GOVERNMENT & POLICY

Digital seals
The Ministry of Posts and Telecommunications (MPT) is experimenting with an electronic version of the traditional kessai system of approving documents, whereby each document under review is stamped with a kakuin (personal seal) before being passed on to a superior. The ministry has started using electronic seals that are "stamped" on a document in a PC when the user submits a password; the document is then routed via a local area network to the next person in the chain for approval. The system, currently used in the MPT's finance division, will be adopted ministry-wide from January 1998. This experiment, the first of its kind by a central government ministry, is designed to both reduce paper and speed up the often-slow bureaucratic process.

MITI sponsors PDA software
The Ministry of International Trade and Industry (MITI) will sponsor development of software that makes PDAs (personal digital assistants) easier to use on the Internet and intranets. The ministry is commissioning development of Mobile Business Tool Gateway Agent Software to an affiliated organization, which planned to have initial specifications completed by June and should have the software ready by spring 1998. The server-based software will provide screen conversion and other functions that reduce the processing burden on the client side, making PDAs easier to use and more productive network business tools.

Ministries champion Japan- developed standards
Starting in FY1998, the MPT will support Japanese firms in establishing international multimedia technology standards. The ministry will work with domestic companies to devise standards for data communications technologies in areas where global standards have yet to be established, and it will propose those technologies to the relevant international standardization organizations. The MPT intends to target five areas, including mobile communications, multimedia terminals, and seamless communications systems.

MITI, meanwhile, has launched an effort to develop international standards for electronic commerce verification services. Currently, US companies such as VeriSign lead in the field of electronic verification, but MITI wants to make it possible for Japanese services and technologies to play a significant international role. Specifically, the ministry intends to propose a common communication protocol to ensure that digital signatures issued by servers in any country can be read and verified by servers in any other country. A MITI subcommittee has been drafting specifications and a technical manual that the ministry will urge other nations to adopt.

Seamless networking sought
The MPT's Research Group on Seamless Communications Technology has released a report that calls for cooperative efforts between government and the private sector to develop seamless network communications. Specifically, the report notes that different wiring schemes and communication protocols are necessary for telephones, cable television, the Internet, local area networks, leased data lines, and satellite communications, which constitute a major impediment to the goal of multimedia resource convergence. The group envisions a single, common standard outlet that can accommodate the entire range of networking technologies and provide a low-cost wiring solution so that consumers can "plug in" to a single source for all their networking needs. The MTP hopes to develop the basic technology by 2000.

MPT electronic commerce trials
The MPT has firmed up plans for a three-year electronic money experiment slated to start in October. Approximately 30 financial institutions, communications carriers, and other firms will use an IC card-based form of electronic money cooperatively developed by NTT and the Bank of Japan to enable purchases both at online malls and in conventional retail outlets. The effort, part of a package of MPT-sponsored Internet initiatives, is aimed at creating a new international electronic money standard. It is likely to draw criticism from leading city banks, however, which oppose the government-led development effort.

MARKET NEWS

Fujitsu ups PC sales goals
Fujitsu hopes to sell 2.6 million PCs in Japan in FY1997. The company shipped just over 2.0 million PCs in fiscal 1996, which was far short of its initial target. But Fujitsu foresees strong growth, primarily in the notebook segment, and forecasts a bullish 30% unit sales increase. The company will also seek to boost overseas sales 50%, to 1.2 million units. According to statistics released by Fujitsu, its money-losing PC operation moved back into the black in FY1996. Fujitsu is seeking to reduce inventories and stabilize earnings in FY1997.

Shopping at the electronic market
The Electronic Market Place (EMP) Council, a consortium whose members include IBM Japan, Jusco, JCB, Shiseido, NTT-AT, and Nihon Shuppan Hanbai, have started an Internet shopping experiment that makes use of IC card-based electronic money. The experiment, one of 14 electronic commerce initiatives sponsored by MITI, will run through February 1998. Some 10,000 volunteer participants will use IC card readers connected to their home PCs to buy products from an online mall. Related card-based electronic money experiments will be conducted at regular retail stores in Tokyo's Mita district and Chiba's Makuhari district.

On the McStreet where you live?
McDonald's Japan has enjoyed brisk sales of the geographical information system that it developed with two other companies. Released in January, the McDonald Geographical Information System (McGIS) has been sold to five restaurant chains; it is being released by Fujitsu under the InfoGIS brand. McDonald's expects to achieve JPY 500 million in McGIS sales within the year by selling the JPY10 million system to 50 companies.

