Big Talk

More National Investment is Needed to Develop Japan’s Cutting-edge Sciences and Technologies

Director, Japan Strategic Information Research Institute Fumitaka Hayashi
Chairman, APA Group Toshio Motoya

Japan Strategic Information Research Institute Director Fumitaka Hayashi was a newspaper reporter before becoming an instructor at The Nikkei. His popular lectures about the economy draw on his past career and on circumstances around the globe. Toshio Motoya spoke with Hayashi about topics including Japan’s untapped resources and how to break free from roughly 30 years of economic stagnation.

Demand must be generated to end economic stagnation


(M) Thank you for joining me on Big Talk today. You have also spoken at the Shoheijuku academy.

(H) Thanks for inviting me.

(M) Can you start by telling us about yourself?

(H) I was born in Tokyo’s Den-en-chofu area. My father had three general stores, rather like the convenience stores of today. He was also active as head of the shopping district and neighborhood association. Perhaps his busy schedule is one factor in why he suddenly passed away during my second year of university. I put off finding employment to take care of my younger brother, who was in high school, and my older sister, who had left her husband. I started working at The Sankei Shimbun when I was 28 and spent 10 years there as a reporter. Based on my interest in the economy, I noticed the paper didn’t do great reporting on that topic despite the fact that the word “keizai” (economy) is part of its official name, “Sangyo Keizai Shimbun.” I saw The Nikkei was advertising for instructors, so I applied. Five of us were hired at the same time. I re-read my college textbooks to prepare for giving lectures about the economy. Because instructors are only kept on if they earn praise from customers, I think that’s why I was the only one of five hires who remained until the end.

(M) You are a popular instructor who speaks about the Japanese economy in many locations. What do you teach about?

(H) First, I believe Japan is the most stable of the world’s advanced nations. It is a country without racial prejudice, and Black Americans find Japan to be a comfortable place. There are no serious economic disparities, resulting in a mostly stable society. The issue is that our economy has not grown at all during the Heisei and Reiwa eras. According to the Organisation for Economic Co-operation and Development (OECD), the economic growth rate from 1991 to 2019 was 2% in Italy; 4% in the United States, United Kingdom, and Canada; and zero in Japan. Our rate was 9% during the high economic growth period and 4% afterwards. It fell to 0.7% and lower after the economic bubble burst. 1997 was the year when Japanese households had their highest annual earnings; the average has fallen by one million yen since then. Yukichi Fukuzawa is known to have said, “Morality without an economy is a nonsensical joke. An economy without morality is a crime.” Without economic growth, citizens will not be interested in national defense or constitutional revision. There are political reasons for this stagnation. When Japan fell into a recession, the government did not expand public spending. Instead, it increased taxes by introducing a consumption tax. There are also economic issues; most citizens already had the electrical appliances and other items they needed, and Japanese factories were moved overseas amidst increasing globalism. During that transitional period for technology, other countries became capable of manufacturing consumer electronics resembling Japanese products. During the past 30 years, the government’s economic recovery policy has been solely focused on large-scale currency issuance, a monetary policy.

(M) What can we do to end this stagnation?

(H) The UK experienced a major recession at the end of the 19th century, during the reign of Queen Victoria. Just like we are seeing today in Japan, commodity prices fell steadily. Some items decreased by 30%. To end the recession, the government issued large amounts of currency and created a great deal of effective demand. Back then, currency was based on the gold standard system. The UK discovered gold mines in South Africa, its colony, and issued currency based on that gold. The UK and Germany were racing to build battleships, which generated effective demand. Iron production had to be increased when surplus iron ran out in the UK, as well as European nations that were influenced by the UK to establish iron manufacturing industries. This lead to price increases and ended the Victorian recession. To name another example, the U.S. was able to drastically reduce its outstanding government bonds after World War II, just like Japan. American wartime bonds totaled 200% of the gross domestic product (GDP). The government built an automobile-oriented society by constructing highways across the country. The automotive industry was revolutionized; higher speeds led to more efficient engines, and tires became thicker and wider with lower pressure. The 1950s and 1960s were the age of the “American dream,” a time when the government reduced its outstanding bonds.

