This document summarizes recent economic trends and policy changes in Japan and discusses their impact on the information and communications technology sector. It notes that the Japanese government has implemented fiscal stimulus and monetary easing policies under Prime Minister Shinzo Abe to end deflation and promote growth. Telecom carriers are moving to provide cloud services as major tech companies operate their own data centers. Electronics makers are struggling with losses but pursuing new strategies around automotive, appliances, and transforming company culture. The future may bring regulatory reforms and challenges for tech vendors to create new services and business models.

1. May 6th, 2013
Harry Takeichi
1
ATIE 2013
New Delhi
Cloud Impact in Japan
~ Government, Carriers and Vendors ~

2. 2
Can Japan end ‘Lost Decades’?
ABENOMICS is making psychological upturn
J-Yen/1USD Rate
79 99
(Nov.13, 12) (Apr.24, 13)
NIKKEI Stock Average
8,661 13,766
(Nov.13, 12) (Apr.23, 13)
LT Interest Rate
0.73% 0.32%
(Nov.13, 12) (Apr.5, 13)
 Fiscal: Big Gov’t Investment in infrastructure
( 2 Trillion USD for Resilient-Japan Project)
 Monetary: BOJ targets 2% inflation by 2years
BOJ supplies double money to market
 Growth: PM leads growth measures & deregulation
TPP, EPAs (EU, RCEP, China/Korea)

3. 3
Economic Growth Scenario
Unprecedented Experiment
Kuroda, the Governor of BOJ explains 2%
(inflation) in 2years, 2 times of money supply.
Ends Deflation?
Promote ICT Solutions for issues i.e. Energy,
Aging, Food and Environment
Government makes big public Investment
to social Infrastructure
ICT Deployment to
Social Infrastructure
 Spending & Investment maybe stimulated….
but
 Will competitive products & services emerge??
TPP, Japan-EU EPA
Japan/PRC/Korea
RCEP(ASEAN+6), TISA
- Drastic De-regulation?
- Lower Corporate Tax?
Government Task
Forces for Growth

4. 4
Mikitani-Paper
~ New Japan KPI Proposal ~
Mr. Mikitani, president of Rakuten, proposes new national KPIs for
new business innovation by IT at the Council for Industrial
Competitiveness
 Repeal ‘Face to Face’, ‘Written Document’ Rules
WEF
‘ICT Regulation Ranking’
42  10 or upper
New KPI
 Internet/ICT ‘Autobahn’ Policy - Speed (Fixed/Mobile)
- Autobahn=no speed limit/no fees
LTE 7.1M/s 
World Fastest
Almost Free
(or Nationalized)
 Cloud Service Expansion
- Cloud Service % to Government IT spending
- Government Service Cost /GDP
25% by 2018
23.1%  20% or less
 Encourage Engineers & Ventures
in Number / Quality / Tax
-Number of IT engineers
- Foreign IT Experts entry
with working visa/year
- Start-ups ratio
0.9mil 2mil
2,85220,000
3.2% 10%
Present  Target

5. 5
Mikitani-Paper
~ New Japan KPI Proposal ~
Mr. Mikitani, president of Rakuten, proposes new national KPIs for
new business innovation by IT at the Council for Industrial
Competitiveness
 Repeal ‘Face to Face’, ‘Written Document’ Rules
WEF
‘ICT Regulation Ranking’
42  10 or upper
New KPI
 Internet/ICT ‘Autobahn’ Policy - Speed (Fixed/Mobile)
- Autobahn=no speed limit/no fees
LTE 7.1M/s 
World Fastest
Almost Free
(or Nationalized)
 Cloud Service Expansion
- Cloud Service % to Government IT spending
- Government Service Cost /GDP
25% by 2018
23.1%  20% or less
 Encourage Engineers & Ventures
in Number / Quality / Tax
-Number of IT engineers
- Foreign IT Experts entry
with working visa/year
- Start-ups ratio
0.9mil 2mil
2,85220,000
3.2% 10%
20.3%
20.3%
25.3%
21.2%
Government
Service Cost /GDP
Designate 25%($20Bil) of
government services
to shift to cloud in 2011
By 2015, 50% of Central
Government’s new IT
spending must be shifted
to cloud
Present  Target
Present Target
By 2015
11.1%
11.5%
Start-ups % (2008)

