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George R. Heaton, Jr.

Engaging an Independent Japan

New directions in Japanese policies will dramatically expand domestic R&D; if it adapts, the United States can benefit.

Japan is at an historic watershed. The economic superpower is poised to fundamentally alter its science and technology (S&T) policy. Few Americans realize it, but the most forward-looking Japanese policymakers are engineering a profound shift in how the Japanese government funds R&D, the organization of university research, cooperation between corporations and academe, and international technological connections. Because the U.S. and Japanese economies are so intertwined, any major shift in Japan's technology policy has major consequences for U.S. industry, our balance of trade, and our presence in emerging markets.

In the new outlook, Japan is in technological parity with the United States. As a result, it will begin to rely more on itself for new research, rather than on the West, as it has done for more than a century. It is also rapidly increasing technological trade with Asia, so much so that the United States could conceivably become a secondary market.

If the United States is to maintain its fruitful relationship with Japan and leverage what will be an unprecedented outpouring of research, U.S. policymakers and corporate leaders will need to have a clear understanding of the shift that is occurring, why it has come to pass, and where it is leading. The United States will have to find ways to monitor and integrate with Japan's research programs much more deeply-just as Japan has inserted itself into the U.S. research infrastructure. It will also have to stop criticizing Japan as a "free rider" on U.S. science. If the United States fails to fully engage Japan in these ways, it will miss opportunities to exploit new technology, increase sales to Japan, and make inroads into the booming Asian market.

End of the "catch-up" policy

The technological connection between the United States and Japan is vital to each. More than twice as many Japanese scientists and engineers go to the United States each year as go to Europe, the number of Japanese R&D sites in the United States is double that of any other country, and about 70 percent of Japan's technology imports come from the United States. The historical strength of these ties has been based largely on stable perceptions. Since the mid-19th century, Americans have presumed that the Japanese were technologically behind and would emulate the U.S. agenda. Japan itself believed that it was behind and took its technological cues from the West, a course set by 19th-century reformers who realized that the country was poor and technologically weak. Japan made the acquisition of knowledge and technology, and a willingness to adapt, the pillars of its catch-up policy, especially since World War II. Although the view of Japan as a follower was revised somewhat in the 1980s, when hype about Japan's lead in computer chips, manufacturing, and consumer electronics peaked, the sense of urgency has passed, and many Americans are reverting to the traditional view. This is a significant mistake.

Japan's new S&T policy indicates that the nation intends to stand on its own two feet. The reach of its technology trade will become increasingly diverse, selling widely to the global marketplace just as the United States does. Japan may well no longer try to emulate the United States or even necessarily care to trade with it before others. It is looking inward for its cues, with the goal of restructuring domestic institutions and relationships to serve the long-term needs of an independent Japan.

The new objective will create extensive change within Japan's well-defined institutional structure, which is strikingly different from that in most developed countries. The Ministry of International Trade and Industry (MITI) is responsible for industrial technology, the Science and Technology Agency (STA) is charged with large-scale projects such as nuclear energy and space exploitation, and the Ministry of Education (Monbusho) supports science through university research funding. Other ministries, even those presiding over important areas such as health care or the environment, have never had large research budgets. Japan has long targeted its limited resources to a few R&D priorities, primarily industrial, where it wanted to catch up. Furthermore, Japan's public funding of R&D has been quite low by international norms; whereas most Organization for Economic Cooperation and Development (OECD) governments fund around 50 percent of domestic R&D, Japan's government contributes less than 25 percent. Industry has paid for the vast majority of work. Many people now argue that since Japan has caught up, this traditional structure no longer serves its best interests.

Japan's university structure is equally ready for change. In the prevailing model, research at national universities is preponderately funded by Monbusho. Private universities also derive the lion's share of their research budgets from Monbusho and thus conform largely to its norms. Neither industry nor other government agencies (Japan has no analog of the U.S. National Science Foundation) provide much university funding. The Japanese professoriate has thus focused little on socially or economically targeted research. Indeed, faculty at national universities could not legally accept industrial funding until quite recently. And although universities enjoyed high prestige and influence on industry through placement of students, research collaboration with industry was absent. Japanese policy had created an R&D structure of closed loops: Industry was connected to MITI; universities to Monbusho. Collaboration between the loops was difficult, for Japanese and non-Japanese alike.

A turning point

For the past decade, there has been intellectual turmoil in Japan's S&T policy. Although on the surface there has been continuity, with some modest policy change, many of the underlying assumptions have been called into serious question as irrelevant or obsolete.

