Japan Takes the Lead in E-commerce Initiatives

Would you be surprised to learn that Japan's government now leads the world in providing electronic commerce initiatives? Jim Bizdos, president of RSA Data Security, cited the aggressiveness of the Japanese government in funding e-commerce pilot tests as one of the reasons that RSA decided to open its first foreign subsidiary in Japan.

The Ministry of International Trade and Industry (MITI), for example, has allocated over JPY30 billion (and this could go as high as JPY50 billion) to fund nearly two dozen pilot programs involving more than 350 companies and 500,000 consumers. The ministry actually received over 230 proposal applications, totaling over JPY300 billion in requests.

MITI expects the market size of the information and communication industry to surpass JPY120 trillion by the year 2010, and the Electronic Commerce Promotion Project is one of MITI's key plays to capture the lion's share of this potentially huge market. The ministry's goals are to develop basic and practical technology for e-commerce and implement the technology through field experiments and limited market trials. MITI has also set up the Electronic Commerce Promotion Council to promote collaboration and share the results of the e-commerce promotion project with as many industry participants as possible.

It is often hard to tell which agencies of the Japanese government are working together, and which are working against each other. The Postal Bureau of the Ministry of Posts and Telecommunications (MPT) is promoting a similar project, for which it has proposed an annual budget of JPY8 billion.

Why, one might ask, is the Postal Bureau interested in electronic commerce? As the regulators of Japan's direct mail and mail-order catalog industries, they view Internet commerce as simply an extension of that business model. As it is likely that a majority of physical goods ordered via the Internet will be shipped by mail, it does make sense. How much regulatory power any particular ministry or bureau will have over Internet commerce remains to be seen.

Here is a quick overview of some of the interesting Japanese government e-commerce initiatives in place today. In many cases, the list of participants is more informative than the actual test itself.

Electronic Marketplace--The intent of this project is to design a system architecture for electronic settlement using the Internet draft iKP protocol and made-in-Japan encryption techniques. Tests in a virtual mall and non-virtual retail stores are expected to involve some 10,000 users. Participants include IBM Japan, JCB, Jusco, Shiseido, Nippon Shuppan Hanbai, Aeon Credit Service, and NTT Advanced Technology

JapanNET--An e-commerce marketplace project. This project, which aims at development of a transaction system that utilizes sophisticated private key pair encryption algorithms, is expected to involve 50,000 users. Project participants include Toyota, Mitsubishi, CMC, Dai Nippon Printing, and Mitsubishi Electric.

Smart Collar Club--Experiments in micro-transactions. The goals of these experiments are to develop an electronic settlement system for small transactions using credit cards, and an electronic money pool participated in by banking organizations. The tests are expected to involve 5,000 users. Participants include DC Card, MasterCard International, Mitsubishi Research Institute, AM/PM, and Laox.

Authentication/Encryption/Settlement--Tests of smart cards. This project will develop security techniques that permit mutual authentication and electronic settlements (in both virtual situations and real stores) using multipurpose IC cards capable of handling credit and electronic cash. Some 30,000 persons are expected to be involved in this project, whose participants include Smart Commerce Japan, Toshiba, VISA International, The Daiei Group, The Hankyu Toho Group, and Netscape Communications.

Virtual City--Kiosk testing with an electronic mall featuring attractive product content and security measures designed to enhance user confidence. The focus is on consumer behavior, from motivating purchases to closing the transactions. The project, which will also feature subsystems to provide information on food and other products through graphic interfaces, is expected to involve 50,000 users. Super-multimedia kiosks will be set up in public buildings, train stations, and department stores. Participants include Japan Research Institute, Sumitomo Credit Service, Yoyogi Seminar, NEC, and Sumitomo Bank.

Virtual Exhibition--Online trade show. This project will create a network-based Virtual Exhibition to test, under real conditions, authentication and settlement functions associated with commercial transactions. Softbank is the major participant.

One-stop Government--A uniform system for providing one-stop electronic public services. The intent of this project is to develop a system by which the public can utilize local government services through access to a Virtual Administrative Center via terminals set up in city government offices and at strategic locations throughout a city. Participants in this project include Densan and Hachijuni Bank.

In addition to these projects, MITI is funding core research that promises to develop new technologies, but will not go so far as to test them in market situations.

Will Japan become a world player in electronic commerce? If not, it won't be from lack of trying.

Forest's Internet Commerce Guide has moved to http://www2.metasys.co.jp/commerce/