Original source: CGV, Chain Catcher
Reprinted: Koala, Mars Finance
Although Japan quickly embraced Web3 technology and introduced relevant policy support, its deep-rooted conservative culture and cumbersome bureaucracy made the pace of innovation extremely slow.
“In my opinion, the current status of Japan’s development in the Web3 field is like the Japanese idiom ‘Hotokezukutetamashiirezu’, which means: making a Buddha statue but not injecting a soul into it. Although the Japanese government has done a lot of work in Web3 policy formulation and standard drafting, there are obvious shortcomings in actual implementation and key steps.”
—Steve, founding partner of Japanese crypto fund CGV
As CGV founding partner Steve said, although Japan quickly embraced Web3 technology and introduced relevant policy support, its deep-rooted conservative culture and cumbersome bureaucracy made the pace of innovation extremely slow.
This culture is deeply rooted in the traditional concept of Japanese society that pursues stability and avoids risks. Enterprises and government agencies prefer to choose a safe path rather than boldly try emerging technologies. As a result, even if Japan quickly accepts new technologies in the global technological wave, it often falters and progresses slowly when it comes to converting them into commercial applications.
1. Japan’s historical lessons: the dilemma of “new technology fever” and “slow transformation”
Meiji Restoration: Technology Introduction and Modernization Challenges
The Meiji Restoration (1868) was a key moment in Japan's modernization. Japan achieved a rapid start in national modernization by introducing Western military, industrial, and educational systems. However, during this process, Japan also faced huge challenges in technology absorption and transformation. Although it learned advanced Western technologies, it took a long time to internalize these technologies into independent innovation capabilities.
For example, during the process of industrialization, Japan introduced a large amount of railway technology from Britain and Germany. However, due to the lack of local experience, railway failures occurred frequently in the early stages of construction, and maintenance costs remained high. It was not until the early 20th century that Japan gradually mastered railway technology and finally achieved localized technological innovation and improvement.
Technology introduction after World War II: the tortuous road from imitation to independent innovation
After World War II, Japan achieved rapid development through the "economic miracle". One of the keys to its success was the rapid introduction and application of external technologies. In the 1950s, Japan introduced automobile and electronic technologies from the United States and became a global leader in these fields in just a few decades. However, this process was not smooth sailing. In the early post-war period, most of Japan's automobiles and electronic products imitated European and American designs and lacked independent research and development capabilities. For example, Toyota almost completely imitated the production lines of Ford and General Motors in the United States in the early post-war period, but Japanese companies finally achieved independent innovation in "lean production" by continuously improving these technologies, and gradually established a global leading position.
In the electronics industry, Sony is a typical case. Sony launched the first transistor radio in the early 1950s. Although the technology originally came from Bell Labs in the United States, Sony successfully opened up the international market by improving the size and sound quality of the product, becoming one of the iconic companies of Japan's independent innovation. Through continuous imitation, improvement and innovation, Japanese companies gradually changed from technology followers to leaders. This process took decades and a lot of resources.
The Lost Thirty Years: Lack of Innovation and Gradual Loss of Competitiveness
The bursting of the bubble economy in the 1990s marked the beginning of Japan's so-called "lost thirty years". During this period, Japan's economy fell into a long-term stagnation, and its innovation capacity and global competitiveness gradually declined. Data shows that from 1990 to 2020, Japan's GDP growth rate has remained low. At the same time, emerging economies such as South Korea and China have achieved rapid rise and surpassed Japan's position in many high-tech fields. For example, in 1995, Japan's semiconductor industry accounted for more than 50% of the global market share, but by 2020, this proportion had dropped to less than 10%.
Historical data on Topix/S&P 500 multiples
(One of the indicators used to measure the global status of the Japanese stock market)
Data source: Daiwa Institute of Research
The reason for this situation is that Japanese companies are too conservative in the process of technology transformation and commercialization, and lack a keen response to emerging markets and emerging technologies. For example, electronics giants such as Panasonic and Toshiba failed to adjust their strategies in time when faced with the wave of smartphones and new semiconductor technologies, and were eventually surpassed by international competitors such as Apple and Samsung. At the same time, Japan's bureaucratic system has also exacerbated this lack of innovation. It often takes years for companies to apply for government support, obtain approvals and compliance licenses, which makes many innovative projects falter in the face of market changes.