Today, the discontent is openly visible. Many Japanese now complain that the predictability of Japanese society, industrial structure, and public policy have bred a climate of institutional rigidity that the country can ill afford. One target of criticism is R&D priorities, long defined by MITI, STA, and Monbusho. Other ministries with important responsibilities-for roads, housing, health care, and the environment-now challenge the policy hegemony. Japan is no longer poor, they note, so there is no justification for limiting funding to a few select industrial channels or focusing on products that can be exported to the West. More broadly, the degree of power the system has conferred on a small set of decisionmakers has begun to chafe.

Another structural feature under attack is the pattern of research funding and management. The flow of monies from Monbusho to universities and individual professors has long resembled an entitlement system. Professors receive a research stipend automatically, and there is little peer review. Complaints are increasing that the system has neither rewarded excellence nor punished mediocrity. A byproduct, many say, is timidly chosen research topics that excessively also favor applied work. The strategy is now under fire as one that commits Japan too heavily to an agenda of only incremental progress and one that will doom it over the long term to dependency on overseas sources of basic science. An analogous criticism is made of industry. Because R&D has been highly concentrated, few new technology-based firms have arisen. Against this backdrop, younger scientists and engineers bemoan a hierarchical pattern of control over the country's technological agenda by the most senior researchers and are pushing for a more egalitarian, open, and mobile career environment.

But the single most dramatic indicator of something amiss in Japanese S&T materialized in 1992, when private R&D expenditures decreased for the first time in decades. The upward trajectory of corporate R&D had appeared unstoppable, a factor routinely cited in the West as one of the underpinnings of Japan's commercial success. Many observers believed that the decline was merely a short-term symptom of Japan's downturned economy. But when reductions continued through 1995, it prompted discussion of underlying structural weaknesses. Policymakers suddenly began to perceive a vulnerability in what had been seen as a strong suit. This possibility was particularly troubling because Japan's leadership had presumed that heavy private funding would stabilize R&D against the vagaries of public funding and politics that bedeviled other countries, notably the United States.

Japan's view of international technological relations is changing as well. Since World War II, Japan's technology policy has been driven by the overseas forces it was trying to catch up with. Apparent technological equality, or even Japanese superiority, which suddenly loomed in the 1980s, came as a shock to Japanese and Westerners alike. Although each nation continues to be obsessed with surveys that show which side is "ahead," together the data indicate a useful parity more than anything else. The new policy movement indicates that the Japanese are beginning to break out of an ingrained inferiority complex. It's not at all clear that Americans are as ready to discard their sense of technological superiority, however. This will have to change if the United States is to adjust to the new reality.

Americans first need to discard the assumption that Japan will simply follow a U.S. led agenda.

Opinion is also shifting on the question of where Japanese technology belongs on the scale that runs from truly innovative to largely derivative. Many Japanese and Westerners have accepted the argument that Japanese scientists, technologists, and their companies have taken a free ride on the accessible R&D of the West. Americans frequently argue that Japan owes an outstanding debt that has come due. Meanwhile, the Japanese want to rid themselves of the stereotype. Right or wrong, these attitudes are affecting how Japan turns the policy corner.

Tensions in this policy area have been exacerbated by attempts by U.S. officials to right the perceived international imbalance in R&D, particularly in public projects. Some awkwardly mounted initiatives have left a residue of frustration. In the case of the superconducting supercollider, for example, the United States approached Japan for "cooperation" (that is, funding) only after it became clear that Congress would not foot the bill. Later, Japan's proposal to fund a large international cooperative research program in intelligent manufacturing systems (IMS) was initially dismissed by one U.S. official as a veiled attempt to gain access to U.S. technology, and it had to be entirely restructured.

Another factor that could significantly change the U.S.-Japan relationship is the increasing integration of Asia. In 1993, for example, 47 percent of Japan's technology exports went to Asia, far outpacing the 30 percent going to the United States. In the same year, 12 times more Asian than American scientists and engineers came to Japan. The gap continues to widen and will make the United States much less the focus of Japanese S&T.

New policy directions

Japan's handling of its turning point in S&T policy has progressed in two stages. The first stage, from the mid-1980s to the mid-1990s, was basically accommodationist, a reaction to foreign complaints. The second stage, from the mid-1990s into the 21st century, is moving toward deep-seated and independently generated reforms.

