Innovation Implemented by Public-Private Co-Creation - Tokyo 2024

NEXTUpWehaveatalkon innovation implemented by public Private co-creation in JapaneseandThisWillBeleedbyoTheSecretofNewFormofCapitalismHeadsHi, um, let me begin my presentation.There are some detailed explanations of the system, so I will be presenting in Japanese.Today, I would like to talk about innovation in public-private competition.In this era of transformation, with so-called DX (digital transformation), policy-making is also changing in this way, and I would like to introduce this to you all.I myself work in the Cabinet Secretariat and the Ministry of Economy, Trade and Industry, so as a bureaucrat working for the Japanese government, I would like to deliver the voice of the field to you all.

Today, we happen to be at the UNU headquarters, and I myself have earned a master's degree at Maastricht University, which has UNU Meritt, an innovation research think tank of the United Nations University, so I am pleased to be able to give a presentation in this setting today. I am very excited about this topic, so let me get right to it. I apologize for starting off with an advertisement for my book, but I published a book this past March titled "Innovation in Public-Private Competition." What is it about? Well, I think there are many people here today who are teaching various startup and new classes, and in this era of the Fourth Industrial Revolution, I think many business models using new technologies like AI and blockchain are being created.

We want to spread these wonderful things to the world, but the reality is that it's not easy to implement them in society right away. This book answers the question of why that is. For example, a common answer to that is that we are required to conform to laws that were optimized for the Showa era, the so-called manufacturing era, or that AI and blockchain are just too new, something that no one in the Showa era could have imagined. The problem is that there are no rules that apply to the situation, and this book answers that question, especially from the perspective of rule-making, and how we are spreading this innovation to the world. Just for your reference, the cover is very colorful and eye- catching at first glance, and the illustration on the cover was drawn by a contemporary artist named Shita, and the thoughts behind it are also written inside, so if it piques your interest, I would be happy if you would read it.

The main topic of this book is this new system called the regulatory sandbox system, and I will now introduce what this is. The concept of this system is, in a word, to just try it out. What does it mean to just try it out? It means that when you want to move forward with a business model that uses new technologies such as AI or blockchain, there are problems with the relationship with regulations. Or there are situations where it seems like something might happen, and in those situations, the idea is to first try it out and conduct a demonstration, collect data from the demonstration, and then proceed with the business based on that, or if such regulations become an issue, move towards regulatory reform.

And the philosophy of the policy is to form policies through dialogue with the market and actual demonstration, and it is called policymaking by experiments. In short, for a long time, especially in Japan, laws were made by the government, and others were rule-takers or rule-followers, and they accepted and used them, which I think was a kind of one-sided public way of communication. But what is happening here is that policies are being made while having a dialogue with the market, including users, and while conducting experiments, and I think that is one new point. And within that, the work of the government tends to be very rigid and precise. However, the fact that it allows for experimentation is also something that I think is very noteworthy.

And the background to the birth of this concept, if we break it down a bit more from the perspective of the stakeholders, the reason why this regulatory sandbox system was created is, first of all, from the perspective of the regulatory authorities, we regulators, although various new business models such as AI and blockchain are being created, we are basically people who write laws and create systems, so to be honest we do n't really know about the cutting edge. And secondly, and this is a bad thing, there is a tendency to follow precedent, so we tend to think that something should be done by following what has happened in the past, and that kind of thought process is easy to get used to, so when it comes to something that is truly novel and has no precedent whatsoever, even if you tell a person in charge at one point of contact it, it is difficult to make a judgment. And there are also the good effects of innovation, but there are also risks, but then The honest truth for regulatory authorities is that it's not easy to determine the extent of the risks. So, they feel that they can't take action on regulatory reforms unless they have sufficient data to prove their point. On the other hand, businesses, especially startups, are also experiencing a lot of frustration.

