·4 min read

There’s a neverending onslaught of bad news of negative trends in Japan. Depreciating yen, aging population, ballooning debt, stagnant GDP, lower ranking in digital competitiveness, dwindling fish population, declining music industry, political scandals… it seems everything is worsening.

But the news media tends to give a negative bias to everything. Let’s talk about the positives for a moment. There are already many articles talking about the positive current state of Japan (great healthcare, delicious food, low crime rate, good public transport infrastructure). But what is actually improving over time?

Startups and venture capital

Startup funding and top talent working at startups has increased dramatically over the past few years (ignoring 2022 for now). Almost a 10x increase in 10 years! (granted, still tiny compared to the US, where startup funding was $330B in 2021).

Fundraising by Japan startups (units: 100M yen)

It’s also cool how various new government initiatives are trying to help (e.g. startup visas, zero-interest loans for foreign entrepreneurs in Tokyo, Shibuya Startup Support Office with bilingual support). Stuff like the Google Launchpad Accelerator (at which I mentored), Google for Startups Campus Tokyo, Coral Capital and its accelerator Coral Reef also opened over the last couple of years.

https://shibuya-startup-support.jp/

More solar and nuclear power generation

Nuclear was reduced after the Fukushima incident, but finally it’s on the uptrend again, increasing energy independence and reducing carbon emissions (hopefully the risks will be better managed…)

More and more awesome buildings

As if Tokyo didn’t already have enough super nice and cool-looking buildings with interesting stores and yummy food, more and better ones keep getting built. Especially in Shibuya (PARCO, Shibuya Scramble Square, MIYASHITA PARK mall, etc.) Don’t know enough to comment on non-Tokyo cities, unfortunately.

Even better infrastructure

The “linear motor car” (magnetic levitation) trains are being built and the Tokyo-Nagoya line will open in 2027 with a speed of 500 km/h, 2x as fast as current bullet trains.

Better games and better anime.

The technology keeps getting better and I am repeatedly wowed by the creativity and execution quality. Check out Belle, Attack on Titan, and Cyberpunk: Edgerunners.

Night City in Cyberpunk: Edgerunners

Crypto / web3

• Regulation: several Japanese government agencies and lawmakers are working hard to improve regulations to make Japan an attractive place for web3/crypto startups and companies. I spoke with a lawmaker and read their policy whitepaper, and the proposed policy improvements are actually quite well thought-out. (article, white paper in English)
• The general crypto scene: startups building cool stuff, conferences, parties, events, online communities… the vibe is great, and a much is growing, even during the bear market.
• Lots of companies, big and small, new and old, with plans for blockchain gaming, the metaverse, NFTs….e.g. check out the list of companies involved with the Oasys blockchain started by doublejump.tokyo (disclosure: I’m a small investor)

Fintech

Not limited to crypto, lots of financial tech improvements have happened. Japan is often called a “cash-based society”, but smartphone-based payments (NFC-based, QR code-based, etc.) such as PayPay and LINE Pay have increased dramatically, as well as credit card use. The percentage of cashless payments increased from 13% in 2010 to 33% in 2021 (granted, still lower than other countries). Adoption of tools such as Money Forward ME (personal finance app like mint.com in the US) or Freee (SaaS for small business accounting etc.) have exploded and saved countless hours for people dealing with paper before. Also, the national government introduced the My Number card for all residents with a private key on a secure chip inside it, and this can be used for secure remote tax filing, for obtaining government documents at any convenience store, and as a health insurance card. This is the same security concept as buying a Ledger or Trezor hardware device with a private key to access cryptocurrency.

Machine learning / AI

There’s a strong uptrend in the number of startups and patents related to machine learning as well as revenue in the AI software/services category. In 2021, the AI systems market grew 26% YoY to 277B yen.

Although Japan is still far behind the US etc., there are unique opportunities for AI that Japan can especially excel at, e.g. AI for manufacturing, fishing, and elderly care.

One area I’m particularly excited about is creative AI. There are already a bunch of Japanese companies (mostly startups) doing impressive work on this, e.g. Qosmo which works on music AI and Rinna (spun out from Microsoft) which works on chatbots and more recently text-to-image (e.g. they fine-tuned Stable Diffusion to make Japanese Stable Diffusion).

Wrap up

Not all hope is lost in Japan! Lots of stuff happening to be excited about now and in the future. And there’s a lot I didn’t cover in this article.