Japan and the Internet Revolution Ken Coates and Carin Holroyd Japan and the Internet Revolution Japan and the Internet Revolution Ken Coates College of Arts and Science University of Saskatchewan Canada and Carin Holroyd College of Commerce University of Saskatchewan Canada © Ken Coates and Carin Holroyd 2003 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2003 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world. PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–92153–4 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Coates, Kenneth, 1956– Japan and the Internet revolution/Ken Coates and Carin Holroyd. p. cm. Includes bibliographical references and index. ISBN 0–333–92153–4 (cloth) 1. Information technology–Economic aspects–Japan. 2. Internet–Economic aspects–Japan. 3. Internet–Japan. I. Holroyd, Carin. II. Title. HC465.I55C63 2003 384.3′0952–dc21 2003048065 10 9 8 7 6 5 4 3 2 1 12 11 10 09 08 07 06 05 04 03 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne To the memory of Klaus Pringheim, in appreciation of his gracious encouragement of our work and his infectious love for Japan. To the memory of Roger Boisvert, a Canadian entrepreneur who played a crucial role in the introduction of the Internet to Japan. We miss them both. Contents List of Tables viii Preface ix Acknowledgements xiii Introduction: The Tip of the Digital Iceberg 1 1 Uneasy Steps: Japan and the Development of the Digital Society 17 2 Japan.com: Government and the Promise of the Internet Society 41 3 The Ketai Revolution: Mobile Commerce in Japan 68 4 Japanese E-Commerce 90 5 The Digital Face of Japan: National Dimensions of the Internet Revolution 124 6 Reflections on a Networked Japan: Japan and the Future of the Digital Revolution 149 Notes 174 Select Bibliography 190 Index 194 vii List of Tables 1.1 Computer hardware investment, US and Japan 27 1.2 Japanese Internet users, 1997–2002 36 2.1 E-Japan targets 58 2.2 IT difficulties facing local government 61 2.3 Preferred e-government services for development 62 4.1 Top 10 web advertisers in Japan, February 2002 94 4.2 Softbank holdings (selected), September 2000 104 4.3 Business to Consumer (B2C) e-commerce, Japan and the US compared, 1998 109 4.4 B2C e-commerce, selected countries 109 4.5 B2B e-commerce revenues in Asia, 2000 and 2004 110 4.6 E-commerce revenues and estimates revenues in Japan, B2C and B2B, 2000–2004 121 4.7 M-commerce and B2C online trade in Japan 122 5.1 Computer access (computers per 100 people) 134 5.2 Internet users in Japan, 2000–2004 134 5.3 Japanese access to the Internet, 2000 135 5.4 Internet hosts, by nation, 2000 135 5.5 Network domains, 1999 136 5.6 Internet users as a % of the population, 2000 136 5.7 People with Internet Access at Home, 2000 137 5.8 Mobile Internet users, 2000 137 5.9 Internet usage, selected countries, February 2001 138 5.10 Top 10 web properties in Japan, February 2002 139 5.11 Frequently used web-sites, Tokyo, 2002 140 viii Preface Japan and the Internet Revolution seeks to explain Japan’s unique and fas- cinating entry into the Internet age. After lagging years behind North America, Europe and other industrial regions in identifying the oppor- tunities presented by the Internet, the country rallied around the new technology in the mid-1990s and forged a most unusual ‘networked’ society. Private use of the Internet is now more commonplace in Japan than, by some standards, any place on earth. Tens of millions of Japanese surf the web via their telephones. A crammed commuter car in Osaka or Tokyo typically hosts a dozen or more users of the mobile Internet, or keitai. While personal computer user remains compara- tively small, Japan consumers are capitalizing on broadband installa- tions, navigating through traffic in Internet-connected vehicles, working with machines connected to the Internet, or shopping in vibrant e-commerce and m-commerce markets. The idea for this book arose during our first extended visit to Akihabara (Electric Town) in Tokyo. This small corner of one of the world’s most fascinating cities had surrendered itself to the digital age. As is described in the Introduction, Akihabara is a digital ‘temple’, mar- keting computers and related electronic products with a verve and ferocity not evident in most other countries. One of us is a self- declared Internet junkie, devoted to staying at the forefront of the digital revolution and intensely fascinated by the marriage of the Internet and national culture which has occurred in Japan. The other, a casual user of the Internet but a specialist in Japanese business and political economy, was intrigued by the evident gap between that encountered in Akihabara and portrayals in the western media of a national economy caught in the grips of despair and deflation and lacking the innovative capacity to join the ‘New Economy’. Thus began this exploration of the digital revolution in Japan and, more specifically, of the evolution of the Internet in the Land of the Rising Sun. The digital phenomenon is so recent and so complex that this book aims to provide an overview of a diverse and rapidly chang- ing Internet environment, striving to offer context and a general analy- sis rather than the kind of detailed statistical, technical, economic and sociological investigations which will inevitably be done. The book seeks to draw the broad outlines of a transformation in process and to ix