In the automotive industry, although Japan still maintained a high level of competitiveness at the end of the 20th century, with the advent of the electric vehicle revolution, emerging companies such as Tesla quickly occupied the market, while Japanese companies such as Toyota and Nissan seemed to be slow to move forward, and only gradually launched electric models in recent years. Data shows that in 2020, Japan's electric vehicle market share was only 1.1% of the world, far lower than China's 44% and Europe's 28%. This slow transformation reflects the conservatism of Japanese companies in the face of technological changes, further exacerbating the loss of competitiveness in the "lost three decades."
In summary, Japan has achieved rapid development by introducing external technologies many times in history, but it faces multiple challenges in culture, system and market to transform these technologies into independent innovation capabilities. These lessons have profound reference significance for the current development of Web3 - if Japan cannot quickly break the shackles of conservative culture and bureaucracy, it may miss the opportunity of a new round of technological revolution again.
2. Current status of Web3 development in Japan: quick response but slow implementation?
Policy-driven rapid response and the strategy behind it
In 2023, the Japanese government released the (Japan Web3 White Paper), which details Japan's development plan in the field of blockchain and digital assets, aiming to create an environment conducive to the development of Web3 technology through policy guidance and support. In 2024, the government further passed a bill allowing venture capital and investment funds to hold crypto assets. The introduction of these policies reflects Japan's strategic intention to achieve economic digital transformation with the help of Web3 technology.
In addition, the policy is also launched to compete with other countries and regions. Countries such as Singapore and South Korea have made significant progress in the field of blockchain and digital assets. Japan is trying to attract Web3 companies and technical talents from around the world through policies to prevent it from being marginalized in the new round of technology competition.
Participation of mainstream enterprises: Web3 layout from SONY to SBI
Many large Japanese companies are also actively involved in the Web3 field. For example, Sony announced the establishment of a department focusing on blockchain technology and NFT, trying to use its strong influence in the entertainment industry to combine digital assets with music, movies and other fields to explore new business models. In August 2024, Sony's Singapore-based subsidiary Sony Block Solution Labs Pte. Ltd officially launched Soneium, a second-layer expansion system based on Ethereum.
Soneium Ecosystem’s First Batch of Web3 Partners (Source: Soneium Official Website)
SBI Holdings (formerly the financial investment department of SoftBank Group) is one of the earliest financial institutions in Japan to enter the cryptocurrency field. Its investment in Web3 involves blockchain payment, digital asset management and other directions. SBI Holdings also cooperates with Ripple to improve the efficiency of financial services through a blockchain-based cross-border payment system. In addition, SBI has also established a dedicated blockchain investment fund with the goal of investing in startups and projects to promote innovation in the blockchain field in Japan.
NTT Group is working on infrastructure and plans to develop a high-performance communication network that supports Web3 applications to ensure that blockchain applications will have sufficient network bandwidth and stability in the future. In 2024, NTT also announced that it would cooperate with multiple Web3 projects to jointly explore how to apply blockchain technology to smart cities and Internet of Things (IoT) solutions.
Lag in regulatory enforcement: Complex legal framework and compliance challenges
Although the Japanese government has actively introduced policies to support Web3, the complex regulations and regulatory frameworks have made it difficult for many companies to implement these technologies. For example, the (Financial Instruments and Exchange Act) and (Payment Services Act) have very strict regulatory requirements for crypto assets, and companies must comply with multiple regulations such as anti-money laundering (AML) and customer due diligence (KYC). The complexity of these regulations has caused companies to spend a lot of resources and time in obtaining licenses and approvals.
According to data from 2024, more than 70% of Web3 companies said that compliance costs are one of the main barriers to their entry into the market, and on average each company's compliance expenses account for more than 20% of total costs. This high compliance cost is a heavy burden, especially for startups with limited resources.
In addition, listing new projects on Japanese exchanges also faces strict regulatory requirements. The Japanese Financial Services Agency (FSA) has very strict review of project listings, and exchanges need to conduct a detailed review of each listed project. According to an industry survey, the average time for Japanese crypto exchanges to list new projects is about 9 to 12 months, while the same process in some other countries only takes 3 to 4 months.