There are countless laws, so it's not easy to figure out which ones are relevant to their business model or philosophy. Even lawyers find it quite difficult. And even if they figure out that a law seems relevant, it's not easy to figure out how to conduct business in a way that doesn't violate it. Furthermore, if they do n't even know if they're allowed to verify anything, they can't collect the data, and they get caught in this vicious cycle. So, there are old regulations that seem relevant but they can't experiment or collect the necessary data.

There was a problem in that situation where we ended up in a situation where we couldn't do anything. So, in this era of transformation, we decided to create a new system that allows us to try things out first, and that's how the regulatory sandbox system was created. Now, let me go into a bit about the system. First of all, as I've said many times before, AI, IoT, big data, blockchain, and various other new technologies and business models are emerging all over the world. This system itself was created in 2018, so it's been exactly five years now, and it's a new system created to spread these new technologies and business models further and further.

So, what kind of system is it? Well, we can't just do it without any restrictions all of a sudden, so first, we ask that you decide on the period and the people who will actually participate, so there will be limitations. However, in that environment, you can conduct experiments on new technologies and business models without being subject to the regulations that already exist. This is the system we will be providing. What's good about it is that, in a rapidly changing business environment, you can quickly reach the stage of proof-of-concept, and then utilize the various data and information obtained there to actually move forward with commercialization, or, if it's a regulatory issue, to change the regulations.

Now, I've just casually mentioned "sandbox," but sandbox, of course, means sandbox in English. The idea behind this is to create a space where people can try things out, just like children playing freely in a sandbox. It's a new and very confident system that truly symbolizes this era of digital transformation and the Fourth Industrial Revolution. So, what I want to introduce here is that there are many signs of change in society today, but even in the field of government policy, we want to create a system like this that has never been seen before and spread this innovation to the world together. So, it's actually been exactly five years now, and a lot of different case studies have emerged, so I'd like to introduce a few of them.

So far, there have been 31 cases, and 150 companies are actually using it. In terms of fields, FinTech is representative because the financial sector is heavily influenced by regulations, but it's also being used in mobility, and among these, blockchain, which many people are probably familiar with, healthcare AI, and the environment, or green. It's being used in a really wide range of fields. So, some of you may be hearing about this regulatory sandbox system for the first time today, but if there's anything you'd like to try in your company, please do not hesitate to contact the Cabinet Secretariat, as there is a centralized contact point there. I think that even if you think there might be some regulatory issues, there are so many government offices and so many different laws in Kasumigaseki that it can be difficult to know where to go in the first place.

I think so, and right now, the Cabinet Secretariat has a window where you can take the first action, so if you access it, they will provide guidance on this law from this government office and will respond accordingly. And if I were to pick one example that is written first in FinTech, it is the data related to the Act on Prevention of Transfer of Criminal Proceeds, and there is an example of a startup called Cowris. The name of the law, "Prevention of Transfer of Criminal Proceeds," is quite unusual and not something you'd hear often, but basically, Cowris is a startup that has security technology to prevent money laundering, and the reason they wanted to use this regulatory sandbox is that when preventing money laundering, there are currently many fictitious bank accounts, and when they wanted to find out which ones were being used, Cowris obtained electricity information from Kansai Electric Power Company, and if electricity was being used in a house, then The idea was that it was unlikely that the fictional, unoccupied house was actually a real house, and they wanted to confirm that. However, Kansai Electric Power 's electricity information is n't normally used for that purpose, so there was a problem with regulations, like whether it was okay to do something like this without permission. So, they actually conducted an experiment in the regulatory sandbox, and the result was that there were no particular problems.

In fact, it also contributed to preventing money laundering, and since Kansai Electric Power is a large corporation, it was also considered a good example of open innovation between a large corporation and a startup. As a result, Kaulis was able to expand their business in a way that was in line with the law, and fortunately, around the time this book was published in March, they also went public and were listed on the initial gross market. In that sense, they used the regulatory sandbox system to really break through and expand into a new market, so I think they can be cited as a prime example of this system. This is just one example, but in that way... Well, various companies are trying things out and pioneering new markets.

