The journey to 2018 has certainly been a tumultuous one. And although political disorder rocked businesses and economies worldwide, we have also been witness to remarkable progress in different sectors and industries.
The march of new technologies and artificial intelligence have continued apace. Reflecting this, driverless car technology has broken new ground, cryptocurrencies have made the headlines, fintech has reached new heights, and data has become the new oil.
In Japan, the agenda during most of the latter half of the year has concentrated on dealing with various North Korean provocations, a snap election in October that saw Tokyo Governor Yuriko Koike fail in her bid to oust Prime Minister Shinzo Abe, and a continued strong focus on tourism growth.
Meanwhile, the UK has continued its intense Brexit negotiations as it lays the groundwork for a stronger relationship with Japan. At the same time, a move to form a cohesive industrial strategy and grow UK businesses is under way.
But what of the future? BCCJ ACUMEN spoke to a number of industry experts to find out what they expect to see in 2018.
Chief Executive Officer, Japan
Standard Chartered Bank, Tokyo Branch
Asia continues to stand out globally in the near- to medium-term with respect to growth. This is evident from the fact that China accounts for one-third of global growth. Since 2001, Japan, in particular, has recorded the longest streak of expansion since 2001. This indicates some success following Abe’s efforts to loosen fiscal and monetary policies, as well as undertake reforms to spur economic growth.North-East Asian economies have weathered interest rate hikes by the US Federal Reserve, and we remain cautiously optimistic that the US Federal Reserve balance sheet reduction will be meagre and have limited effects on financial markets.
Both China’s Belt and Road development initiatives and Taiwan’s New Southbound Policy are not entirely exclusive; there is room for collaboration, including with Japanese and Korean businesses, to seek growing investment opportunities within member countries as well as other emerging market economies in the region.
Advances in computing power, unrestricted mobility and the explosion of data have enabled the digital transformation of banking on an unprecedented scale. This has also opened up banking to new competition—from both start-ups seeking to capture parts of the value chain (fintechs) as well as new entrants from the Internet economy.
Collaboration is inevitable. Banks and fintech firms can have a symbiotic relationship that can be win–win for all parties. Teaming up with fintechs gives us a chance to test out new technology without putting in heavy investments. It allows us to be nimble and to move quickly.
Some areas we are focused on are data, IoT, identity, distributed ledger, AI, chat bots, regulatory technology and cybersecurity.
Governments in Asia have been taking a leading role in creating an ecosystem for fintechs to thrive by relaxing regulations, providing avenues for experimentation, making it conducive for venture capital to take stakes in companies, and creating networks and forums such as fintech festivals.
Assistant Professor of Finance
Warwick Business School
There are signs of an accelerating professionalisation of cryptocurrencies trading—both the CME and CBOE Global Markets have been given a regulatory green light for listing futures contracts on Bitcoin. This is a significant step since it gives a mainstream instrument to investors and speculators to trade bitcoin.
Second, the explosion of initial coin offerings (ICO) is increasing the number of existing cryptocurrencies actually tradable. In this respect, although bitcoin remains the crypto on the headlines, it is quite likely that there will be a consolidation of the overall market for cryptocurrencies, which resemble more and more securities rather than a competitor of fiat money.
The main risk in this space is regulatory. If regulators step in decisively, that might generate a contraction in the demand of digital currencies in general. However, this is not a short-term scenario. Although bitcoin keeps making the headlines, it has a market capitalisation that is less than one-third that of Apple’s, which essentially means the size of the market is still too small for regulators to really have to step in.
The main challenge is to have big businesses to actually adopt bitcoin and the like. Unless bitcoin can be used to pay taxes, salaries and investments, I find it hard to think that big businesses such as Amazon and Alibaba Group will start to accept bitcoin in the foreseeable future. It is much more likely they will create their own cryptocurrency, which probably will be more similar to a tradable voucher within their own businesses.
The very nature of cryptocurrencies and demand-driven assets will keep pricing fluctuating substantially. However, even if the “bitcoin bubble” bursts, the underlying technology—the blockchain—is undoubtedly here to stay for a long time.