(M) That created demand, as well.

Japan’s mission should be developing and manufacturing next-generation semiconductors


(H) Technology is Japan’s only hope for economic growth, and the government should carry out fiscal policy to that end. The Meiji government built a modern state with the slogan, “Enrich the nation, strengthen the army.” Today we should focus investment on technology, with the aim of becoming a nation founded on cutting-edge sciences and technologies. Artificial intelligence (AI), quantum computers, and regenerative medicine are drawing particular attention. However, semiconductors are of premium importance because these manufacturers can rule the world. Russia can’t make its own, so it imports Chinese semiconductors for tank signal systems that measure distances from enemies. China builds semiconductors using equipment from other advanced nations and parts from Japan. The people who think Japan’s economy is destroyed do not know its true power. Last July, a decision was made for Japan and the U.S. to work together on developing next-generation semiconductors at a manufacturing base in Japan. Why would the U.S. agree to this, considering that it prefers domestic factories? The answer is that the U.S. lacks tangible abilities to mass produce semiconductors. Japan is the only country that can domestically produce all semiconductor equipment, excluding Dutch-made extreme ultraviolet equipment. Even Taiwan and South Korea -regarded as semiconductor leaders – purchase components from Japan. In contrast, Japan can accomplish the entire process by itself.

(M) That’s amazing.

(H) It’s also impressive that Japan has top shares for most semiconductor manufacturing equipment and materials, reaching 90% in some categories.

(M) I assumed Japan could never catch up to Taiwan and South Korea, but I see it’s not that simple.

(H) That’s right, and semiconductors are being revolutionized with totally new materials. Japan holds all the important patents for these. To draw a comparison, if Taiwanese and South Korean products are propeller planes, the U.S. and Japan are working to develop jets. Taiwan and South Korea make semiconductors with electronic circuits that heat up. The Japanese-American plan uses a photonic technology that produces no heat. We can bet our national survival on semiconductor technology, and should devote any amount of time, technologies, and money necessary.

(M) I agree entirely.

(H) The president of Boeing, the American aircraft manufacturer, said America needs Japan and the two countries are only growing closer. The American aviation industry is developing new engines and fuselage designs to solve environmental issues caused by fossil fuel. Carbon fiber is essential when building lighter airplanes. Carbon fiber is just one fifth as heavy as the duralumin traditionally used in fuselages, yet it’s 10 times stronger. American and European carbon fiber is melted by duralumin. This isn’t true of Japanese carbon fiber, which is why they are fully dependent on it. The American F-35 fighter is built of lightweight carbon fiber and is easier to fly than Russian and Chinese planes made from duralumin, even with the same engine power.

(M) So Japan controls this important technology?

(H) Yes, and with larger airplanes being built, it will be increasingly important to use lightweight materials. Boeing plans to make brand-new types of aircraft in Nagoya, although they initially talked about locating the factory in Los Angeles. The reason is, if you need a particular type of screw, it can take three years to obtain it in America. Thanks to the small, high-quality factories in Japan, you can get it delivered the next day. Nagoya is also where Japan built the Zero fighter. This is a real twist of fate, and I sense some significance to Boeing planes being manufactured in the home of their past enemy.

(M) That’s true.