Seamless workflow
Fujitsu, Hitachi, NEC, and Unisys Japan have agreed to establish common specifications that will allow their respective workflow software packages to work seamlessly with each other. Each of the four firms offers workflow software that enables employees to submit expense reports, circulate documents for review, and otherwise improve workplace efficiency by reducing paper flow, but each package uses its own proprietary specifications. By establishing a common standard, the companies will enable customers to easily transfer data between packages. Unisys Japan planned to release a common-specification version of its StaffWare in July, while NEC plans to unveil its new version of StarOffice this fall. Hitachi and Fujitsu will release their GroupMax and Teamware Flow packages in late 1997 and early 1998, respectively.

Games aren't always fun
Softbank will start providing support to Gamebank, the money-losing joint venture it established with Microsoft in August 1995 for the purpose of porting dedicated game-machine software to the Windows 95 platform. Gamebank, owned 60% by Softbank, drew industry attention as a joint venture between the most powerful software companies in Japan and the US, respectively, but the market for ported-to-PC games failed to materialize as expected. In FY1996, Gamebank suffered a loss of more than JPY 1.3 billion mainly due to prepaid royalties on software titles acquired from overseas firms. Softbank will reorganize the game business, with Softbank President Masayoshi Son serving as president of Gamebank until a replacement is found for the former president, who resigned in March.

INTERNATIONAL NEWS

Fujitsu to develop software in China
Fujitsu has started commissioning some of its software development projects for Japan to its Beijing-based Chinasubsidiary. The move is intended to address the increasingly severe shortage of domestic software engineers and take advantage of China's lower wages, which average as low as one-quarter the Japanese level. Fujitsu plans to double the number of the subsidiary's engineers to about 200 within two to three years and expects that the subsidiary will be able to handle about 10% of the workload arising in Japan.

Japan runs patent deficit
Japan's balance of patent royalty payments swayed further into the red in 1996. The deficit, which had been decreasing until 1994, grew 6% year-on-year to JPY 342 billion in 1996. Japan's total patent royalty payments to other countries surpassed JPY 1 trillion for the first time in 1996, a 20% year-on-year increase. The sharp increase is attributable largely to the fast growth of computer software imports from the US. Royalty payments by other countries to Japan reached JPY 723 billion, up 28% from a year earlier.

Hard disk drive production up
Japanese manufacturers plan to increase their investment in hard disk drive production in Japan and Asia. NEC will invest JPY 10 billion to raise monthly output by 35% (from 2.4 million units in FY1996 to 3.3 million units in FY1997) at its subsidiaries in Ibaraki (Japan) and the Philippines. Toshiba will invest ´6 billion to increase output at its Philippine plant by 35% over the next four years, while Fujitsu intends to boost hard disk drive production in Thailand, the Philippines, and its two domestic plants by 85%, from 7 million units in FY1996 to 13 million units in FY1997. IBM, which has begun construction of a $560 million plant in Thailand, plans to launch production there in the first half of 1998.

TELECOM TOPICS

Slow growth for OCN
NTT got off to a slow start in signing subscribers to its Open Computer Network (OCN) service, which was unveiled in December 1996. At the end of March, OCN had just 2,650 subscribers, including 450 subscribers to the OCN Economy Service (leased 28.8K-bps connections) and 2,200 subscribers to the OCN Dial-up Service. Limited availability (about a dozen cities) was one factor limiting initial growth. NTT planned to have dial-up access points in about 250 cities by the end of June, and targets 250,000 subscribers within four years.

Mini-satellite communications
A new type of communications service that uses mini-satellites will be launched in spring 1998. The MPT Telecommunications Council has decided on technical specifications for the service, which will use satellites orbiting the earth at an altitude of 800 km. The cost of launching such a mini-satellite is estimated at 100,000 or less, and individual monthly subscription fees should be in the JPY 3,000 to JPY 4,000 range. The service will initially be targeted at Japan's domestic market, but will likely be expanded to international service in the future.

Cellular phone growth strong
One in four Japanese households owns a cellular phone, according to an MPT survey on use of communications services conducted in October 1996. Per capita cellular phone ownership surged from 10.6% in FY1995 to 24.9% in FY1996, while per capita PHS (personal handyphone system) ownership jumped from just 0.3% to 7.8% in the same period. Per capita PC and facsimile ownership, meanwhile, reached 22.3% and 20.7%, respectively. The use of cellular phones among businesses surged from 14.7% in FY95 to 55.7% in FY96, while business use of PHS use grew only slightly, from 9.1% to 10.7%.