Senior Investment Adviser
AP Advisers Limited
The fast evolving trend of online technology is both a challenge and opportunity for the financial planning industry. Individuals have easy access to online investment platforms and are increasingly indulging in DIY investing without consulting a professional.
Most people, however, recognise the need for a human adviser, so it is also an opportunity for financial planners to use their own online technology to streamline overall fees and increase their clients’ investment returns.
Needless to say, the hot topic is cryptocurrencies. If more governments embrace this sector and institutional money continues to flow in, values could continue to rise sharply. Equally, huge potential risks are faced by investors in this space, so our advice, if anyone is considering a punt, is to only invest what you can afford to lose!
Looking at more traditional sectors and beyond 2018, we believe alternative energy looks attractive to the long-term investor, as does global infrastructure. This assumes, of course, there are no nasty hiccups like geo-political events and financial crises.
Robert Walters Japan K.K.
The ability of firms to secure talented bilingual professionals with specialised skills and abundant experience is increasingly beginning to affect corporate futures and is a key to growing the Japanese economy. The effective job-openings-to-applicants ratio announced by the Japanese Ministry of Health, Labour and Welfare (MHLW) moved above 1.5 to 1, the highest level in 43 years, and the majority of firms operating in Japan are faced with labour shortages.
Despite this, global and cross-border business accelerated even further in Japan throughout 2017, alongside advances in globalisation and technology. As a result, many firms in a wide range of industries are in greater need of professionals who are both familiar with global business, and proficient in a second language, putting the level of demand for bilingual specialists at an all-time high.
Continuing a trend from the latter half of 2016, many industries in 2017 saw a spread in the application of cutting-edge IT technologies, and Japan has recently been facing a significant shortage of engineers who are capable of deploying artificial intelligence (AI) and IoT technologies, and sales specialists who can sell these technologies in Japan and abroad.
There has been active discussion around the potential for AI to take jobs away from human beings. However, that will not be the case in Japan, as the country will continue to face an increasingly severe workforce shortage, due mainly to an ageing and declining population.
A report by the MLHW indicates that, even with the progression of AI applications in line with the fourth Industrial Revolution, by 2030 there will still be a workforce shortage of about 640,000 people. The need for experienced specialists and professionals for jobs that require human communication, such as sales and management, will increase even more, not to mention all of the new jobs created by advances in technology.
Managing Director, Japan
Three trends have been prevalent in financial services (FS). Firstly, due to tightening of Financial Service Agency (FSA) regulations in recent times, the appetite for compliance, risk and audit professionals has been increasing and will continue into 2018.
Secondly, within asset management and investment banking, due to improving market conditions an increase in demand is being experienced for front office professionals such as portfolio and relationship managers.
Lastly, across most sectors in FS, digital transformation projects and programmes have been on the rise, as many companies look to modernise their marketing or improve their customer experience. Most of these projects are long-term commitments and likewise will continue into 2018.
The pharmaceutical industry is experiencing a boom period as firms scramble to release new treatments, such as cancer CAR T-cell therapy. This has, in turn, created a high level of demand for professionals within the medical affairs and medical liaison areas as release dates loom and organisations look to promote these drugs to the market.
With the technology market, two trends that stand out are, first, the continuing flood of fintech, blockchain and cryptocurrency-related firms entering the market. Hiring is extremely active in this space and it is one of our key focuses.
Second, cyber security still proves to be an extremely robust market that continues to grow at an infinitely accelerating pace.
Across all three of our target sectors, the underlying trend is that, with gradually improving market conditions, we are seeing more companies trying to hire actively within a limited candidate pool. This pressure on supply has caused an upward movement in salary levels as firms compete to secure talent from the same scarce pool of talent.
Senior Consultant, Pharmaceutical Team
Titan Consulting K.K.
