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What Does Web 3.0 Mean for Japan?

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What Does Web 3.0 Mean for Japan?

Assessing the practical feasibility of Japan leveraging participation in Web 3.0 for economic growth to counter China.

What Does Web 3.0 Mean for Japan?
Credit: Depositphotos

In early April 2023, Japan’s ruling Liberal Democratic Party’s Web 3.0 project team published a white paper highlighting the current government’s appetite to participate in the ever-growing Web 3.0 world. This announcement preceded another effort in April 2023 by OpenAI to openly court the current Japanese government by pledging to protect user privacy and safety in the artificial intelligence (AI) realm, potentially even opening an office in Japan after directly meeting with Prime Minister Kishida Fumio. 

The news of Japan’s seeming embrace of Web 3.0 followed on the heels of multiple examples of Tokyo leveraging developmental aid to counter China around the world, to include the April 2023 announcement of proposed revisions to development assistance projects in Asia and an August 2022 announcement of over 3 trillion yen in Japanese investments in Africa. 

Japan’s desire to grow economically to compete with China is certainly a positive notion given Beijing’s significant economic influence throughout Asia and the rest of the world. While recent announcements seem to bode well for homegrown Japanese economic initiatives to grow Web 3.0, true implementation of emerging technologies at a tactical level will remain challenging for the Japanese government and companies alike. Factors like Japan’s risk-averse culture, aging population, and emphasis on long-term stability over disruptive innovation make adoption of emerging technologies a sore point of concern for a country with such a strong technological foundation. 

Japan’s previous strengths in promoting technological innovation in the past have resulted in some successes in leveraging Web 3.0 as a potential launching point into continued economic success in the digital world. Most recently, Japan’s strict regulations, which included specific capital requirements that separated customer funds and company funds, ensured that FTX Japan was storing about 19 billion yen in funds from about 100,000 customers, potentially enabling a return of assets to FTX’s Japanese customers. 

Japan’s standing in being recognized as a crypto-friendly country is certainly a positive note for Web 3.0-based growth in Japan.  

However, Japan’s attempted use of Web 3.0 as a cornerstone of economic growth may be challenging to implement on a practical level, particularly for a country that remains relatively stagnant in terms of true adoption of emerging technologies. According to a Ministry of Economy, Trade, and Industry report, Japan has a distinct lack of entrepreneurs, limited exit opportunities, and poor domestic market for innovative products and services, posing a significant challenge for both startups and individuals eager to jump into the world of Web 3.0. 

Additionally, efforts like Japan’s Digital Agency have seen little success in breaking the Japanese attitude toward innovation, with The Japan Times reporting little marked progress as of the Digital Agency’s one-year anniversary in late 2022. A report compiled several years earlier presents another alarming statistic: a mere 7.5 percent of the tens of thousands of national government-level procedures could be completed online, further posing trouble for a country so eager to jump headfirst into the Web 3.0 ecosystem. 

5G is an excellent example of a current emerging technology that is struggling with integration in Japan, a factor that is particularly important to highlight due to strong internet connectivity being a cornerstone of a true Web 3.0 future. While Japan boasts a seemingly impressive number of base stations and indicative 5G subscribers to date, actual adoption of 5G has remained challenging for Japanese telecommunication companies. 

The country’s robust 4G services, some of which were just recently implemented at full scale in 2020, has reduced the urgency for updating to 5G, in addition to the tremendous infrastructure costs associated with 5G deployment. Additionally, struggles with 5G power levels make adoption for users less enticing due to reduced signal strength, therefore slowing Japan’s attempts to implement 5G. 

While Japan has made headway in upgrading their telecommunication infrastructure to 4G and has clear plans for future upgrades in accordance with efforts like Japan’s Beyond 5G Promotion Consortium, the lack of success so far and current challenges 5G is facing in its implementation must give pause to those advocating for other implementations of emerging technologies to promote Web 3.0 as a central pillar for future Japanese economic growth. 

Japan’s effort to push for digital payments is another example of an emerging technology having difficulty in finding its footing as a potential gateway into Web 3.0. The traditionally cash-heavy Japanese culture is still extremely prevalent even to this day, with cashless payments representing less than 30 percent of all private consumption expenditure, with this number most likely being driven upward due to the COVID-19 pandemic. 

While Japan has begun making inroads by launching a digital yen central bank digital currency (CBDC) pilot in April 2023, and also promoting an effort to encourage companies to pay salaries digitally around the same time, significant en masse utilization of Web 3.0-native tools like CBDCs and digital payments has not yet emerged. In fact, low adoption rates among Japan’s ever-increasing elderly population will most likely result in sluggish acceptance of such emerging technologies.

Another challenge to Japan’s journey for widespread use of digital payments is the fact that a Japanese phone number and/or Japanese bank account is often required for digital payments usage in Japan, presenting yet another obstacle to international organizations and individuals wishing to push for Japan’s participation in the borderless world of Web 3.0. 

While Japan’s government seems to be eager to push forward into embracing Web 3.0 as a way to help leverage Japanese economic success to potentially counter Chinese influence, true en masse adoption of growth drivers like Web 3.0 will certainly prove challenging due to a variety of societal, governmental, and corporate factors. Japan’s existing struggle with embracing technologies that form the building blocks of a Web 3.0 world, to include 5G and digital payments, highlight this distinct potentiality. 

However, continued momentum from the Japanese government, corporations, and individuals alike could possibly help drive adoption of Web 3.0-based emerging technologies, truly enabling Japan to utilize Web 3.0 as an economic driver in a digital future.