The Digital Landscape of Japan: What Has Been Done and Can Be Done – An Binh Nguyen

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*This article is originally published in the Asia Pacific Policy Observatory December 2024 Report.

Overview

Japan is an island nation located in East Asia with a population of 124 million people. Having its position amongst developed countries, Japan has its economy backed up by advanced technology, a robust industrial base and a manifested high living standard. Japan is renowned for its automotive and electronics industries, which significantly contribute to global trade and position the country as a key player in the Asia-Pacific digital economy. 

With the early General Election held in October following Kishida Fumio’s announcement of not running for reelection as leader the Liberal Democratic Party (LDP) and Ishiba Shigeru winning the party election, despite still being the largest party in the House of Representatives, this is the first time LDP was not able to secure the parliamentary majority since 2009. Meanwhile, the Constitutional Democratic Party (CDP) has obtained around 50 more seats while The Democratic Party for the People (DPP) also made significant gains to be the fourth largest party with 28 seats.

The Future of Japan’s Digital Landscape

Japan has made significant strides in its digital environment, with its digital policy transforming various sectors, including data protection, fintech, retail, artificial intelligence (AI), digital health, and cybersecurity. For instance, the Government of Japan (GoJ) enacted in June 2024 a policy named the Act on Promotion of Competition for Specified Smartphone Software (SSCPA), a movement to regulate the competition among smartphone software providers and show Japan effort in curbing antitrust behaviors in the application market., Inspired by the EU’s Digital Market Acts (DMA), this law has a tighter focus — targeting specifically those happening on smartphones, allowing less resource requirement and making it manageable for the Japan Fair Trade Commission (JFTC).

Movements in Governing Digital Assets

The Japanese government has previously elevated various policies to support the digital landscape of Japan. In September 2021, the Japanese parliament established a Digital Agency that works to maintain the effectiveness of technology and ensure people’s daily lives through digitalization with their goals –– varying from the promotion of digital infrastructure, and digital adoption encouragement to addressing social challenges. During Kishida’s tenure, he also proposed distinct initiatives. One of which is the Digital Garden City Nation Initiative which aims to integrate advanced digital technology into urban planning and development, which include. A large investment in digitalization was made during Kishida’s tenure that exceeded USD 750 billion in 2023. 

Prime Minister Ishiba Shigeru’s approach to technology and digital policy builds upon the groundwork laid by his predecessor, yet with his concentration on the field of innovation and digital transformation, he especially considers emerging technologies like blockchain, Non-Fungible Tokens (NFTs), and Web3 in driving economic growth. Ishiba championed the role of Blockchain, and NFTs in allowing Japan to further boost their value in various aspects, such as food and tourism, on a global scale. His plans include to integrate blockchain technology into the economy, support Web3 startups, and discuss the need for tax reform to support crypto and blockchain startups. Moreover, he suggested a number of crypto-related policies, including leveraging decentralized autonomous organizations (DAOs) and NFTs’. He also appointed the role of Minister of Digital Transformation to Taira Masaaki, who suggested a plan to connect diverse experiences and incorporate Japanese intellectual property law into NFTs.

Previously under the Kishida regime, the Ministry of Economy, Trade and Industry (METI) allowed venture capital firms to hold cryptocurrency assets, a movement that plays an important role in facilitating strategic investments that support local startups and medium-sized enterprises. Under the Ishiba administration, Minister Taira aims to address cryptocurrencies’ tax regime that was as high as 55%, which drives investors away. In November 2024, Ishiba reached a deal with the Democratic Party of the People to input their proposal of tax cuts into his newest economic stimulus package – a movement that is announced to cut the tax of crypto to 20%- equal to the stock trading rate. The budget for the package will be approved by December. However, measures need to be taken during this period of deregulation, to prevent cybersecurity attacks such as the Coincheck hack in 2018.

Japan’s movement on AI

AI received increasing attention as this technology is promised to be employed in a handful of other priority areas, including command and control, cybersecurity, logistics support, and administrative work. In 2024, a Basic AI policy was issued, with AI being used in 7 priority areas, including the field of radar and satellite targets, intelligence collection and analysis, as well as military. This policy also emphasizes the risk of AI usage and puts forward the demand for AI guidelines while considering ongoing discussions on risk reduction in the international community and among the defense authorities of other countries.