The first stage was characterized by some counterproductive interchanges. The foreign critique, loudest from the United States, charged that Japan had not contributed its share to the basic science from which technology is developed and that its technological enterprise was impenetrable to outsiders. Japan responded by offering funding for a number of international cooperative projects. These included the IMS project, the Human Frontiers Program in biology, various energy and environmental projects, and space and defense cooperation with the United States. But the efforts did little to alter the domestic R&D structures or improve external realtions. IMS offers a cautionary example. Because the Japanese had excellent manufacturing processes, they thought that their proposal to fund IMS research abroad would provide some pay-back and reduce the free-rider criticism. But U.S. officials, piqued by the haste and lack of coordination, characterized the early initiative as an effort to buy U.S. research. After several years of negotiation, a regional funding scheme was developed in which Japan, North America, and Europe all operated distinct programs that were only loosely linked. The good side of the IMS story is the much-increased communication among firms and between industry and government. The unfortunate result is the lack of government support. The United States spent barely a dime to support its program, and Japan did little to improve its domestic policy.

Japan met the second criticism of its 1980s technology policy-that its technical enterprise was impenetrable-with attempts to internationalize programs by opening them up to outsiders. For example, the Japan Society for the Promotion of increased its fellowships that place foreign scientists and engineers in Japanese universities, research institutes, and corporations. Foreigners were also admitted to the university professoriate. But the number of scientists and engineers from Western countries entering Japan did not increase dramatically.

In retrospect, the international research collaborations and the limited opening of positions to outsiders were salutary moves to pacify Western criticism, but they by no means produced a sea-change in Japan's S&T policy. Fundamental change must rest on a more compelling rationale.

Japan's policymakers now realize this and have set out to more fundamentally transform the structure of their nation's S&T policy. Five broad shifts are in progress:

A renewed national commitment to S&T, accompanied by steep increases in R&D funding. Evidence of this change materialized unmistakably in 1995 with the passage of a new Basic Law for Science and Technology, which pertains to the government's responsibilities. Although the actual language of the legislation does not sound radical, the mere passage of such legislation is a wakeup call. It explicitly recognizes the need for increased government support for S&T and thus elevates the priority of this area in budgetary debates. It also makes S&T a responsibility of all levels of government and all ministries, so it may well provoke a more egalitarian distribution of resources. Important consequences such as these will unfold over the next several years under a new Science and Technology Plan, mandated by the law and put into effect in mid-1996. This plan will begin to alter the government's administrative structure and budgets.

The most visible and discussed feature of the plan is a pledge by the government to double public R&D expenditures. Although it is not yet clear how long this will take, there is strong consensus that it should be accomplished within a decade. R&D increases of such magnitude would put Japan on a growth path that is steeper than that of any other country.

A new balance between public and private funding. Although at no time in the foreseeable future will public funds surpass private, the plan notes that Japan can no longer depend on the private sector to the same extent as before to fuel the nation's R&D. Japan thus intends to move toward even greater public funding at a time when many other countries are going in the opposite direction. In the United States, government funding of S&T R&D has slipped to about 40 percent of the total and continues to drop.

Broader R&D goals that include more socially relevant work. Japan currently devotes a smaller share of its R&D to health than does any other major country. Areas such as this are likely to receive greater attention. In addition, the character of R&D is charted to shift from applied research toward more basic research. Indeed, the framers of the Science and Technology Plan-representatives of the various ministries, plus top industry and university technology leaders-actually intended a quantum leap in the level of basic research across all areas, from materials science to genetics. They hope a jump will occur in industry as well and serve as a springboard for Japan to launch more radical innovations than in the past.

Closer ties between universities, industry, and government. The administrative relationship among the major research sectors is being closely scrutinized for restructuring. Within the past two years, for example, MITI has begun to fund university work, primarily with research grants from the quasi-independent New Energy and Industrial Technology Development Organization (NEDO) on a wide range of energy, environmental, and industrial topics. The highly enthusiastic response engendered thus far may indicate the beginning of a new partnership between the universities and industry, as well as new cooperation between MITI and Monbusho.

The development of a new institutional style. Perhaps the least tractable, most culturally imbedded problem to overcome is the attitude toward authority and institutional structure. Much discussion and a wide variety of initiatives are being considered to change this dimension. Peer review is being studied and experimentally applied as an alternative to the traditional system of institutional grants. Personnel mobility is being enhanced through more short-term appointments and possible career tracks outside the lifetime employment commitments that have characterized all large Japanese institutions. And the freedom to pursue open-ended creative research has been pioneered in some unusual funding arrangements that give researchers virtually free rein. Initiated by the Exploratory Research and Technological Opportunities (ERATO) program in STA, this concept seems to be spreading.

What it means for Americans

The strongest signal coming from Japan's policy reform is that S&T will be more important than ever in Japan's future. Already the world's second biggest R&D performer, Japan will move further ahead of its European counterparts and closer to the United States as a result of government increases in R&D, plus the inevitable rebound in industrial funding. Given the sheer quantity of work Japan will be supporting, the U.S. government and its corporations, universities, and even its individuals would be wise to intensify their engagement with Japan to take advantage of the results.