Insufficient innovation capabilities: talent gap and international competition
Japan's talent pool in emerging fields such as Web3 is obviously insufficient, and the gap is particularly obvious compared with other countries. According to the 2023 Global Blockchain Talent Report released by LinkedIn, the number of professional talents in the blockchain field in Japan is only 1/10 of that in the United States and less than 1/4 of that in South Korea. The lack of high-quality developers and technical experts has become one of the important bottlenecks restricting the development of Japan's Web3 industry.
Behind this talent shortage is the result of Japan's education system's lack of attention to emerging technologies. Although Japanese universities have strong teaching and research capabilities in traditional engineering disciplines, they have limited educational resources in new technologies such as blockchain and smart contracts, and the relevant course settings are relatively backward. In addition, the conservative nature of Japanese corporate culture makes it difficult for companies to cultivate innovative talents internally, and many young people lack the courage to try and accept failure.
3. How to overcome the limitation of “making a Buddha without putting a soul into it”?
Improving policy implementation: simplifying procedures and strengthening departmental coordination
In order to solve the problem of lagging policy implementation, the Japanese government needs to take a series of specific measures to improve the implementation of policies. First of all, the approval process should be simplified and unnecessary bureaucratic links should be reduced, especially in the supervision of innovative technologies. For example, a special Web3 fast approval green channel can be set up to provide accelerated approval services for innovative projects such as blockchain and digital assets, thereby shortening the time from project establishment to implementation. In addition, it is also crucial to strengthen coordination and cooperation between departments. The government can establish a cross-departmental working group specifically responsible for promoting the implementation of Web3 policies to ensure smoother cooperation between different departments to reduce friction and delays in policy implementation. At the same time, the Japanese government can also learn from the successful experience of Singapore, Hong Kong and other regions, promote the "regulatory sandbox" mechanism, allow Web3 projects to be piloted in a controlled environment, lower the compliance threshold, and gradually improve regulatory measures.
Encouraging bold innovation in enterprises: tax incentives and government funding
In order to encourage enterprises to innovate boldly in the Web3 field, the Japanese government needs to introduce a series of incentives. First, tax incentives can be used to encourage enterprises to increase their investment in research and development. For example, tax exemptions for research and development expenses can be provided to enterprises that invest in blockchain technology research and development to reduce the innovation costs of enterprises. In addition, a special innovation fund can be established to provide financial support for small and medium-sized Web3 enterprises to make up for the funding gap of these enterprises in the early stages of development. Similar government funding programs have achieved remarkable results in the United States and South Korea, which have successfully cultivated multiple unicorn enterprises through government support and cooperation with enterprises.
Strengthening international cooperation: choosing the right partners and models
International cooperation is crucial for Japan's breakthrough in the Web3 field. In order to make up for its shortcomings in blockchain technology, Japan needs to actively seek cooperation with other countries and companies. First, Japanese companies can establish strategic partnerships with companies in countries and regions that are leading in blockchain technology (such as China and the United States), and obtain the latest industry knowledge and experience through technical exchanges and project cooperation. For example, they can cooperate with regulators in Hong Kong to jointly promote the implementation of regulatory sandbox projects, or cooperate with blockchain companies in the United States to explore innovations in mechanisms such as virtual asset user protection and cryptocurrency transaction monitoring.
In addition, it is also very important to strengthen cooperation with overseas universities and research institutions. Japanese universities can jointly conduct research on blockchain technology with top international universities (such as Stanford University, University of California, Berkeley, Hong Kong University of Science and Technology, etc.), jointly cultivate high-end talents, and fill the gap in domestic professional talents in the field of Web3.
Conclusion
Web3 technology provides Japan with the possibility of achieving "digital renaissance", but whether it can break the historical dilemma of "Buddha's work and soul entering" depends on the efficiency of policy implementation, the strength of corporate innovation and the attraction of global talents. If Japan is still trapped in conservative culture and complex bureaucracy, the Web3 industry may become another lost opportunity in the "lost thirty years".
In the global Web3 wave, Japan faces major challenges and opportunities. Only by truly breaking free from the constraints of conservative culture and bureaucracy and seizing the opportunity of technological change can Japan no longer lag behind other countries on the road to digital revival and achieve long-term sustainable development.
