Discovering Japan

It is a familiar cliche that Japan, despite its traditional prowess in consumer electronics, lags miles behind the U.S. and Europe when it comes to the Internet.

Business Week and the Washington Post, among other publications, have reported that exorbitant local telephone charges threaten to strangle Japan's online efforts. And the Financial Times reports that even Sony is desperately outclassed by American rivals in networking technologies.

Commentary of this sort helps reinforce the West's stereotype of Japan as dysfunctional in its efforts to embrace the Net. But there is another side to the story. Japan's traditional heavy industries -- from automaking to steel to shipbuilding -- are models of advanced information technology and have world-beating productivity rates to prove it. Meanwhile, Japan is far from inert, even in the most innovative areas of cyberspace. This is apparent from the performance of Tokyo-based Softbank, which has bankrolled more than 200 U.S.-based Net startups.

Softbank's aptitude for the Net is no fluke. Even at the level of ordinary everyday life, there are countless impressive, if less visible, illustrations of Japan's affinity for the Internet. Take, for instance, the highly digitized little mail-order firm that operates from the office next to mine in central Tokyo. In Japanese terms, the firm's most notable distinction is that it imports a lot of handmade tweed from Ireland. Nothing ostentatiously techie about that. Nor is the company's dramatis personae notably techie -- the staff consists of three graying types whose average age is 57. Nonetheless, the firm uses the Net every day, to track inventory at a warehouse deep in the Japanese countryside and to keep in touch with suppliers in Ireland. The firm even set up a Web site to sell directly to consumers, bypassing the Japanese catalog retailers that have been its main customers.

Now, Amazon.com this is not. With sales of just $3.5 million a year, it is a peanut compared to Amazon. But it is clearly achieving a sales per employee ratio that would make most American Internet businesses blush.

This little firm's use of the Net is far from unique among small Japanese businesses. Indeed, the stereotype of the Japanese as placid, consensus-minded rice-eaters who, in developing Internet business opportunities, lack the aggression of their carnivorous counterparts in the U.S. is simplistic.

Certainly, there are areas where Japan lags behind the U.S. But in citing such areas, the American press is wrong to imply that Japan is somehow clownishly dysfunctional. Any considered examination of the facts indicates that there are generally quite respectable reasons why the Japanese have followed a different trajectory. Take, for instance, the slow adoption of e-mail in Japan. As AOL Japan cofounder John Barber points out, the Japanese have been stymied by a fundamental difficulty: Their language is a lot more time-consuming to type than English. Rather than hunt and peck on a highly complex Japanese-language keyboard, many office workers prefer to send faxes.

Now let's look at the high connection charges Japanese Net users face. Although generally regarded as reflecting some basic inefficiency of the Japanese system, there is a different explanation: The charges spring from a fundamental and quite rational difference in telecommunications policy between Japan and the U.S. Basically, the Japanese phone giant NTT, in common with countless other monopolistic players in Japan, believes in robbing Peter to pay Paul. NTT overcharges for basic local telephone service and uses the profits to finance various major telecommunications-development projects in fields like ISDN, mobile phones and electronic cash. It is no accident, for instance, that Japan now appears to be leapfrogging Germany to seize the international lead in e-cash.

In Western comment on Japan's contribution to the Net revolution, almost everyone forgets the most important factor of all: hardware. The communications revolution is being driven in large part by hardware breakthroughs. In particular, semiconductors are much more powerful than they used to be, thanks in large part to the Japanese, who have developed ever purer forms of silicon and manufactured the lithographic equipment that prints ever finer lines on silicon chips. They've also developed techniques for mass-producing laser diodes -- a key driver of the dramatic cut in global communications costs.

About half of the world's laser diodes are made by Sony. That's the very same company that the Financial Times contends is behind in communications technologies. In truth, Sony has done more than almost any other corporation to make possible the communications revolution. Indeed, when you measure its contribution in mass producing ever more advanced communications and computer hardware, no nation has contributed more to the Internet Economy than Japan. n Eamonn Fingleton lives in Tokyo. He is the author of In Praise of Hard Industries (Houghton Mifflin, 1999).

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