Demand-led Innovation Policy in Japan

Sep. 2009

Ministry of Economy, Trade & Industry

Japan

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Ⅰ. Issues on R&D for industrial technology in JapanR&D system in Japan is facing two issues.

(1) Cooling of R&D investment due to the recent world financial crisis

・ R&D investment in 2009 FY is expected to decrease by 7% compared to 2007FY → The amount is about US $10 billion

・ Difficulty in employing researchers in private sectors

↓

・ This provides strong negative impacts on the industrial innovation in Japan

・ This results in losing potential for growth during the economic recovery period

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Forecast of R&D Investment in 2009FY (compared with 2007FY)

70% of the companies reply that R&D

cost will decrease in 2009FY

compared with 2007FY.

Source: Questionnaire results in

METI, Japan

(2) Delay in taking action for the change in competition model of R&D

・ Fundamental technological capability does not contribute much to development of new products/market.

↓

Importance of “Concept creation” based on the new values

・Advancing individual technologies and their combinations for realizing the necessary products/services required for the society of next generation.

（”Concept-driven type R&D” will be important.)

Innovation policy in the world emphasizes on connecting social challenge and innovation.

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Ⅱ．Future Direction

１．Changeover of national technological strategy → “Solution type“

Current 4 Strategic fields (Life-science, ICT, Environment, Nano-technology)

↓

New strategy (Target area)

Focusing on resolving national urgent issues

“Solution (low carbon society, health and secure & safe society etc.)” = Based on “Demand pull” concept.

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Current 4 Strategic fieldsExamples of Goal

Energy & Environment,

Depopulation, water/foods etc.

Mission, Vision, Goal

Seed Push type Demand Pull type

fruits

fruits fruits

fruitsfruits

fruits fruits

fruits

fruits

Mission, Vision, Goal

Nanotechnology

fruits

Nanotechnology

EnvironmentEnvironment

Biotechnology Biotechnology

IT

・Defining new products/services realizing the new concept, “Solution”

(Example) Healthy and longevity society

→ ・New medical service

・Health maintenance/improvement

・Advanced diagnosis service

R&D on seeking new products/services models

→ Possibility of creating various innovation

・Specifying “Key technology” from the required products/service

(Example) Low carbon society (transportation systems)

→ ・Next generation fuel cell technology

・Robotics technology

・Sensor and devices etc.

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２．Defining priority area

Creating a new product/market by innovative technology which can solve social issues such as aging society with a falling birthrate, environmental and energy restriction etc.

Social Task Required technologies for solving social issues

Low carbon, Environmental conservation

New energy technology (next generation battery technology etc.)Saving Energy technology (heat pump technology etc.) Natural resources saving (3R) technology Environmental load reduction technology etc.

Aging, Health Advanced medical careHealth technology (sensing etc.)Robotics technology etc.

Food self-sufficiencyFood-safety

Plant factorySafety management (traceability) technology etc.

Traffic jamAccident prevention

Safe transportation methodNavigation system, Sensor Technology

６

３．Formulate thrusting strategy for technology area (Specifying key technology from the outcome)

Back cast type → Specifying key technology from the goal and defining the target level

Specifying key technologies from the image of future social system after 10 or 20 years, and these technology is divided into required elemental technologies. Finally important technology should be selected.

Back cast type technology roadmap

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Ⅲ．Concrete Policy

1. New policy for creating demands (Solution model)

(1) Japanese low carbon society model

(2) Japanese pleasant, healthy and longevity society model

2. “Solution type” creation of new demands

3. R&D base for producing outcomes

4. Encouraging combined use of elemental technologies

5. Promoting R&D by new type of research organization

6. Virtuous cycle of innovation and social needs

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１．Policy for creating new demands(1) Japanese “low carbon society” model

• Under the close demand-supply gap situation in the world, it is necessary to create new demands by a new value which can provide a solution for various problem.

• To create a Japanese model for solving world common issues, regional organization conducts demonstration experiment with combining advanced technology, formation of formalities, improving infrastructure and development of management systems/know-how in intensive and/or multiple way.

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Realization of Low carbon society system

1. Establishing infra-model of energy supply for the introduction of RE

2. Stimulating intensive use of energy in residential and industrial sector

3. Creation new business derived from management of energy demand

4. Supporting International standard of technology modules

Smart Parking

Co-generation

Next generation SS

Smart houses / stores

Storage battery

PV

Smart BuildingSmart

School

Networks of

energy supply

5. Showroom impacts

6. Synergy effects between overseas projects and low carbon society

Introduction of

Renewable Energy

Evolution to home & abroad

1.Solving legal issues internally

2.Demonstrating Japanese town in

abroad

3.Demonstrating low carbon society in

abroad

Classifying Social system

1.Models of Developed country

2.Models of Emerging country

/Developing country

(2) Japanese “pleasant/healthy longevity society” model

Ο Under the world fastest aging of population, we intend to realize pleasant/ healthy longevity society- by creating services which can support pleasant society by regional ideas, collaboration between various industries and information technology- by spreading social innovation model to the whole of country.

