Pacific Money

Will Pokémon Go Power Up Japan’s ‘Cool Economy’?

Recent Features

Pacific Money

Will Pokémon Go Power Up Japan’s ‘Cool Economy’?

The game’s phenomenal success is good for Nintendo, but it doesn’t mean much for Japan’s creative industry at large.

Will Pokémon Go Power Up Japan’s ‘Cool Economy’?
Credit: Flickr/ Darren Mark Domirez

Is Pokémon Go a game changer for the Japanese economy? Within days of its release in early July, a record 21 million people were playing at once, tracking down and capturing the cute little monsters on their smartphones. Creator Nintendo’s shares soared. But the phenomenal popularity of the game raises important questions, beyond just “where’s the nearest Pokégym?” Is it a sign that Silicon Valley-style innovation is reinvigorating corporate Japan’s notoriously insular management? Might this be the first big success story for Prime Minister Shinzo Abe’s “Cool Japan” initiative, a key element in the structural reforms promised but so far undelivered by Abenomics? Unfortunately, while the story is certainly good news for Nintendo and Pokémon, it is unlikely that Pokémon Go is harbinger of any broader shift in Japan’s creative economy.

For one thing, while Nintendo deserves its plaudits, Pokémon Go is as much an American creation as a Japanese one. The lovable critters, which first appeared on the Game Boy in 1996, were spliced onto an existing augmented reality game, Ingress, which was developed by Niantic Inc., formerly a research team at Google and now an independent company. Like Ingress, Pokémon Go relies on data and location services from Google Maps: Japanese aesthetics, Yankee ingenuity. That wouldn’t matter if the game were representative of a broader resurgence of Japan’s creative economy. It probably isn’t. The truly surprising thing about Pokémon Go is that it is a comparatively rare Japanese cultural product which stands to make real money internationally.

From AKB48 to Dragon Ball Z, Japanese pop culture enjoys worldwide fame. Fortune? Not so much. Japan’s Ministry of Economy, Trade and Industry (METI) states bluntly that “Japan’s fashion, food and content are very popular overseas, but they are not necessarily profitable.” Globally, creative industries such as movies, television, music, animation, and gaming are big business, accounting for about 7 percent of world exports with an above-average growth rate of 14 percent. They are also believed to generate broader national benefits including greater innovation, tourism, and diplomatic soft power. However, exports from Japan’s kontentsu (“contents”) sector were a mere 0.5 percent of total world output in 2012. Using a broader definition of creative goods, the United National Conference on Trade and Development (UNCTAD) estimates Japan accounted for just 1.7 percent of world exports in 2008.

Mass culture is big business in Japan, but exports are simply not an important source of revenue, accounting for just 5 percent of all creative industry sales in 2012.Exports are relatively low for two reasons. First, a large, wealthy population means that producers have long had a home market healthy enough to sustain them without needing to look abroad for growth. Secondly, government policy has historically limited competition and protected the interests of certain powerful domestic producers. Gaming is one of the few sectors that developed without a great deal of encouragement or protection from the government; anime is another. Not uncoincidentally, they have been two of the most successful of Japan’s creative industries internationally. Pokémon Go is, in this sense, just another in a series of global hits that stretch all the way back to Pong, Space Invaders, and Super Mario. Even so, cautious management and a focus on the tastes of domestic players have dramatically eroded Japan’s previous dominance of global gaming markets.

Other sectors, including broadcasting and music, are closely regulated and dominated by a few big players who enjoy high degrees of state protection and support. Japan’s domestic music market, for example, is huge: easily the world’s largest by per capita sales, and second only to the United States in absolute value. A handful of major record companies, including Sony and Victor, dominate the market, controlling everything from content to hardware to distribution. Government policy has insulated them from competition, for example with exemption from anti-monopoly laws. Record companies were even permitted to fix CD prices, which can be over twice as high as in the United States. It’s easier for them to milk the domestic market than venture overseas. Secure profits have also meant that the studios have been slow to digitize. Over three-quarters of Japan’s music sales are of physical products (in the U.S. over 70 percent are digital) which also hinders global expansion. Only a handful of my regularly-polled American students have ever been able to name even one J-Pop band or artist.

Against this background, the government is struggling to convert cultural cachet into cash. The bureaucrats at METI have targeted creative industries as an engine for growth in the digital economy, following the model of British Prime Minister Tony Blair’s highly successful “Cool Britannia” policy initiative. In 2013, amid great fanfare, Prime Minister Shinzo Abe announced a “Cool Japan Promotion Fund” to raise the international profile of the country’s mass culture. The need for such a fund, currently set at about $1billion, is itself an interesting reflection on how little faith policymakers seem to have in the economic clout of the nation’s artists. Questions also remain about the helpfulness of elderly politicians dabbling in the creative sector – after all, if you have to tell people you’re cool, then you’re not. But while Japan’s elites love to boast about “Gross National Cool” they have thus far proved reluctant to the tackle the cartelization and overregulation of much of the sector.

In fact, in the name of helping creative industries, much public money is being spent on renovating historic buildings or advertising campaigns to promote rural tourism and exports of Washoku (traditional Japanese food). Perhaps it is coincidental that many of the beneficiaries of this largesse (rural districts, farmers, sake brewers, construction companies, and large advertising agencies) happen to be key supporters of the ruling Liberal Democratic Party. Meanwhile, the Agency for Cultural Affairs spends just 12 percent of its budget on support for artists and new creative activities.

Pokémon Go will undoubtedly be good for Nintendo, although not as good as often assumed. At least it suggests that the company is finally prepared to embrace mobile gaming. However, in the absence of major structural reforms it is unwise to assume that other sections of Japan’s creative economy will follow suit.

Henry Laurence is Associate Professor of Government and Asian Studies at Bowdoin College, USA. He is the author of numerous articles and books about Japanese and British politics.