Japan's Transformation Aiming for Web3

As the world's third-largest economy, Japan has faced numerous challenges in recent years. Factors such as the recurring COVID-19 pandemic, the difficulty in resolving the debt crisis, and the intensification of population aging have put its economy in a precarious position.

Data shows that in mid-August, new COVID-19 cases in Japan increased by 6% compared to the previous week, ranking first in the world for five consecutive weeks. At the same time, the yen has performed weakly this year, and the Nikkei 225 index has fallen by about 14% year-to-date, underperforming the S&P 500 index.

These situations remind people of Japan's "lost thirty years." At that time, Japan made progress through internal transformation and opening up to the outside world, achieving advancements in basic research and economic system reform, as well as industrial upgrading. Currently, Japan hopes to retrace this path and aims to rejuvenate itself in the new wave of the internet represented by Web3.

The Development History of Japan's Economy: The Coexistence of Destruction and Construction

As an island nation, Japan has abundant marine resources and developed logistics, but also faces challenges such as resource scarcity and frequent natural disasters. These characteristics drive Japan to continuously expand outward.

After World War II, Japan's economy fell into chaos for a time. However, under government intervention and the opportunities brought by the Korean War, the Japanese economy quickly recovered. From 1959 to 1970, Japan's average annual real economic growth rate reached as high as 11.3%. By 1968, Japan's Gross National Product ranked second among Western countries.

Thereafter, Japan began its industrial transformation, shifting from heavy and chemical industries to technology-intensive industries. After the collapse of the bubble economy in 1990, Japan restarted its global expansion strategy and increased overseas investment. At the same time, Japan strengthened basic research and talent development, laying the foundation for industrial upgrading.

After several adjustments, Japan has transitioned from a closed economy to an open economy, continuously upgrading its industrial structure. It has formed advantages in high-end manufacturing, new energy, and biotechnology. In 2021, Japan's GDP per capita reached $39,300, with 47 companies selected for the Fortune 500.

The Development of the Internet in Japan is Lagging Behind

However, in Japan's leading industries, the internet sector is relatively lagging behind. In 2021, among the top 20 global internet companies, only Rakuten from Japan made the list.

Japan has the conditions for a mature e-commerce market, but the e-commerce penetration rate was only 8% in 2020, far lower than China's 37%.

The reasons for the lag in the development of the Internet in Japan include:

1. The market size is limited. Japan has a small population and language cultural coverage, making it difficult to form a large-scale market.

2. Lack of innovative atmosphere. Japanese culture is relatively conservative, while the internet industry requires rapid iteration.

3. Offline services are improved. A developed offline commercial system reduces the demand for internet services.

4. Aging population and the prevalence of conglomerates are not conducive to internet innovation.

5. Missed a key development period. The Japanese internet often adopts a following strategy, making it difficult to master core technologies.

Currently, Japan's IT industry is mainly focused on regional outsourcing, lacking leading companies. In 2020, the number of IT professionals in Japan was only 1.22 million, far lower than in the United States, India, and China.

Japan's Transformation: Policies and Markets Progressing Together, Targeting Web3

Recently, the Japanese government has shown a strong interest in Web3.

In May, Prime Minister Fumio Kishida stated that Web3 could lead economic growth and will promote the construction of a related environment from a policy perspective.

In June, Japan issued the world's first stablecoin legislation and approved economic policies to promote the development of Web3.

The government is also promoting the revision of the bill, proposing to exempt Web3 companies from certain taxes on token financing.

These measures demonstrate the Japanese government's emphasis on the development of Web3. In fact, Japan's attention to Web3 is necessary:

1. The pandemic has exposed the shortcomings of digitization, prompting Japan to reassess the importance of transformation.

2. Under the aging population, economic growth is weak and new momentum needs to be found.

3. Web3 has not yet formed a global order, and Japan has the opportunity to overtake on the curve.

4. Japan's advantages in the gaming and anime fields align with new concepts such as the metaverse and NFTs.

Under loose regulation and a good market culture, Japan's Web3 has seen certain developments. As of early 2022, Japan had 30 licensed cryptocurrency exchanges, with over 6.2 million account holders. In 2020, the number of stores supporting cryptocurrency payments reached 87,100.

Some Japanese companies are also starting to lay out Web3. Bandai Namco and Sega are collaborating to develop the blockchain Oasys, while local projects like Astar Network are emerging. Japanese users are very enthusiastic about projects like Cardano.

Venture capital firms are also actively positioning themselves. SoftBank has invested in unicorns like CertiK and InfStones, and SBI has become one of the most active blockchain investors globally. KDDI and Bandai Namco have also launched specialized Web3 funds.

Despite the many challenges facing Japan's Web3 development, the dual drive of government promotion and market demand makes future growth worth期待. Whether Japan can make a comeback through Web3 remains to be seen.