The Journal The Authority on Global Business in Japan

According to Google Director of Engineering Ray Kurzweil, the point at which our world will be irrevocably changed by artificial intelligence (AI) is near. In 2005, the futurist predicted that computer intelligence will surpass that of the human brain by 2020, and that by 2045 the two will merge in an event he calls the Singularity.

Since the 1990s, Kurzweil has made 147 predictions and has an 86-percent accuracy rate. Among these are that, by 2019, paper books and documents will become almost completely obsolete, creative AI will be able to create complex art and music, autonomous vehicles will dominate roads, and language translation machines will be routinely used in conversation. While advancement in these areas may fall short of a complete transition by 2019, all have come true ahead of schedule. So, his prediction that the manufacturing, agriculture, and transportation sectors will be almost entirely automated by 2029 is one that businesses would be wise to heed.

As we make our way through this transition, challenges lie ahead for both business and government. How can companies put AI to work in ways that help them survive market changes, increase profits, and benefit customers? How can lawmakers set rules that foster innovation, protect individuals, and avoid unforeseen consequences when they do not fully understand the technology?

Kurzweil predicted self-driving cars would rule the roads by 2019.

DIALOGUE
As Mari Matthews, chair of the American Chamber of Commerce in Japan (ACCJ) Government Relations Committee and head of Government Relations at AIG Japan Holdings sees it, the most dangerous gap is that the pace of AI and Big Data governance progress do not match the traditional process of lawmaking. “To that end, it is beneficial for both the private sector and government to have more rigorous discussions and usage of the regulatory sandbox to test certain products which use AI and Big Data,” she said.

The scope of technology discussion is changing compared with that of the 20th century according to Megumi Tsukamoto, director of Government and Corporate Affairs, Japan, at Caterpillar Inc. and co-chair of the ACCJ Digital Economy Committee. “Currently, data is viewed as an important asset by almost all countries and companies. We should take trade, data protectionism, and national security policy into consideration when we set digital-related policy, including in areas such as AI and Big Data.”

Parker J. Allen, president and CEO of lobbying and PR agency Parthenon Japan, believes there is hope for improved dialogue between the two sides. “In government relations, policy communication in highly technical areas represents a particular challenge, because there are situations where politicians and even company representatives sometimes do not fully comprehend what they are discussing,” he told The ACCJ Journal. “There is a lot of frustration, especially among tech firms, that they can’t quite get their point across. But I am optimistic that Japan’s new generation of rising politicians are quickly becoming well-known for advocating proactive innovation policy.”

At the 2016 G7 summit on Kashiko Island in Mie Prefecture, then-Minister for Internal Affairs and Communications Sanae Takaichi proposed setting basic rules that would govern AI globally based on eight principles that Japan believes are key to managing its application. “The development of AI is expected to progress at a tremendous pace of speed, and it should be amazing technology that does not give anxiety to people,” she told reporters at the summit.

AREAS OF IMPACT
Leading companies across the board have already embraced AI, in every field from agriculture to finance. “I don’t see AI as some surprising new thing,” Allen said. “Rather, it is simply generating more buzz now due to the rise of self-driving cars and talkative virtual assistants.”

While those examples may be some of the most visible, AI is now being applied in areas of daily life that will become increasingly apparent as society ages.

Yutaka Iwahori, director at specialist Japanese government relations advisors GR Japan, sees distribution and services—particularly in healthcare and mobility—as being most dramatically impacted.

“In healthcare, I wouldn’t expect AI to replace doctors; rather it will increasingly help in areas such as diagnosis,” he said. “I would also expect AI to be applied to areas where traditional service industries are facing difficult structural challenges, such as shortages of drivers and nursing care providers, where real-time matching of supply and demand—and dynamic pricing—can make a big contribution. Big Data and AI also open up new possibilities in mobility as a service (MaaS), for example in optimizing efficiency between different modes of transport.”

But Allen doesn’t see AI as a cure-all. “One of my concerns about AI is that it is often referenced in Japanese legislative circles as an alternative to immigration. While self-driving cars and care robots might be able to alleviate some of the issues that face Japan’s aging society, it is far more practical to increase the flow of immigration.”

Lawmakers, he pointed out, have begun to embrace this reality with the announcement in May that Japan will accept 500,000 foreign unskilled workers by 2025 in five key sectors hit by labor shortages. Under the plan, those working in agriculture, construction, lodging, nursing, and shipbuilding could stay in the country for up to five years.