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Patients Caretaker Caretaker’s

family

Medical

institutionCare business

Ambulance

Food supply Cleanup business

Aesthetic/Spa Fitness Convenience store

Pharmacy

Municipality/NPO

National Health

Insurance Institution

IT

infrastructure

Health service to

each persons

Streamlining

works by using IT

Computerized

prescription,

Receipt,etc

Management of care

evidences by ITReal time

information service

Consolidating information

of caretaker and patients

Filing online care records

Data

Data analysis

・Developing program

of health and lives

・New services

Setting guideline for

cooperation with medical

institutions

Information

service

Visual and safe

care service

２．”Solution type” new demands creationΟ We draw a “future forecast drawing” which shows a direction of a country, and

remove sense of uncertainty and stagnation and create new demands, investments and employments.

Ο According to the view points for the purpose of creating new demands/employments, we focused on the “low carbon innovation”, “pleasant/healthy longevity society”, “tasty and safe Japanese foods” and support an approach to establish a new “National concept”

（１） Creation of new demand from realization of Low carbon society

Areal evolution in collaboration between

agriculture, commerce & industry

Promoting plant factory from home to abroad

（３） Creation of new demand from cooperation between agriculture and commerce & industry

Creation of health-related industry

Improving regional medical care system

Promoting innovation in medical and care field

（２） Creation of new demand from realization of pleasant and healthy, longevity society

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Adjusting low carbon and energy supply-demand

system

Employing all policy measures for battery vehicle

Steady implementation of nuclear energy and

internationally expanding

Realization of resource power ”Japan ” through

recycling

3. R&D base for creating outcomes

Under the situation in which open innovation is accelerated in worldwide, to practice strategic harmonization such as advancing R&D common fundamental technology and promote competitive R&D, Creation of R&D base which attracts human resources, funds and

information from abroad is extremely important.

Creation of value by synergy collaboration (out bound type) is rapidly recognized as a R&D method of company instead of obtaining/ compensating technologies (out bound type) owned by other companies

< Policy for promoting out-bound type open innovation >

Forming “R&D base” by national R&D projects

→Formation of synergy effects created by collaboration/integration of various researchers, complimentary collaboration between companies

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Inbound type

Open innovation

Outbound type

Open innovation

Mutual supplementation of existing

technology

Creating values through collaboration

Company A Company B

Company B

Company DCompany C

Company A

４．Encouraging combined use of elemental technology

Improvement of ability to Integrate or systemize multiple elemental technologies will be important.

<Example of solution type research encouraging innvation>

Competitive R&D support systems such as ”Stage Gate System” or “Competition System” for promoting outcome oriented research

Example of incentive type, competition type policy (Competitive R&D for predetermined subject)

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Government makes honorable recognition of performing the technical issues,

and provide financial incentives. This scheme encourage competition between

research teams and makes the case of failure public.

Ministry of Economy, Trade & Industry

NEDO

The subsidized innovative project for encouraging the outcome to promote the business use

(Supporting flame for problem setting competing type)

Grant

Subsidy

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5. Promotion of R&D by New-Type Organization

Establishing systems of research associations based on revised law (Act on

Research and Development Partnership concerning Mining and Manufacturing Technology) for collaborative research and commercialization by corporations, universities and national research institutes

6. Virtuous circle of Innovation and Social Needs

Reinforcing virtuous circle mechanisms to benefit the public by generating innovation to solve social issues

Promoting Discussion about next-generation social system and new technologies

Providing opportunities for discussion led by private sectors for suggesting measures to take by themselves

(Example of activities for designation of new society system)

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(Appendix 1 ) Eco-Point System

The eco-point system was introduced to protect global warming, stimulate the economy. By purchasing energy saving home electronics, consumers receive eco-points which can be exchanged for various products/services.

Green home electronics means air conditioners, refrigerators and digital TVs having status more than energy saving level ４☆.

Period of providing eco-points : For the purchases on May 15, 2009 – March 31, 2010

Japanese government will provide US $3 billion

as way of stimulating demands in private

sectors.

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(Eco-point system LOGO)

(Appendix 2) Top Runner Program

• Expectations regarding the role of energy conservation are increasing due to mounting global environmental problems. As a result, demands that machinery and equipment's energy consumption efficiency be increased to the greatest extent possible are now a reality. The Top Runner Program has come into existence in light of this situation.

• This Top Runner Program uses, as a base value, the value of the product with the highest energy consumption efficiency on the market at the time of the standard establishment process and sets standard values by considering potential technological improvements added as efficiency improvements. Naturally, target standard values are extremely high. For achievement evaluation, manufacturers can achieve target values by exceeding target values by weighted average values using shipment volume, the same as the average standard value system.

Fuel Efficiency

(km/L)

At the time of standard setting

Target Fiscal Year

19km/L

18km/L

17km/L

15km/L15km/L

14km/L

13km/L

12km/L

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Weighted average per product

category is used to judge

achievement of the standard

Standard setting of

Top Runner Program

Policy tools:

• Recommendation

• Publication of company name

• Order

• Penalty (up to 1M yen ) or approximately

$10K

Target Products:

21 products

(Appendix 3)Demonstration Initiative for Eco-Innovation This initiative is a publicly-offered project to research feasibility and demonstrate

technical seeds in order to find and utilize technical seeds in industry and

university under environmental and resource restriction.

This realizes the establishment of low carbon and recycling-oriented society

(eco-innovation) utilizing the environmental technology.

Target：Corporation, University, Public Research Institutes etc.

Project Scale: Feasibility study：100 thousand US$

Demonstration: 300 thousand US $

Period：within a year

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