6. Telecom Operators make Good Profits,
Electronics Makers make Huge Losses
(15)
(10)
(5)
0
5
10
15
20
Automobile
Pharmaceutical
Machinery
Food
Chemical
PrecisionInstrument
Non-ferrousmetal
PulpPaper
Textile
Shipbuilding
Oil
Steel
ElectricEquipment
Trading
Telecom
Service
RealEstate
Retail
Gas
Construction
LandTransportation
MarineTransportation
Profits of listed companies for Apr-Sep, 2011 vs 2012
(not including Power and Monetary industry)
2011 2Q 2012 2Q
US$ Billion
Manufacturing non-manufacturing
(Source: Nikkei)

7. 7
Who is your rival?
~ Interviews with Carrier Tops ~
‘Customers’
as a fast-changing
marketing target
‘Silicon Valley’
as a innovative group of synergy
‘Verizon Communications’
as a cloud servicer

8. 8
Verizon Show at CES 2013
~No Phones There~
Running shoes that
Uploads runners data
without smartphone
Foot ball helmet that
uploads detailed data
of shock for players
so that a team can
monitors their health
Trash can in Allentown, PA, advises city
sanitation department of the suitable
timing to be emptied so that garbage
truck routes can be optimized Heads-up PC that makes
a worker`s both hands free
Plug-in On Board Diagnosis
(OBD) module that gathers
various car data so that
rental-car company monitors
for efficient maintenance

9. 9
NTT DoCoMo keynote at MWC 2013
~ $11B revenue from New Business in 2015~
Mr. Kaoru Kato
(President, 2012- )

10. 10
Why carriers move toward Cloud
1. Network Concept has changed.
Services are provided by Data Centers (not by network nodes)
IAAS
SAAS
DC
DC
DC
PAAS
Cache Server
for popular
video contents
2. Major OTT players own & operate dedicated DCs and backbone network, that
push telecom carriers down to access conduit and deprive their revenues.
Global WAN to
connect own DCs
DC
IX
IX
Peering with ISPs
ISP
ISP
ISP
Telecom Carrier
Job Scope
DC
DC

11. 11
NTT Invests to transform
themselves to a CLOUD Player
‘Be A Valued Partner of Inter-service’
 Focuses ‘Global Cloud Services’ as its core business
 Supports Business Model Innovation and Quality Life Style
 Further expands Overseas business (US$20B revenue by 2017)
 Acquired
Mr. Satoshi Miura
(President, 2007-2012)
Mr. Hiroo Unoura
(President, 2012- )
‘Driving for Service Creation Group’
 Focuses on Solution Services Creation
 Expands Overseas Business (US$10B revenue by 2012)
 Acquired

12. Acquisitions to be a Cloud Player
Ms. Meg Whitman
(President & CEO)
US$1.6Billion by HP
(2007)
US$13.9Billion by HP
(2008)
Mr. Glen F. Post
(CEO)
US$2.5Billion by
Century Link (2011)
Mr. Lowell McAdam
(Chairman &CEO)
US$1.4Billion
by Verizon (2011)
US$0.445Billion
by Verizon (2007)

13. 13
ICT Value Shifts Rapidly
Connecting
A with B
Easy Access to
Information
Search
Information
Sharing
Information
Mobile BB Internet
with intuitive UI
smartphone
Utility IT Service
(Public Cloud)
Convenient
Shopping
Behavior / Preference Analysis
& Target Marketing
Solution
- Single Answer
( find my best one
from crowdsourcing)
- Intelligent Answer
(avoid known failures)
Delightful Experience
- Impossible to Possible
- Unaffordable to Affordable
- More Human-front Services
(ICT-innovated analogue services)
- High Social Value
Game Changer, Black-box
- Creation of Industry, Market, Social Structure
- Users can be Servicers by sharing their own resources

