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Contemporary Japan Speaker Series Part 3: Digitalizing Innovation in Japan: The Development of Smart Cities and Implications for Business, Policy, and Sustainability in Asia-Pacific

Nash Lecture Theatre (K2.31) Strand Campus
02/02/2017 (18:15-20:00)

masarueDr Yarime Masarue started by explaining Japan’s historical background in the area of innovation, tracing it back to the Meiji period or Pre-World War II period. There was a need for a sound, scientific and technological base with well-developed sources that translated into an emphasis on modernisation through science and technology based on the ‘Fukoku-Kyohei’ (Strong People, Strong Nation) principle. The main objective was to develop capabilities with the existing resources to make Japan a strong nation. After explaining developments during the Meiji Period and the uses of innovation as a means to build military capabilities that would suit objectives in Japan’s strategy during the war, the next relevant period were the immediate years after the conflict. The post-war period was characterised by a more balanced approach to the uses of science, technology and innovation, with a more constructive focus development and recovery. Japan focused its innovation efforts on peaceful and positive purposes.

In the 1970s, Dr Yarime explained, there was a difficult period due to the oil crisis, which made growth to slow down and innovation projects to be interrupted. Support for knowledge and resource intensive industries, however, did not stop and remained constant until the crisis was over. Later on, in the 1980s the trend was towards knowledge intensive sectors, with importance being given to the improvement of knowledge and competing with other countries at the industrial level. During this period, Japan sought the means to acquire technological capabilities through partnerships and from this decade on, technological fields were encouraged and prioritised, something that brought issues such as research and development (R&D) and intellectual property to the map.

Nowadays, Dr Yarime explained, in spite of science and technology being very important matters in Japan, there is a declining trust in them because they have failed to predict or reduce the impact of natural disasters. This matter became more acute after the 2011 earthquake and the Fukushima accident. Following from them, the necessity to use technology to address challenges and global problems arose. Meanwhile, making Japan competitive and efficient keeps on being a must and an essential part of the Japanese strategy for innovation, especially because of the increasing importance of science in an increasingly competitive world. Innovation therefore is intended to tackle different challenges, particularly those related to the environment. A very important part of the strategy, strongly emphasized by Dr Yarime is the role of society as one of the components and beneficiaries of innovation.

After explaining the basis for the innovation strategy, Dr Yarime referred to the particular case of environmental problems. Climate Change is a reality and it has to be addressed soon, as all nations throughout the globe are suffering the consequences in one way or another. Dr Yarime explained that one of the most important steps to solve a problem through innovation is the efficient identification of challenges in order to have clarity in how to target the problem and then design the adequate strategy that solves said problem and, at the same time, increases competitiveness. The problem of climate change is regarded as a serious issue in Asia. For this reason, most if not all nations have agreed to follow the goals of the Paris Climate Change Agreement. These goals include limiting the rise in temperature by less than two degrees, trying to keep to 1.5 degrees as the maximum increase, and reaching a peak in emissions as soon as possible. In order to achieve these objectives, Dr Yarime stressed the importance of a solid compromise, by encouraging cooperation and enabling innovation in order to target these problems in an effective way. Since innovation is a process in itself, there are issues that arise during the different stages. In Japan, research and development has decreased due to a reduction in expenditure, due to limitations put on universities. These limitations are imposed by a law that restricts research for defence or military purposes and, since universities had a major role during the pre-war and the war period in the defence and military fields, they are under stringent regulations.

Japan, however, has decreased expenditure in nuclear and other traditional sources of energy and has focused on looking for cleaner and more sustainable options. The main priority in Japan is replacing nuclear energy with other cleaner and less risky sources. There are plans and projects such as the Sunshine and Moonlight projects that are being implemented to provide electricity and other services. The government has also been supporting all industries that are relevant to the objective of looking for cleaner resources; the semiconductor industry is an example. Thus, projects and ideas are subject to a rigorous analysis, and then the best or the most suitable ones are implemented. In order to give more space to innovation and having more alternatives, a substantial part of the GDP is destined to financing clean energy projects. The target is to have efficient consumption of fewer resources with minimal harm for the environment.

Later on, Dr Yarime showed several graphs and statistics related to CO2 indexes from countries in East Asia, with China being the leader in emissions, followed by Japan and South Korea. Subsequent graphs also showed which countries are the leaders in creating clean energy alternatives, with Japan in the first place, followed by the US, Germany, South Korea and China. Afterwards, another graph showed CO2 emissions by region. China produces half of the total for Asia, due to its increasing demand for resources and increasing energy needs. Coal keeps on being the main source of fuel in both China and South Korea, which makes the matter of using alternative fuels a priority.

