The residual post-Olympics momentum may just be the catalyst to shatter cultural ceilings and power Japan for a satisfying decade ahead.

Due to the decline in Japan’s population, the country Japan finds itself in the unique position where a labour shortage presents the chance for the development of new automation technologies, without the risk of creating massive unemployment.

The number of employees over 65 rose from 5.7m to 8.6m between 2008 and 2018, and their share in the workforce will amount to around 20% by 2030. That is why the urgent adoption of the internet of things (IoT and industrial IoT) and automating technologies by 2025 in industries such as construction in Japan is required to improve productivity by 20% and manufacturing productivity by up to 2% per year.

According to a whitepaper released in November, ‘Japan’s next decade: Opportunities for economy and society after the 2020 Tokyo Olympics’ by The Economist Corporate Network (ECN), Japan can transform the challenges it is facing into the drivers of growth for the decade starting with 2020.

The report, sponsored by tobacco company Philip Morris Japan*, is based on desk research and consultations with experts and senior executives of Japanese and foreign companies in Tokyo. In totality, the paper shows that despite serious challenges, Japan has immense potential for the future.

Four socio-economic factors—the silver job market; the relentless automation needed to mitigate the silver workforce; womenomics, and tourism—when managed with care and respect, can bring Japan’s economy to a much larger size than the government’s current target of ¥600trn.

This would require more than new programmes by the Cabinet Office or new strategies by business, however; a shift in perspective and change of mindset are needed to see the risks as opportunities to be realised by society as a whole. This is the added value driven by the adoption of Industry 4.0 in Japan—essentially equal to yet another set of massive opportunities acrrued to being the host of the 2020 Olympics.

Dimitry Rakin, ECN North Asia Associate Director, says: “There is a tendency to view the future of Japan negatively after the so-called ‘lost decades’, but the experts point out how even such phenomena as an aging population or a shortage of labour present benefits, if tackled correctly. Elsewhere around the world, Japan is still a ‘number one’ in such areas as automation or inbound tourism, and that there is an immense potential for growth in the spheres where it is lagging now, like diversity promotion and womenomics.”

Riding on the wave of post-Olympics opportunities

The 2020 Summer Olympic and Paralympic Games in Tokyo are playing a central role in the narrative of Japan’s revitalization. The direct economic benefits of this iconic event are forecast to range from ¥30trn (US$282bn) to ¥32trn or around 0.6% of real GDP. The cumulative effect of the Games is set to bring more important results than simply faster GDP growth.

The legacy created by the Olympics after 2020 should be enough for the country to start building Japan’s ‘Next Decade’. The key areas mapped out in this report indicate how to reap the benefits of the unique opportunities on offer: new markets, new technologies, new customers and new workers. Some interesting insights reported include:

Going beyond automation: The report notes that besides automation, the upskilling of workers and the import of foreign talent. Steven Vogel, professor of Political Science, University of California, Berkeley comments: “Japan needs to re-tool its labour market and its education and training system to meet the needs of the 21st-century economy. ‘Womenomics’ and the workstyle reform are a move in the right direction. The government has identified the right next step with its ‘human resource revolution’ slogan, but we have not yet seen bold steps. Those might include much stronger STEM training, especially in software engineering, and better retraining programmes.”

‘Womenomics’ in action: According to the Harvard Business Review, hiring more women, migrants and senior workers and promoting them in their career paths drives up performance; “total diversity”, on average, leads to innovation revenue that is higher by 19 percentage points and EBIT margins that are higher by nine percentage points. The rise in the labour participation rate of women is one of the highlighted achievements of Japan’s womenomics policy. At 68.7% in 2018, the rate was higher in Japan than in the US (66.1%) or South Korea (58.8%). This has already prompted US think-tanks to view Japan as an exemplar of how to tackle the problem.

The incredible Kaizen 2.0 work ethic: The term Kaizen (translated to mean continual improvement) applies to processes, such as purchasing and logistics, and the workflow crosses organizational boundaries into the supply chain. It has been applied in Japan’s healthcare, psychotherapy, life coaching, government, and banking, and even now, the world’s perception of the high quality and reliability behind made-in-Japan products is still very good. Now, Kaizen 2.0 leverages on digitalization, Lean methodologies, agile innovation and transformation to break free from its past cultural and socio-economic mistakes.

Becoming a model for international tourism: Japan is ranked as one of the top-5 countries in the world in the Travel & Tourism Competitiveness Index and the number of international tourists is growing by double-digits every year. It is expected that the tourism industry’s share of GDP will be much greater in the near future after the 2020 Olympics. It comes as no surprise that Tokyo occupies first position for the number of visiting foreign tourists. It is the safest metropolis globally, rank tops  for ease of transportation, overall safety and orderliness of the streets and quality of business facilities (shared meeting spaces, conference venues, etc.). The most popular leisure activity for them is, by far, the food experience, which is not surprising given that Japan’s capital has the highest number of Michelin-starred restaurants of any city, both in absolute and per-head terms.

The paper concludes optimistically: “Even if the highest projections are not realised and the level of GDP growth does not skyrocket, Japan can show the world that there is so much more to what defines the success of the country in the 21st century. “Beyond GDP” thinking was shared by many experts interviewed for this paper, and this could be seen as a next-level opportunity for Japan to lead in a world where double-digit economic growth is no longer perceived as an ultimate goal and sustainable development means a lot more.”

According to David Semaya, executive chairman, Sumitomo Mitsui Trust Asset Management, there is already thinking around the world, especially with the demographic challenge, that GDP is not necessarily the right benchmark for evaluation of a nation’s success. Quality of life is so much better in Japan—maybe we make less money, but we live longer and we don’t have the political upheaval we now see elsewhere.”

In the current turmoil of conflicts and global political scandals, sustaining this environment (and preserving the deep cultural heritage) is already an achievement that Japan can be proud of in the coming decade.

Editor’s note: Readers may be skeptical about research funded by certain categories of companies, publishing data from such research does not mean we endorse the findings, and readers can make up their own minds from evaluating the integrity of the independent agency commissioned for the research, and from the quality of research methods, peer reviews and quality of the findings disclosed therein.