Although belated, Japan’s healthcare business is finally seeing true momentum in the digitisation of the industry. With the continued convergence of the healthcare and IT sectors, there’ll be more focus on developing health apps and other IT innovations. These could range from wearable patient devices able to enhance data for physician analysis or channels for quicker transferral of information between pharmaceutical firms and healthcare workers.
We can also expect there will be a high demand for employees with IT literacy across the board in pharma, as different functions such as procurement and medical affairs seek to improve their processes through further digitisation.
One of the main challenges facing our industry, especially in Japan, is continued pricing reforms putting the squeeze on the bottom line. Drugs now have their prices evaluated bi-annually against their own projected forecasts, and we have seen some surprises with big products only receiving barely 50% of their projected price targets here. This puts a larger burden on foreign firms with large investments in the Japan market.
In terms of healthcare recruitment, there is no doubt the market is competitive not just locally, but across Asia–Pacific. All the major recruiting firms now have dedicated healthcare teams, and in Japan we have seen more off-shoot shops with a sole focus on healthcare starting up.
Curvature Japan G.K.
The two key themes that IT decision makers are facing that we often hear are to do with the cloud and security. Questions loom such as how we can leverage or implement a cloud strategy. At the same time, security risks through attacks such as ransomware will always be a concern.Implementing new technology to help improve efficiency for workflow processes and providing analytical decisions (for example through big data) is one area that will differentiate competitors, but the key is effective implementation and general acceptance by the workforce.
We see more investment and growth in the Asia–Pacific and Japan markets. In the market space that Curvature falls into, we see there is constant need for IT decisions that involve juggling firms’ limited IT budgets between innovation and the status quo.
Pipeline Security KK
The world of the Internet of Things (IoT) and connected-everything is upon us and automation and smart IoT is the next step. Devices such as Amazon Echo and Google Home show us the power of devices being able to simplify everyday tasks. We are also seeing glimpses of the power of automation and smart devices with Industry 4.0 and will likely see more innovation in factories worldwide.
With all of this comes the need for better security and new ways to mitigate risks. Ransomware, for example, can be seen, but it gets much more difficult to detect and to provide protection against if the hackers are sabotaging the design of vehicles, changing small elements in chemical products, or changing parameters on medical instruments.
The IoT and Industry 4.0 will bring a fresh wave of opportunities to Japan, a country that is very good at building things with great attention to detail. Automation will require precision and Japan will likely be a leader in building some really great solutions.
Competition is always fierce and will likely become even harder as we see changes occurring much more rapidly. The move to the cloud has enabled technology firms to innovate at a much faster rate, but also means the loss of market share can be just as quick.
Japan’s technology market is still led by firms that existed 100 years ago, yet other countries have new firms as young as 5–10 years old leading their markets. Japan is slowly changing, but we feel it needs to accelerate the change to help the regional market compete and step up in the global market.
Head of Education
British Council Japan
The Japanese university sector will become more competitive when it comes to ensuring sustainability. With government subsidies and the youth population on the decline, universities will be required to diversify their revenue sources more than ever. In April 2017, the Ministry of Education, Culture, Sports, Science and Technology (MEXT) eased the regulations for all national universities on lending real estate assets to third parties and management of assets deriving from donations.
Kyoto University has a plan to establish a firm in 2018 that will offer consulting and training services. It will be a first-of-its-kind set-up by a national university, and will be made possible under regulations specifically eased for the Designated National Universities (DNU). The DNU system was introduced in 2017 to improve the overall competitiveness of selected Japanese universities.
Employers in Japan are finding it difficult to recruit people with the right skills and the higher education sector is required to respond to such demand by developing students’ employability skills and entrepreneurial mindset. In 2018, MEXT plans to enhance various funding schemes for academia–industry consortia. These include a talent development programme in data science and management for PhD students and postdoctoral researchers, and the “Exploration and Development of Global Entrepreneurship for NEXT generation” (EDGE-NEXT) programme.
Head of Marketing, Japan
We have noticed, in recent months, that the average age of students enquiring with us to go abroad is getting younger. I believe one reason for this is due to Japanese universities now accepting A Levels as a way of getting in to undergrad courses here. Nowadays, Japanese students can go to sixth form in the UK, and then get in to a Japanese university, using their A Levels as a way of entry.