Then Dr Yarime then moved on to discuss the agreements and compromises reached by the international community. He presented the ‘Mission Innovation’ initiative, which consists of a compromise made by different countries to share their know-how and research and development findings that could solve environmental problems. This is laying the ground for technology and environment policy integration, but there are practical difficulties related to concerns about intellectual property rights.

Continuing with the importance of sharing and generating information, Dr Yarime moved on to explain the digital dimension of innovation, which can be done through the following means: big data (all kinds of information available), internet of things (availability of information in a single platform), digital platforms, open data vs. intellectual property (a matter under discussion in G20 summits, as there is the question of the implications in terms of knowledge that openness could have).

After explaining the importance of information, Dr Yarime introduced the concept of Smart Cities as the practical dimension of the social component inside innovation, as it is visible and has implications on people’s daily lives. The idea of smart cities consists of the large scale introduction of renewable energy with minor impact on the quality of electricity in voltage and frequency. This plan also implies a cost pressure to improve energy efficiency, as they also seek to decrease the costs during peak periods and most importantly, make it resistant in case of natural disasters. Dr Yarime explains that this project is being carried out through merging advanced technologies including ICTS and storage batteries with cogeneration and renewable energy through distributed energy systems. These technologies would allow the strengthening of the resilience of the energy supply against disruptions and disasters, consequently keeping a balance between electricity demand and supply capability. If energy is used more efficiently, Dr Yarime highlighted, supply can also be reduced and energy can be saved.

The biggest challenge with innovation, like with any other project, Dr Yarime continued, relates to implementation. He explained that each stage can be complex and that the time to fully implement new technologie varies. In terms of the needs for implementation, Dr Yarime labelled resources as ‘the necessary hardware and software’, and then explained that the process has different components that interact among them: actors and stakeholders, technology developers, system operators, local communities and consumers, interests and concerns. Afterwards, Dr Yarime said that there are different interpretations and understandings of smart cities based on the mutual exchange of energy and information between the supply and demand sides. This is due to the expansion and integration of smart cities bringing a lot of components into the equation.

Dr Yarime then explained that innovation works differently according to the country and government policies. The central role of research, development and also learning, Dr Yarime said, relies on three actors: universities, industries and government. These actors interact and they contribute to knowledge in different ways, as sources of data and information vary. Dr Yarime showed two graphs on how innovation works in Japan and how it works in the United States. While in Japan it is present in almost all fields of corporate, social and government spheres, in the United States it is focused only on certain sectors of the country, mainly the academic and industrial ones. In order to put this into context, Dr Yarime showed a spreadsheet that indicated that all of Japan’s major companies (Hitachi, Toshiba and Mitsubishi, among others) are involved in innovation and in developing green projects. The role of policies and regulations is also relevant, as they dictate the incentives to promote renewable energy by creating the adequate platforms among different stakeholders and through the liberalisation of energy markets at the system level. The Japanese government, by decreasing the use of nuclear energy, seeks to promote renewable and clean sources.

In the last part of the talk, Dr Yarime explained the origin of smart cities since 2000, when individual technologies were designed, and 2001, when they started to be implemented. Later on smart cities started to focus on local differentiation. The difficult task and an arising challenge, however, is standardisation of instruments to be used in smart cities as circumstances and technologies vary and some markets are still subject to some restrictions. In order to address this challenges regarding how to implement innovation in smart cities, according to Dr Yarime it is necessary to have clear visions matching implementation; strong leadership and transparency; coordination among stakeholders; reduce the asymmetry of knowledge and expertise between large companies and local governments and communities; robust business models and human resources with skills and capacities to understand and integrate technical and social dimensions. Dr Yarime finished by saying that public funds for these projects would later be transferred to private management for competitive purposes, therefore efficiency has to be observed at all times.

There were two questions raised after the conference. The first one was regarding the importance of education in making people conscious about the environment, as this is a feature in Japanese education but, in the case of China, it is still in the way. Dr Yarime answered by saying that Japan had to learn to respect and observe the environment as a consequence of disasters such as the Minamata disease, which, unlike Fukushima, took place in a context where climate change was not considered a difficult or pressing issue. He then said, however, that designing a prompt solution was pivotal. In the case of China, the problem is getting more difficult, as China is facing the consequences already but the solutions are still on the way. The second question was about the project of smart cities in Germany and how implementation was turning into a complex issue in terms of making people used to the matter. Dr Yarime said that this is also an important part of the project in Japan: how people respond to the initiative and how it can be improved.

Summary prepared by Maria Blancas Larriva

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