Seven keys have been outlined for AI by the Social Principles, which include (1) human-centricity; (2) education and literacy; (3) privacy protection; (4) security assurance; (5) fair competition; (6) fairness, accountability, and transparency; and (7) innovation.  However, no firm law has been announced, as Japan still approaches AI with the priority of innovation while minimizing potential harm. 

Within the Liberal Democratic Party (LDP), the Project Team on AI Evolution and Implementation (AI PT) was formed under the Digital Society Promotion Headquarters and chaired by Taira Masaaki. On February 16, 2024, the AI PT introduced a proposal based on the “Basic Act on Responsible AI Promotion” to focus on large-scale, high-impact frontier AI models, as well as requiring developing companies to follow the seven priority areas and social principles, where developers shall report their conformity to the government or the AI Safety Institute. Along with this draft, the government also started to work on developing a legislative proposal to accommodate PT’s request and launch the AI framework.

Currently, Ishiba’s attitude toward AI legislation remains unclear. Nonetheless, he showed his support for AI advancement. In his recent speeches, Ishiba intends to succeed Keshia’s policies, emphasizing fostering a favorable environment for AI research, development, and implementation as well as promoting the role of the Government in AI policy. He also announced new economic pledges such as an additional JPY 10 trillion (USD 65 billion) in cutting-edge technology investment in artificial intelligence (AI) and semiconductors.   

At a high level, Japan, along with many other Asian countries, holds a more cautious attitude toward implementing AI policies as it tries to strike the right balance without impeding innovations. While Japan’s AI guideline for Business was launched in April 2024, it emphasized its non-binding nature by encouraging developers, providers, and businesses’ ethical adoption of AI. 

In Minister Taira’s speech in October 2024, he also reiterated that Japan’s current approach to AI governance will be based on current laws and guidelines as the overarching framework while introducing specific legislation to high-risk areas. Meanwhile, the government also acknowledges adjacent digital policies could exert indirect influence on AI usage and development. For instance, the Information Distribution Providers Act passed in May 2024 in combat against harmful content from online platforms might be considered as a piece of relevant risk-mitigating legislation on AI technologies in spreading false or misleading information.

Active Cyber Defense and What Needs to be Concerned

Japan has been showing great vulnerability to the problem of cybersecurity. While the skill of hackers has become more sophisticated, Japan still lags behind other developed countries due to constitutional constraints while ransomware attacks against Japanese infrastructure remain high. In 2023, an attack in Port of Nagoya hamper vessels at the shipping hub for Toyota Motor Corp., causing damage to the supply chain. In the same year, a Chinese hacker breached the information in JAXA’s system of the Japan Aerospace Exploration Agency. Former Prime Minister Kishida was to propose an active cyber defense act, yet his administration postponed the related bill submission.  

Under Prime Minister Ishiba, Japan’s cybersecurity policy is poised for significant enhancements in response to the increasing threat of cyberattacks. Ishiba has committed to implementing “active cyber defense” measures, which involve preemptive actions against potential cyber threats, such as disrupting enemy servers when attacks are detected. The National Security Strategy listed out 3 measures to implement “Active Cyber Defense”, namely (1) leveraging information sharing with the Government in case of cyberattacks to the private sector, (2) detecting servers and infrastructure that are deemed suspected with support from domestic telecommunication providers, and (3) taking essential action in case of severe cybersecurity attacks by intervening attacking servers as much as possible.

This initiative aims to strengthen Japan’s cybersecurity capabilities to align with those of the United States and major European nations. However, several factors need to be taken into consideration by the Ishiba administration, as such a rule of “active cyber defense” is concerned with violating existing rules and policies. Two of these are under the Japanese Constitution which guarantees citizens’ rights to secrecy of communication; as well as the Telecommunication Business Law requiring telecommunication providers to protect the secrecy of their clients. By allowing the authority to patronize those networks, there is a high likelihood of citizen information and privacy being revealed. Another policy that faces the issue of being overhauled is Japan’s Act on Prohibition of Unauthorized Computer Access, which prohibits unauthorized access to the system, going against the initiative’s 3rd  condition that permits the Government to access other party systems. It is also considered by the paper that one measure taken to neutralize the attacks will be malware sending, which constitutes criminal law of computer virus creation.  