NET NEWS

Net hub experiments underway
NTT will provide interconnections between several major ISPs, and thus reduce online congestion. Currently, there are just three commercial hubs in Japan, the largest of which is operated by a volunteer group of academics and is unlikely to undergo expansion. NTT and IIJ planned to experiment for six months starting in June, not only with interconnections but with cooperatively developed technology for efficiently distributing memory-intensive content from a central server. The experiments, to be supervised by NTT Software Laboratories, will take place at a key NTT facility in Tokyo's Otemachi district, with 6M- to 45M-bps dedicated links to the various providers.

VAN providers look to the Net
The Telecom Services Association, an industry organization of value-added network (VAN) service providers, is launching a series of electronic commerce field trials. The experiments will focus on Internet-based sales of digital content and a debit-based electronic settlement system that uses the SET (secure electronic transactions) standard. Amid the boom in Internet usage, Japan's VAN providers, which rely on leased lines to serve their customers, are under pressure to review their operations for efficiency and viability. The organization expects to complete development of the experimental system by fall, run the experiments through March 1998, and then use those results to develop separate Internet-based businesses.

Sound security
NTT has developed technology to prevent unauthorized use and reproduction of music delivered electronically via the Internet. The music can be scrambled using security technology, and users must pay for a special key to unlock the music they wish to listen to. The semi-disclosure system features the ability to scramble music to varying degrees, allowing content providers to provide sample pieces of music.

Electronic commerce is "in"
Commerce on the Japanese Internet is soaring. According to a communications white paper released by the MPT, the Japanese electronic commerce market exploded from ´700 million in FY1995 (1% of the world market) to JPY 28.5 billion in FY1996 (8% of the world market). Among the companies responding to the ministry survey, bookstore Maruzen received ´247 million in orders between April 1996 and April 1997. Mitsubishi Research Institute, however, estimates that unless sales of a product generate more than ´100 million with a 5% profit margin, a company will not break even on the sales effort.

Help for small distributors
Bargain America, operator of a website featuring links to US mail order companies that will ship to Japan, has developed a system that it says will enable small and midsize manufacturers and distributors to open online shops in as little as four days. Bargain America's website (http://www.bamerica.com/) features links to dozens of online shops, mostly large mail order companies with long experience in the marketing and mail-based distribution of hard goods. Bargain America will not only create an online presence, but also settle transactions and ship products on behalf of smaller companies that want to gain exposure in Japan.

IN 50 WORDS OR LESS

NEC
has licensed from Iomega, the Utah-based removable storage media maker, the right to manufacture and sell 100MB Zip drives worldwide. This makes NEC the second Japanese company to license the Zip technology, following Matsushita Communication Industrial.

Sharpaims to sell 550,000 of its Zaurus PDAs (personal digital assistants) in Japan in fiscal 1997, up 55% over the previous year. The company will also make its Zaurus software technologies available to software developers in an attempt to expand the application base.

Hewlett-Packard Japan and Oracle Japan are teaming up to sell Enterprise Resource Planning (ERP) system products. The two have set up a technical center to promote sales of HP servers bundled with Oracle applications.

Check Point Software Technologies, an Israeli security software firm that has an over-40% world market share for firewall software, has opened an office in Tokyo. The company is selling its products through some 20 firms, including Fujitsu, NEC, and Nihon Sun Microsystems.

Mie-based cable TV firm CTY and leading Internet service provider Internet Initiative Japan (IIJ) have teamed up to create Cybernet Communications, in which they will hold 42% and 10.5% stakes, respectively. The new firm, headqua rtered in Yokkaichi City, will develop cable-based intranets for corporate customers.

NEC has teamed up with Teijin Cognos to sell data warehouse construction tools. The two companies have signed a systems integrator agreement under which NEC will use Impromptu and PowerPlay by Cognos of Canada in its data warehousing systems integration projects.

Hewlett-Packard's OpenView ranked first in Japan's domestic network management software market in FY1996, according to a survey by publisher Nikkei BP. Novell's NMS ranked second.

Softbank and 14 systems integration (SI) vendors have started providing an anti-virus security service. Initially targeted at companies with more than 1,000 PCs, the service will integrate vaccination software developed by Trend Micro (in which Softbank has a stake) with the consulting expertise of the SI firms.

According to a Web survey of its users conducted by Tokyo-based search engine service provider Cyberspace Japan,17% are women; 60% access the Internet from home; Microsoft's Internet Explorer has a more-than-30% market share; and nearly 30% have purchased merchandise online.

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