To successfully engage Japan, Americans first need to discard the assumption that Japan will simply follow a U.S.-led agenda. Turning to Asia is a growing temptation, and the tensions over issues of trade, funding, and internationalization provide a certain motivation. Furthermore, Japan's technological independence will increase its value to the United States. There will be more innovation to tap, but the United States will not be able to mine it with yesterday's strategies.

Ironically, the path that probably holds the most promise is nongovernmental. True technological cooperation at the cutting edge is best achieved between individual companies, universities, and people. Both governments need to face the reality of their diminished power. In addition, the United States should discard its tendency to insist that Japan remake itself to suit U.S. policy objectives, and Japan needs to work to break down the walls that impede external cooperation in its government, university, and industry R&D systems.

The cooperative approach most likely to result in mutual benefit is small-scale and particular. It focuses on individuals rather than institutions, side-by-side collaboration rather than arms-length exchanges, and long-term partnerships rather than short-term contracts. For government, this means avoiding big projects. Instead, the governments should help companies on either side of the Pacific to join forces on specific research items and help academics join in specific pieces of research. One model for this role was the National Research Council's U.S.-Japan Manufacturing Research Exchange Program in the early 1990s, which provided a charter for institutions and individual researchers to identify and pursue collaborative possibilities.

The U.S. government can also craft public policy that sets the right climate within which private relationships can flourish. It should operate as an intermediary that brings people together and as a funder that supports focused joint research projects. These efforts could be catalyzed by a U.S. secretariate that seeks opportunities to set up collaboration or by secretariates within specific programs that foster joint work. To some extent, this pathway has been pursued at the Department of Commerce under various cooperative agreements. But the Commerce Department resources could well be multiplied many times and even then would not come close to what Japan spends on parallel activities.

The United States can also improve integration between nations just by preserving its traditional open doors. Many government-funded industrial consortia could benefit from being opened to foreign firms that are capable of making technological contributions, whether or not their home countries reciprocate, which is now typically a legal condition of participation.

Another key to leveraging the rising tide of research in Japan is to get more U.S. people inside Japanese R&D programs. There are already enough fellowships and grant money for these undertakings. A real obstacle is that for many people in industry and academia there is no incentive to go to Japan. A three-year stay, for example, is often seen as an interruption in a U.S. professional's career path that would go unrewarded in companies or universities. If CEOs and department chairs would recognize the value of such knowledge and create career tracks that reward it (say, a vice presidency of international research or more joint international labs) more people would be interested. Companies can also integrate into Japanese programs by staffing an international division with people whose job it is to scout out opportunities in Japan. This is precisely how the Japanese have leveraged U.S. research.

The path that holds the most promise is nongovernmental. True cooperation is best achieved between individual companies universities and people.

Because societies do not change overnight, liberating the many dimensions of the U.S.-Japan technological relationship will be slow. What has been suggested here is not so much an acceleration as a new trajectory for change. In the old trajectory, the United States wanted Japan to be like the United States, and Japan wanted to emulate the United States in order to catch up. It's time to discard those notions and realize that Japan must go its own way. If the United States wants to keep its current level of cooperation with Japan and even increase it, it has to build a relationship based on the new operating principles of Japan's parity and independence. Japan seems more ready than the United States to craft the new trajectory. At least, the Japanese talk about it more. Because Japan will continue to represent the United States' most important technological relationship, both as partner and rival, Americans should start listening, and talking more themselves.

Recommended reading

Lewis Branscomb and Fumio Kodama, "Japanese Innovation Strategy," Harvard University Center for Science and International Affairs, 1993.

George R. Heaton Jr., "Advanced Technology Progams: Current Practice in the United States, Japan, and Europe," report for the OECD Directorate of Science, Technology, and Industry, Paris, 1997.

George R. Heaton Jr., "Global Technology Policy: Is the U.S. Ready?" Issues in Science and Technology, Fall 1991.

Japanese Technology Evaluation Center, "Japan's ERATO and RESTO Basic Research Programs," Loyola College International Technology Research Institute, Baltimore, Md., September 1996.

White Paper on Science and Technology 1995. Science and Technology Agency of the Japanese Government, Japan Information Center for Science and Technology, Tokyo, Japan, 1996.


George R. Heaton, Jr., is a professor of management and social science at the Worcester Polytechnic Institute in Massachusetts. He has taught science and technology policy in Japan and served as a consultant with many Japanese institutions.