On top of that, the events coming up—the 2019 Rugby World Cup and the Tokyo 2020 Olympic and Paralympic Games—are internationalising people here, increasing motivation to learn other languages. There are also a number of other funding options that are pushing students to go abroad, such as the Tobitate scheme run by the Ministry of Education, Culture, Sports, Science and Technology.
I predict that more Japanese junior and high school students will look to study abroad. I also know that a number of schools in Japan are slowly incorporating the International Baccalaureate in to their system—this is a major change, as the syllabus is extremely different from the standard school syllabuses here.
We are seeing a number of our partners introducing online courses, webinars and similar concepts. I do think for now, though, students in Japan are still looking for “normal” programmes. We are still seeing the value in the traditional face-to-face ideas here.
Co-founder & President
Custom Media KK
Digital marketing and social media will continue to grow at a rapid pace and firms and brands will be forced to engage with their customers on channels that are still relatively new. Meanwhile, these channels are getting more business savvy, constantly changing up their models to boost the bottom line.Understanding these changes and being extremely agile to adapt to them will be critical to succeed. We see many brands in a rush to get on social media without a clear strategy or analysis of whether their brand needs to be there or not—and, if they do, on which channels.
Live video streaming also has potential for further growth in 2018, as it offers a more interactive way for businesses and brands to reach customers. Social media platforms are continuing to develop the most effective ways to install this capability into their systems.
With these advances will also come a huge talent shortage, with increasing demand for a tech-savvy, digital marketing workforce with experience in the media industry. One way to solve this, rather than entrusting your valuable brand to a string of young interns, is to use professional content-creation agencies that have a good understanding of digital media and strong networks in the Japanese market.
Brands that set key performance indicators for the sake of having them will end up mismanaging budgets or, worse still, overspending and being disappointed with the results. Defining realistic KPIs with a clear purpose for social media is crucial. Is fan growth or fan engagement more important?
Co-founder and Publisher
Custom Media KK
Quality print publications, such as BCCJ ACUMEN, and other hard copy marketing material will continue to faithfully serve an influential and affluent niche market in 2018 and beyond. By regularly landing on consumers’ desks—and being kept on their shelves—long-life trusted advertising and professional editorial puts itself way ahead of the relentless and unsolicited adverts, fake news and scams flooding our email inboxes every day. Complemented by digital, hard copy is here to stay.
Mori Building Co., Ltd.
According to our annual survey of office needs in Tokyo, more than 60% of firms planning to lease new office space are doing so to expand. The primary reason is to expand business and accommodate an increasing number of employees. The vacancy rate in central Tokyo is at a historical low, and rent has been increasing steadily.
Together with the rapid development of new technologies and the second Tokyo 2020 Olympic and Paralympic Games, how people think and behave will start to change. And as that changes, developers will need to change, too, as cities are the platform of everyday human activities.
Regional General Manager Japan, Korea and Thailand
British Airways Plc
Next year will be an exciting one for the tourism industry in Japan. We will be just a year away from the 2019 Rugby World Cup and two years from the Tokyo 2020 Olympic and Paralympic Games. The country will be in the spotlight on the world’s stage once again and the government has a target to attract 40 million inbound tourists from all over the world. We expect to see many initiatives and developments moving forward at full speed.Air travel is about more than moving people from A to B; with so much information easily accessible at their fingertips, tech-savvy travellers today are demanding better products, services and prices when choosing their flights.
Today’s travellers are super connected, not only during their stay, but also on board, and we expect this trend to grow further in 2018. This year we started rolling out our latest generation high-speed Wi-Fi services on our long-haul network. We will also become the first airline to offer connectivity on our short-haul flights using Europe’s first-ever 4G high-speed inflight network. We aim to have 90% of our fleet connected by 2019.
We also continue to modernise the way customers book seats with us in the 21st century—with significant development of ba.com and the BA app and enhancements to the way we relate to the travel trade.