Investing in robot development to make use of small and medium part factories


(H) Human resource development is also a key part of establishing Japan as a nation founded on cutting-edge sciences and technologies. Students should absolutely receive advanced education from an early stage. Specifically, they should focus on learning to read and write Japanese from the first to fourth years of elementary school. Fifth grade, junior high, and high school should be integrated education. Universities should provide specialist training only, and graduate schools should be places where students write papers to share with the world. We should also allow high-performing students to skip grades. I think we need a system that recognizes students who display high abilities in specific subjects, rather than those with decent grades in all areas. An expert committee in the Cabinet Office’s Council for Science, Technology and Innovation is putting together a technology budget. It will be restructured and enhanced, then determined from an objective standpoint with cooperation from industry experts and Nobel Prize winners. With the aim of making Japan into a cutting-edge science and technology-oriented nation, 100 trillion yen of national bonds should be issued for that purpose, along with the same amount of construction bonds. The total should be divided to invest 40 trillion yen each year for a period of five years. Some are worried about rising interest costs and the weakening yen, but interest rates have little effect on the GDP because our rates are low and few foreign nationals hold Japanese government bonds. Japanese wealth is not going to flow overseas. Looking at Bank for International Settlements data, Japanese companies have more retained earnings than the U.S. and 27 European Union countries; they are holding on to these earnings because there is nowhere to invest them.

(M) That’s not actually a good thing.

(H) I think they should invest in projects to move power cables underground and introduce optical fiber. This has already happened in the Akasaka area where APA Group is headquartered, but there are still aboveground electric lines all over Japan. Videos from 10,000 channels can be transmitted via plastic optical fibers the width of a human hair, and Japan possesses all these optical communication patents. One benefit is that they can transmit large amounts of data. Another is that they are not harmed by solar flares, since they do not use radio waves. Optical communication makes it possible to send enormous amounts of information. For example, children with physical disabilities could attend class from home, and patients in Hokkaido or Okinawa could be operated on by top brain surgeons in Tokyo. Optical fiber is also resistant to cyber-attacks.

(M) Those are all positives.

(H) Another promising investment is high-altitude, fixed-point airships. Mobile phone networks will be upgraded from 5G to 6G in the future, and we will likely need more base stations due to the shorter signal range. Western countries are attempting to resolve this by using drone base stations at altitudes from 20,000 to 50,000 meters. Obviously there are limits to how long they can be continually operated, which is why Japan is working on airships. Three airships at an altitude of 20,000 meters could send signals throughout the Kanto Plain. Intense temperature variations at those altitudes would destroy airships made from regular materials. Japan is the only country that can manufacture superfine carbon fibers of a length that could circle the globe twice, and with a weight of just 10 grams. This material is used to make aircraft fuselages. If you layer 24 pieces to make a bag and use it as the outer shell of an airship, it can withstand long periods at 20,000 meters. This technology was successfully tested in 2006, and now the government just needs to make a decision.
People are also investing in Japanese technologies to create precision components. Today’s gasoline vehicles are composed of three million parts. Electric vehicles have only 100,000 parts. This will lead to the demise of component manufacturers in areas like Tokyo’s Ota City, Osaka’s Higashiosaka City, and Niigata’s Tsubamesanjo. We should invest in robots as a way to make use of these technologies. China is number one in the world for robot production volume, but most of its parts come from Japan. Japan is also the world leader for patents and important software. Together with the U.S., which has the number-two position, we would be unstoppable. Denmark opened a national robot nursing school and actually uses robots from around the world. Among these, Japan’s caregiving robots are highly lauded. Robots can help feed patients and do tasks that are difficult for human caregivers, such as lifting patients out of bed and bathing them. By introducing caregiving robots, facilities will be able to pay their human workers more. They are also being used in brain and heart surgeries.

(M) Do human doctors perform surgeries remotely?

(H) Yes, human doctors start the surgery, then robots autonomously perform some portions. Robots can do tasks that humans cannot handle, even in areas with lots of small nerves. I also think we’ll see robot craftsmen and sushi chefs.

(M) I imagine this will be a good thing in Japan, which has a shrinking population.

Japan has great abilities and a promising future


(H) Japan must also increase its energy self-reliance. In my opinion, it will be important to develop magnesium fuel cells, which are used as emergency power sources by hospitals, police stations, fire stations, and the Japan Self-Defense Forces.

