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Digital trade

Japan’s digital trade benefits to quadruple to US$506 billion by 2030


Published 04 May 2020 | 4 minute read

The digital economy has a critical role to play in helping Japan achieve productivity growth. Understanding the role of digital trade, both domestically and for exports, is therefore crucial for businesses and policymakers in Japan. This report aims to address these gaps by providing new data on the importance of digital trade and recommendations for how Japan can fully exploit the benefits of digital trade as part of its overall digital vision.

Digital economy has a critical role to play in helping Japan double its current rate of productivity growth and boost the country’s annual GDP growth to around 3 percent by 2025.

Japan is facing several economic headwinds. The country struggles to escape deflation, and an ageing population is becoming an increasing drag on workforce participation and growth, intensifying the fiscal pressures of providing social-security and healthcare benefits.

The role of digital trade is therefore crucial for businesses and policymakers in Japan as it will enable Japanese firms to take advantage of digital technologies by leveraging cost efficiencies (from storage of data), create scale economies by pooling data across borders to generate richer insight and support collaboration (particularly where Japan may have skill gaps or labour shortages).

Digital trade covers the production, distribution, marketing, sale or delivery of goods and services – domestically and abroad – supported by cross-border data flows.

It will also enable adoption of efficient business practices (such as allowing consumers real-time access to their bank accounts even when abroad), and support management of global supply chains (such as tracking of export containers using Internet of Things technology).

In 2017, the economic value of digital trade-enabled economic benefits to the Japanese economy is estimated to be worth US$110 billion but this could quadruple to reach US$506 billion if fully leveraged, according to a report published by the Hinrich Foundation, titled “The Data Revolution: How Japan Can Capture The Digital Trade Opportunity At Home And Abroad”.

The biggest beneficiaries from digital trade are domestic sectors that have embraced the technological gains brought by the data flows. Economic gains supported by digital trade across major sectors in the Japanese economy is captured by enabling digital technologies that increase worker productivity, lower costs and create new source of revenue.

Also, the export value of virtual goods and services enabled by digital economy, such as e-commerce, account for US$17 billion in exports in 2017, making it the 9th largest export sector. By 2030, Japan’s digital exports could grow to more than four times to reach US$73 billion, the report said.

The Japanese government is taking a leadership to role by negotiating ambitious digital trade rules in free trade agreements such as CPTPP and e-commerce initiative in the World Trade Organisation (WTO).

In order to reap the benefits brought by digital trade, Japan needs to advocate for ensuring open data flows and interoperability by adopting the APEC Privacy Framework and join the APEC Cross Border Data Privacy Rules System as well as adopt ISO Standards that specifies controls to protect personal data.

It should promote innovation-oriented approaches to copyright and intermediary liability regulations by adopting a well-balanced internet Intermediate Liability regulations as it can ensure the effective removal of illegal content without constraining the free flow of information.

The Japanese government should also minimize border frictions. This would require a need to a reduce local registration, removal of disclosure requirements of key intellectual property, and minimizing unnecessary procedures and duties.

Learn more about the Hinrich Foundation's digital trade research project here.


Author

Pragya Bhatnagar

Pragya Bhatnagar is a Research Associate with the Hinrich Foundation where he focuses on International Trade Research. 

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