“However, Japan’s limited-term approach to immigration will continue to cause problems, and the AI-powered alternative will not come to the rescue fast enough,” Allen warned.

Morio Sotsu, a public policy consultant in the Public Affairs Division of public relations agency Vector, Inc. added: “The rate of aging and labor-force reduction are statistically reliable predictions, but we cannot measure the impact these will actually have on society by statistics alone. Therefore, dialogue between businesses and government becomes more important. However, this dialogue alone is not enough. Objective analysis and examination by third parties and academia is also required, as are public discussions.”

Agriculture is one sector that will be greatly impacted by AI.

REGULATION
AI has the potential to spur greater innovation and economic growth, but restrictions placed on the technology could have unintended consequences. Helping politicians better under­stand the potential impact is important, and knowing how to do that within the context of Japanese culture is a must.

“The Japanese legal system puts emphasis on solving existing social issues and realizing specific effects,” Sotsu said. “Ideas to regulate and nurture new developments in advance are lacking. Thus, from the business side, it is necessary to explain what effect new technology has on social tasks.”

As Iwahori explained, “In general, it’s fair to say that regulators tend to pay more attention to the risks than they do to the positive benefits of technologies. In Japan, when something goes badly wrong, the public is more likely to call the government to account rather than individuals. The natural response to that is to make strict regulations and to err on the side of caution—particularly with regards to new phenomena, such as AI,” he said. “It would help businesses to understand the concerns of lawmakers so they can react—for example, by preparing thorough responses on questions of risk—or even taking a proactive stance on self-regulation to ensure flexibility in the long run.”

Giving an example of how GR Japan supports different sectors do this, Iwahori cited transportation and lodging. “A company that wants to use AI and Big Data in the taxi industry would have to grapple with the restrictions of the Road Transportation Law, while hotel and home-sharing businesses have to comply with the Hotel Business Law,” he said. “Traditional business laws such as these were often created on the assumption that transactions take place either face-to-face or in writing. In practice, those are the sorts of challenges that make it difficult for some businesses to adopt innovative IT.”

Sotsu said that boosting public opinion is also necessary, and that businesses cannot rely on jargon. “To move the Japanese legal system, it is necessary to disseminate information to the public with easy-to-understand words and to gather the voices of actual beneficiaries.”

Despite the government’s best intentions, there can be challenges for companies in Japan who want to use AI and Big Data to provide new services, according to Iwahori. “The govern­ment understands the need to reform the mindset and processes that lie behind Japan’s detailed and input-based regula­tion or the so-called “Iron Triangle”—the close bond between regulators, industry associations, and legislators that forge Japanese law—but it’s not a simple task and it will take time.”

PROGRESS
Allen said he is closely watching the Japanese government’s actions on legislative initiatives related to innovation policy, sharing economy services, and cryptocurrency. “There have been positive developments. I am hopeful of the ratification of new legislation for a ‘regulatory sandbox,’ passed by the Diet in May, which lets the government suspend regulations upon request on a case-by-case basis.

“The Fintech sector is especially hopeful that this sandbox will allow for new technologies—including new platforms that use AI—to be tested without needing to wait years for regulatory reforms,” he said, adding that sharing economy services are also making inroads into greater legislative acceptance, even if the recent Airbnb purge (page 39) might suggest otherwise.

“To promote the use of AI in Japan, what is needed is not only rules on AI itself, such as rules on intellectual property rights or AI copyrighted material, but also regulatory systems that will help businesses that are either using or that want to use AI,” said Iwahori in closing.

“In addition, businesses need to be ready to discuss not only the benefits and utility of their technology, but to do so in the context of the policy goals that existing legislation has sought to advance, such as productivity and stable employment.”

As for AI-backed policy research and the drafting of legislation, Allen is certain that we will see this become reality in the coming years—even if it sounds Orwellian right now. “People in the legal profession are already saying that AI will move forward so quickly that systems themselves will be able to assess, diagnose, and respond to complex legal problems within the next decade. Perhaps we should start researching what kind of tea Vice Minister Alexa would prefer.”

Christopher Bryan Jones is Editor-in-Chief of The ACCJ Journal. Originally from Birmingham, Alabama, he has lived in Japan since 1997.
It is beneficial for both the private sector and government to have more rigorous discussions