The Future of Investment and Collaboration in Major Industries

August 2022

We are entering a post-Covid-19 era, and Japan is transforming in order to meet pressing present and future challenges. Here, the private sector is taking the steps necessary to promote innovation among companies and across industries. Key among those plans is to lay the foundations for collaborative partnerships between international and domestic stakeholders.

As we noted in the prologue of this series, this article falls under one of our themesthat is, articles sharing key insights on investments and collaborative partnerships in high profile industries in Japan. Such content has three overall goals: 1) to introduce key trends in those industries; 2) to share the growth potential of the market here; and, 3) to highlight opportunities for investment in Japan and collaborative innovation with Japanese companies.

To that end, we will discuss innovation trends in the green sector, digitalization, manufacturing, healthcare and other fields; we will consider trends in foreign companies entering the Japanese market; and, we will explore global collaborative efforts by both Japanese and foreign companies—with examples given in each case. This article will provide a general overview of these topics.

The green sector is an area that is awash with opportunities for innovation and collaboration, as we will see in future articles. Japan declared, in 2020, that it aims to achieve carbon neutrality by 2050. Suffice to say here that not only the government but also the private sector in Japan—that is, individual companies as well as entire industries—is pushing forward with innovation in this sector. Such innovation is taking on many forms: from adoption of Environmental, Social, Governance (ESG) principles to allocation of green sector-related transition financing to a renewed focus on green-focused R&D and open innovation projects. Increasingly, these initiatives are being done in partnership with foreign companies, institutions and skilled individuals.

Let’s turn to digital fields. As in the green industry, individual businesses and entire industrial sectors are prioritizing digital transformation across society, and actively adopting digital solutions. Here, too, the private sector is taking the steps necessary to spur innovation in digital transformation or DX, and leveraging post-5G technology, cloud-based services, quantum technologies and more. In future articles, we’ll dive deeper into business- and industry-wide adoption of DX in fields such as financial technology (FinTech) and education technology (EdTech), as well as in lifestyle-related services.

In the manufacturing industry, meanwhile, Japan is likewise pushing forward with efforts to promote innovation not only through DX, as alluded to above, but also via introduction of other cutting-edge tech, in particular solutions related to a carbon neutral society. Areas such as R&D in advanced semiconductors are being prioritized, and that’s in addition to sectors—such as automobiles and robotics—where Japan has traditionally been strong. Here, too, foreign entities are investing in—and collaborating with—Japanese companies.

The healthcare industry is similarly undergoing a major transformation. As Japan leads the world in aging populations, advanced technologies and solutions are being developed in the fields of medical devices, regenerative medicine, pharmaceuticals, and preventive medicine. A country with some of the highest numbers of elderly people, Japan has become fertile ground for investment by entities worldwide in the healthcare industry.

Next, let’s consider the changes underway in Japan’s business environment, focusing on how these transformations are supporting foreign entities—including startups. As the business environment in Japan continues to evolve, becoming one that supports innovation, it is also welcoming investors, companies and skilled individuals from overseas. That is why it’s encouraging to see a wide range of companies entering the market, including growth-stage startups. In upcoming articles, we’ll feature some foreign startups that are active in Japan, highlighting why they chose to enter this market and what they find appealing about the country as a whole. We’ll ask about the opportunities presented by entering collaborations with domestic stakeholders. And we’ll inquire about challenges, such as those faced when entering Japan in the first place, as well as what plans they have for the future here. A key goal will be to share practical tips that foreign-affiliated entities can rely on when planning to do business in Japan.

Finally, it’s worth pointing out that Japanese companies are actively engaged in open innovation with foreign companies in various industries, and are promoting collaboration and partnerships. Such engagements, which have been implemented in various locations in Japan and overseas, have led to the creation of new technologies, solutions and markets. That is in part why the Japan External Trade Organization (JETRO) developed the “J-Bridge” program, an initiative that aims to support global collaboration and cooperation between Japanese and foreign companies. In upcoming articles, we will see examples under this program, discussing topics such as why foreign firms choose Japanese companies for partnering, the background and aims of such collaboration, and the outcomes they envision for their future.