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Can Health and Automation Investments Help Japan Grow?

With the world’s oldest population and sliding birth rates, Japan is struggling for growth. Could foreign investments in healthcare and automation provide a solution?


A growing number of nations face significant economic and social challenges due to aging populations. Globally, 1 in 11 people were over age 65 in 2019. By 2050, that number is expected to be 1 in 6. 

That’s why leaders of multinational companies might want to pay attention to Japan right now. 

The world’s third-largest economy may be in a unique position to design a new blueprint for technology-driven growth in a shrinking, post-pandemic world.

Dropping birth rates present an uncertain future for countries and employers competing for talent. Older workers may stay in the workforce longer, but they’ll likely need more healthcare as they approach and start retirement. Younger workers with recent training are destined to become an even scarcer commodity in a global marketplace. 

In broad strokes, this is Japan’s story. The nation closed 2020 with a sharp economic rebound and record household financial assets, according to the Bank of Japan. But Japan still supports the world’s oldest population while dealing with a worsening shortage of workers. Recent data shows that Japan’s 65-and-above demographic represents 30% of its total population and is expected to rise to 40% by 2050.  

Recent efforts over the past decade to open the Japanese economy to foreign-owned businesses and a broader cross-section of domestic and foreign workers have been regarded as a solid first step. But many experts think technology will have to become a bigger factor.

 

Policy, Meet Automation

Former Japanese prime minister Shinzo Abe introduced a series of economic reforms in 2012 in the aftermath of the 2008 market crash. Dubbed “Abenomics,” the policies helped bring more women, retirees and foreign workers into Japan’s labor pool while loosening regulations for multinational businesses operating in Japan. 

And then came COVID-19. Experts say many in Japan didn’t believe remote work could adequately maintain business productivity while improving quality-of-life issues for one of the world’s most intense work cultures. It did both. 

Now many believe that technology—and the global companies that can deliver it—should be allowed to go further.

According to the McKinsey Global Institute, Japan leads the world in the potential for jobs displaced by automation as more than half of work time in Japan is now spent on repetitive activities—two-thirds of which can be automated. 

Japan’s future productivity won’t depend on machines alone. Even with the most sophisticated automation systems, employers need to start training and reskilling workers to fill between 11 million-12 million new positions that Japan will need by 2030. Many of these openings will be for data scientists and technology experts able to “translate” automation into innovation and growth, McKinsey says. 

Before the pandemic, remote work was limited, if not non-existent in the country—reflecting the nation’s conservative business culture where workdays were long and decisions were made largely in-person. Now that Japanese workers and their global counterparts have learned they can keep operations productive from home and other locations, Japanese companies might use remote work to recruit talent across borders in ways they’ve never tried before.

To help Japanese companies meet those challenges, global automation and IT companies may want to evaluate expansion in or near Japan to help the nation digitize processes, workflow and planning across multiple industries, including healthcare.

 

Japan’s Promising Healthcare Frontier 

Healthcare is considered one of four core industry sectors that account for nearly 50% of Japan’s GDP. Despite its relatively small population, Japan has the third-largest pharmaceutical and second-largest medtech markets in the world.  

In a separate report, McKinsey says digital transformation in healthcare could increase the industry’s contribution to Japan’s GDP an additional 11%-15% by 2030. Areas of opportunity include using robotics and machine learning to facilitate drug development and support doctors in diagnosis and surgery. 

Japan’s leadership in robotics may hold some of the greatest potential. Japan is the world's predominant industrial robot manufacturer, according to the International Federation of Robotics. Post-COVID-19, new patient and system demands may drive further growth. 

Marketing research firm GlobalData places the size of Japan’s medical device market at $34.6 billion by 2025, compared with $29.3 billion in 2018. One contributor to medtech’s rise may be the nation’s removal of import duties on many products in that category, including high-use equipment in orthopedics and cardiology as well as technology used in laser surgery and diagnostics.

The country is also regarded as a global leader in using electronic health record (EHR) systems, opening the possibility for wider data collection from wearable health devices.

Japan’s combination of increasing healthcare spending and its potential in health robotics and other medtech solutions could make the country an attractive market for healthcare IT investment.  

However, regulatory hurdles exist as Japanese regulations still require face-to-face physician visits, paper prescriptions and strict limits on the amount of patient data that can be shared and analyzed electronically. Such modernization could not only set new care and research standards for Japan’s aging population but provide a template for nations facing similar challenges throughout the world. 

Learn more about J.P. Morgan’s international banking solutions and our healthcare industry expertise, or reach out to us below. 

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