(M) Can magnesium be extracted from seawater?

(H) Yes, in the past magnesium chloride has been extracted from ocean water, and electrolysis was performed to produce magnesium. The current method involves burning magnide ore. This magnesium can be used for fuel cells, and it produces no carbon dioxide when burned. The magnesium oxide created after burning can be returned to magnesium metal by using a solar laser. This will help establish a society where magnesium is recycled. Japan would be able to obtain energy equaling 500,000 years of power for the entire world. There are other types of renewable energy to leverage, such as the 3,000 hot springs across the country. Hot spring water with a temperature of 100°C is combined with cold water at bathing facilities. We could use that source water for binary generation by mixing it with ammonia, which has a low boiling point of 50°C. The steam can turn turbines and generate power. KOBELCO mass produces these types of generators. Another energy option is agricultural water. Japan has 45,000 kilometers of water channels, equaling two thirds the length of the Equator, but there are only 40 power generation facilities utilizing irrigation channels. We could revitalize towns by using hot springs and agricultural water to generate power for vegetable factories, fish farming, and other businesses.

(M) That’s a good idea.

(H) There are approximately 650 vegetable factories in Japan, but just about 10 of them are profitable. Electric bills are a major hurdle; more would be profitable if they didn’t have to pay for power. For example, they could use factory waste heat. Low-cost electricity would lead to new potential. Four different crops could be sequentially grown in the same plot; some vegetable varieties could be harvested in just one week. Factories have about 300 workers, which creates lots of jobs. There is a worldwide shortage of marine products as China uses trawlers to harvest them in huge amounts. This results in more aquaculture. In 2013, Japan’s aquaculture volume surpassed its amount of naturally harvested marine products. Cultivating them on land is fundamentally like having an aquarium. With the latest technologies, facilities can be sterilized by instantaneously applying 100 million volts to break apart nanobubbles in the water, which are just one micron large. This makes it possible to grow huge amounts of marine products without chemicals. Touzai Bussan in Chiba Prefecture farms lots of freshwater fish, namely sweetfish, char, and salmon. They are fed on soy beans to reduce unpleasant odors, and are highly praised by non-Japanese people as well. A closed school in Tenkawa Village (Nara Prefecture) has been made into a pufferfish farm, and they’re engaged in trial and error to increase the survival rate proportionate to costs. As this shows, we can cultivate fish even in landlocked places like Nara. These are the sorts of topics that I’m asked to lecture about.

(M) I’m sure many aren’t familiar with these things. I’m thrilled that your lectures inform people about Japan’s strengths.

(H) Yes, they appreciate the information, but it’s hard to make progress on actually using these examples to start foodstuff factories or aquaculture facilities. Sometimes I think the best method might be for the government to build and manage facilities that are sold off to the private sector, like during the Meiji period. Many people in rural areas have ample assets, and I think they would spend hundreds of millions of yen to buy existing facilities. It seems this could be particularly effective in Hokkaido.

(M) You have lots of innovative ideas. Is it possible that Japan can use its untapped assets to achieve growth?

(H) Absolutely.

(M) At the end of the interview, I always ask for a “word for the youth.”

(H) I’ve brought up specific numbers demonstrating that Japan still has great abilities and a promising future. I hope young people will feel confident as they actively participate in society.

(M) Thank you for sharing such an interesting conversation with me today.

(H) Thank you.


Fumitaka Hayashi

Born in Tokyo in 1942. Graduated from Keio University. Worked at The Sankei Shimbun and as an instructor in the Nikkei Staff Editorial Education Department. Is a registered instructor at the Mizuho General Research Institute and director of the Japan Strategic Information Research Institute. Responding to the common view that Japan has stagnated and lost its vital spirit, he uses concrete images and data in his lectures on broad-ranging topics about Japan’s future prospects nationwide.