14. 14
Competition of Customer Experience
~ Retail Market in Japan~
 Pleasure like mall
window shopping
Logistics Centric
- minimum delivery time by its own huge warehouse
- Support purchase decision by personalized line-up
Active Tenants Centric
- Ultimate support to tenant shops
 Pleasure to make the
simplest shopping with the
quickest delivery and long-
tail line up.
 Face to face interaction with real human clerks
ease and pleases net- phobia customers
Human Service centric value
- Shop clerks’ face to face support service
- Internet order with pick-up / layaway at shop
- outsourcing for home kitchen/fridge & store
- Multi-purpose hybrid terminal
(ATM, Government Service, Entertainment tickets etc)
Cost and After-Sale Service Centric
- Networking local SMCs as decentralized warehouse
and sales-support resource
- Strong ASKUL’s B2B (wholesale and logistics)
- Yahoo’s attracting portal and auction
 Pleasure to make
the most economical
shopping

15. Telecom Operators make Good Profits,
Electronics Makers make Huge Losses
(15)
(10)
(5)
0
5
10
15
20
Automobile
Pharmaceutical
Machinery
Food
Chemical
PrecisionInstrument
Non-ferrousmetal
PulpPaper
Textile
Shipbuilding
Oil
Steel
ElectricEquipment
Trading
Telecom
Service
RealEstate
Retail
Gas
Construction
LandTransportation
MarineTransportation
Profits of listed companies for Apr-Sep, 2011 vs 2012
(not including Power and Monetary industry)
2011 2Q 2012 2Q
US$ Billion
Manufacturing non-manufacturing
(Source: Nikkei)

16. 16
FY2011:1us$=80yen
FY2012:1us$=94yen
0
20
40
60
80
100
120
140
Revenue
2011 2012 (Forecast)
US$ Billion
-10
-8
-6
-4
-2
0
2
4
6
Net Profit / Loss
2011 2012 (Forecast)
US$ Billion
All-Rounder ICT Consumer
Electronics
All-Rounder ICT Consumer
Electronics
Japan Electronics - Financials

17. 17
Panasonic
Net loss
2011 ($9,652M)
2012 Forecast ($9,562M)
Sharp
Net loss
2011 ($4,700M)
2012 Forecast ($5,625M)
1US$=80yen
Mr. Tsuga, president of Panasonic,
targets $20Billion automobile related
revenue in 2018. Assuming $70-80B
of total Panasonic revenue in 2018,
automobile and house related revenue is
expected to consists its majority.
Mr. Okuda, president of Sharp, tries to change its culture of
growth by one-strong-product. He aims to become a leading
hitter from being a slugger (home-run hitter).
2012 Financial Fiasco Drives Them to Different Places
Sony
Net loss Net Profit
2011 ($5,708M)
2012 Forecast $250M
Mr. Hirai, president of Sony, commits to revive original Sony DNA,
which product stimulates peoples curiosity and move users
emotionally.

18. Marketing
 Real Value oriented
 Differentiate from competitors
 Statistic Analysis of Point of Use
(Big Data)
 Co-creation with partners
Software Developer / Systems Integrator
 Vendors deliver service  Deliver complete software
 No more huge scale effort basis contract
 Vendor continue to develop while it is on service (No
user requirements. Nobody knows final specification)
 Mashup and Customization service business will grow
18
Tough Paradigms for Vendors
Servers / Storages
 20% of servers sold world-wide is
bought by
 design servers and
manufacture them by ODM
 Low power consumption is a key
ARM processor server  Intel,
SSD (Flash memory drive) HHD
Network Platforms
 Generic LSI  Customized LSI
 make 10GPS
OpenFlow switch by themselves
Data Centers
 Standardize specs of DC
=> DC as commodity
 DCs Interworking and service
orchestration is key technology
 Scale-out  Scale up
( 15,000 servers/ 1 operator)
DC
DC
DC
PAAS SAAS
IAAS
Terminals
 Voice I/F on all things
 Terminals For illiteracy
(48% of Indian people )

19. Conclusions
- Government: - Regulation reform for
new business emergence &
government cost reduction
- Telecom: - Cloud-infra (DC/Platform) Provider
 Total Application Servicer
- Service: - Social value oriented
- Human-oriented service
- ICT Vendors: - Tough time for restructuring ….
- Higher Technology  Service Value
- Seeking for new value by
vertical integration

20. Thank you
नमस्ते
Namaste
Harry Takeichi
takeichi@ciaj.or.jp