Another easy-to- understand example is Loop, which is known for its mobility services. Loop is especially strong in Minato Ward and Shibuya Ward, which are the places where they were founded, so you can see a lot of Loop buses running around there. Nowadays, you can see these small mobility bikes zipping around Tokyo without helmets or licenses, but when these new mobility vehicles first appeared, they were n't bicycles, but according to the regulations at the time, they were considered motorcycles. And if it's a motorcycle, you naturally need a license and a helmet, so they applied to the regulatory sandbox system to prove that it's different from a motorcycle, and that safety can be ensured in this way. That's how we arrived at the current situation where you can see them zipping around Tokyo.

Those are some of the main examples. 。 English: This is an introduction to the following, and each and every one of these involves the hard work and struggles of many people involved, and there are many stories of how they overcame those challenges, but due to time constraints, I will stop here and move on to the next page. I would also like to change the perspective a little and talk about the regulatory sandbox system, whose main users are startups. The Japanese government has been putting a lot of effort into startup policies for about a year and a half or two years now, and we are still not winning, so I would like to introduce that last. It is a common understanding within the Japanese government that startups are very important as drivers of innovation, especially disruptive innovation, and specifically, at the end of 2022, we announced the full details of the support measures in the Startup Nurturing Year-Long Plan.

It is not so much about the scale of the amount of money, but for example, the related budget listed there is the largest ever at 1 trillion yen, which will be used over five years, and so it is really happening now The plan involves investing resources into every conceivable policy, and what it aims to achieve is, firstly, in terms of monetary value, to increase investment in startups tenfold in five years, and to increase the number of startup unicorns lost. However, the policy is based on the fact that Japan's ecosystem is still not fully developed, so rather than strongly supporting any particular area, the focus is on building talent networks, and of course, on funding, such as how to strengthen the supply of funds and how to diversify exit strategies. The third is large corporations, and since large corporations have a particularly strong presence in Japan, the policy is based on these three pillars, and it has been a little over a year and a half since then, and it has completely moved into the implementation phase, but currently, the environment for fundraising, or rather, the environment for funding, is not necessarily on an upward trend due to the global situation, but in particular The number of startup companies is visibly increasing, and I think that the phase in which startups nurtured under this 5-year startup incubation plan will rapidly grow within that market will become even more important. And at that time, I think that the more you try to do something new, the more you will inevitably run into regulations that you didn't anticipate, and you will be unable to implement it in society immediately. So I would like to encourage everyone to use this regulatory sandbox system and help spread innovation to a wider audience.

In fact, the government has never put so much effort into startups before, and I myself have had the opportunity to give lectures in various places, not only in Tokyo but also in other regions, but the policies of a country inevitably change with the trends of the time, and what is in the spotlight changes. In that sense, 2020 is the year of startups. It was put forward as an agenda item by the government at the time, but now, a year and a half to almost two years later, I feel that the startup policy is no longer just a passing fad, but has truly taken root. And I strongly feel that this is because Japanese society is now being freed from old systems such as fixed-term employment and seniority, and startups are not only the drivers of innovation, but also a symbolic presence representing the transformation of this old social structure in Japan. So, I would like to continue to contribute in my capacity to help these people to exert their power as much as possible, and if you have any questions about startups or want to try using the sandbox, please feel free to contact me.

That's all for my presentation. Thank you very much. [Applause] Have an ask hand? Thank you. I think this will be a basic question, but there is something called a special zone system, right?

What is the difference between that and this? Okay, so this sandbox system is, well, the sandbox system targets a specific business model, so if you want to test that business model and check its relationship with regulations, you can do so for a limited period and with limited participants, in which case the law does not apply. On the other hand, for example, in Tsuba's Tokku, I think there is a robotics center there, and they are collecting various data there to move forward with new things, but it is not the case that the law does not apply in the Tsuba area. So if you want to focus on that business model and move forward with implementation, it is recommended that you use this regulatory sandbox system. All givethanyou [applause]