta between Azerbaijan and Japan!
Two Thoughts
There are obviously many different ways one can take this comprehensive data set and draw conclusions. We would like to leave our readers with two thoughts to start the debate.
First, this year, the Abu Dhabi Investment Authority (ADIA) pulled its (relatively small) investment team from Japan. When making the announcement, ADIA indicated it would want to re-focus on the Indian market. From an investor perspective, given the difference in momentum between the two countries, and the upside potential of an underserved 1.35bn population — India ranks #61 in Digital Evolution State — this move seems entirely rational given the DII.
Second, for all the public proclamations of a “Digital Ministry”, etc. by the Suga administration, Japan, just like many European countries, has been stalling. Changing this will not only require an initial spark, which the pandemic might well provide as an external catalyst, but also continued momentum and acceleration over a five to ten year timeframe. This is longer than the typical Japanese Prime Minister lasts in his (and hopefully in the future, her) job.
This article is part of our Tokyo FinTech Publication, please follow us to read more from our writers, like hundreds of readers do every day. Please also register for our short weekly digest, published every Saturday, at the link below.
Should you live in Tokyo, or just pass through, please also join our Tokyo FinTech Meetup. In any case, our LinkedIn page, Facebook page and our Instagram account are there for you as well.
