Japan’s long-awaited digital transformation

A newly established digital agency was unveiled in Japan recently. The agency, located in an Akasaka skyscraper, is unprecedented in every way. Under the direct supervision of the prime minister, with 120 of its 500 officials hired from the private sector, the new agency has the authority to manage IT system budgets across Japanese government ministries.

Compared with many of its Western peers, Japan has managed the Covid-19 crisis relatively well given its population size and ageing population. But there was one critical aspect of outbreak management in which Japan failed: the effective use of data and technology. In July 2020, then health minister Katsunobu Kato lamented that the greatest challenge in responding to the Covid-19 crisis was the ‘delay in digital transformation’. Creating the agency was one of Prime Minister Yoshihide Suga’s key policy pledges from day one of his administration. It was designed to overcome ‘the defeat in the digital war’. The new digital agency carries the heavy burden of wiping away the stain of this failure.

For many countries, technology plays an essential part in fighting the pandemic. In Japan, technology has been a weakness, not a strength. Covid-19 response experts from Japan’s health ministry faced difficulties collecting accurate and real-time data, such as the number of cases and vacant hospital beds. Precious time and resources were used to confirm numbers with local authorities by telephone and manually input data into computers.

Fax machines were used to exchange hand-written information among medical institutions, regional public-health centres and local governments. Japanese local governments spent months delivering cash grants to their citizens while developed countries such as Germany, South Korea and the United States swiftly — sometimes in a matter of days — completed payments using digital platforms.

System developments during the pandemic often failed. Health Center Real-Time Information-sharing on Covid-19, the system hastily built by the health ministry to collect real-time patient data, was criticised for its poor usability, as medical establishments were required to input more than 100 data points when scarcity of resources was the core issue. The COVID-19 Contact-Confirming Application was incompatible with Android operating system updates for months.

An online system that was introduced to accept applications for employment adjustment subsidies was suspended immediately after launch. In order for local governments to conduct vaccination programs, Japanese local government officials needed four different systems in place: an individuals’ records management system called the Vaccination Record System, a vaccine allocation system, local government ledgers and a vaccine distribution system.

Why did a seemingly high-tech country face these challenges? Aside from simply getting rid of fax machines — a move recently ordered by the administrative reform minister — the Japanese government has to overcome a number of fundamental issues.

First, the government was hindered by insufficient in-house capabilities to manage digitisation. Software development is often outsourced to third-party vendors without proper knowledge and oversight. One of the reasons the government lacks internal capabilities is its personnel practice: procurements are managed by career bureaucrats, most of whom have a background in law or the social sciences. The accumulation of their professional knowledge is hampered due to frequent rotation within government agencies in short-term cycles of two years.

Under the lifetime employment culture, the government has very a small number of mid-career employees. The digital agency’s hiring of external experts on an unprecedented scale is thus an important milestone in improving its human resources pool and building digital capabilities.