Enforcement of related policies may also face challenges from Japan’s long-standing principle of an exclusively defense-oriented governance approach, which only allows the use of military forces and authority resources in situations of real attacks instead of preemptively striking against potential aggressors. Such an act of defense is deemed controversial as it requires the Government of Japan (GoJ) to analyze information and take action if there is any chance of risk. Steadily, amendments have been made, however, to this long-standing principle, as an action of Japan to respond to the rising perceived threat from the global security environment. 

In December 2022, Japan released a trio of documents: the National Security Strategy, the National Defense Strategy, and the Defense Buildup Program. The trio proposed and underscored the importance of “Counter-Strike Capabilities” – a policy concept that allows the Government to take on offensive moves. While such capability applies primarily to missiles and traditional warfare scenarios, Japan is also ramping up its cyber defense and security in view of the rising number of cyberattacks from neighbor countries including China, Russia, and North Korea that have been targeting Japan’s critical infrastructure.

Furthermore, there is a recognition of the need to bolster Japan’s cybersecurity infrastructure through improved public-private cooperation and enhanced intelligence collection capabilities. Additionally, his administration aims to strengthen collaboration with international partners to share intelligence and best practices, thereby enhancing defenses against sophisticated cyber threats.

Most recently, METI announced its intention to publish a cyber security rating system for companies by 2025, which is currently in consultation. The key aspect of this system is different rating levels for different circumstances, in which basic measure of routine updates and information management is indicated with levels 1-2, advancing information management systems for supply chain critical participants is considered level 3-4, and third-party verification of company cybersecurity capabilities is required for Level 5. This would enable broader apprehension of (and henceforth, response to) cyber threats by the general public.

Conclusion and call to action

Japan’s digital landscape is at a critical juncture, shaped by both the opportunities and challenges presented by emerging technologies, especially in a time of change in power. Under Prime Minister Ishiba’s regime, the concentration moved to blockchain, NFTs, and Web3 as an important tool for economic revitalization, acknowledging the significance of technology in leveraging the growth and position of Japan globally. Only with a whole-of-a-government approach led by the Ministry of Digital Transformation, emerging technology and innovation can be integrated in a way that drives Japan’s advancement in an economic and digital landscape.

Japan needs to address the rise of AI in the policy framework. With efforts to establish guidelines and frameworks, Japan should look into the ethical and social implications of AI and the technologies it enables. With a set of clearer AI legal frameworks, the government could proactively address challenges that would go against responsible AI development.

Cybersecurity remains to be a concern for Japan and many other jurisdictions. Ishiba’s commitment to implementing active cyber defense measures is commendable in underscoring the urgency of enhancing Japanese national security protocols. Nonetheless, it is crucial to also assess relevant constitutional constraints and the balancing of rights. Multi-stakeholder dialogues would be essential in coming up with an efficient system understood and accepted by most. 

Furthermore, the government’s commitment to public participation in the policymaking process is crucial for fostering a responsive and inclusive digital economy. Encouraging citizen engagement not only enhances democratic values but also supports innovation by incorporating diverse perspectives. Yet, recent criticisms regarding gender representation in Ishiba’s administration indicated a long(er) road ahead in achieving equity and inclusivity. Addressing these disparities is vital to ensure that diverse voices contribute to the nation’s digital future.

In conclusion, understanding and navigating the complex issues that arise in the digital world requires the Ishiba administration’s effective collaboration with its citizens, and public and private sectors to achieve a multi-stakeholder landscape. By taking action to establish sophisticated and well-understood digital policies, enhancing security measures, and encouraging members of society to take part in the digital economy, Japan can realize its full potential as the leader across the global digital landscape.

Written by An Binh Nguyen (Edited by Ho Thi Kim Hang & Jasmine Ko)

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