Japan’s 29th Place IMD Digital Competitiveness Ranking, Explained

Japan’s 29th Place IMD Digital Competitiveness Ranking, Explained

Japan came in 29th place in the World Digital Competitiveness Ranking for 2022, a slide of 7 placements from their best finish in 2018 in 22nd place. 

We take a look at how the global digital competitiveness ranking is calculated, the factors that contributed to Japan’s digital competitiveness ranking, what the government is doing in response, and the subsequent opportunities for businesses looking to shift to virtual. 

What is the IMD World Digital Competitiveness Ranking? 

For the past 30 years, IMD has analyzed how nations lay the groundwork for future growth, with the Digital Competitiveness Ranking, an offshoot of their annual World Competitiveness report. 

The Digital Competitiveness Ranking assesses the ability of 63 economies to adopt and explore digital technologies to create economic transformation within business, government, and across all societal sectors.

Now in its sixth year, the Digital Competitiveness report examines the readiness of countries to adapt to advancing trends throughout the world, as well as attitudes toward globalization and e-government. 

Countries are ranked by how they fare in the following 3 categories: 

  1. Knowledge

  2. Technology

  3. Future readiness

Digital Competitiveness Factors and Sub-factors
Image source: IMD World Digital Competitiveness Ranking

Each of the factors is further divided into subfactors to create 54 criteria by which each country earns a score and a total overall rank. 

Criteria include hard data (e.g., Internet bandwidth speed) and soft data (e.g., company agility). Hard criteria represent 2/3 weight, and survey data represent 1/3 weight.

2022 rankings: Japan’s 29th placement

A total of 63 countries were ranked in 2022’s World Digital Competitiveness Ranking.

Of the 63 countries examined, Japan ranked 29th in 2022, falling one placement from their 28th place finish in 2021. Their best showing came in 2018, with a 22nd-place finish. Other Asian countries finishing ahead of Japan include South Korea in 8th, Taiwan in 11th, and China in 17th.

Global Competitiveness Ranking 2022
Image source: IMD World Digital Competitiveness Ranking 2022

Of the 14 Asia-Pacific countries ranked, Japan scored 8th overall in Asia, with their best Asia-Pacific ranking at 7th in 2018 and 2016. 

Asia Pacific Digital Competitiveness Rank 2022
Image source: IMD World Digital Competitiveness Ranking 2022

Looking at individual score components, Japan ranked last (63/63) in the following categories: 

  • 63rd in Talent: International experience

  • 63rd in Business agility: Opportunities and threats

  • 63rd in Business agility: Agility of companies

  • 63rd in Business agility: Use of big data

There were a few bright spots: Japan ranked 1st in pupil-teacher ratio (training and education), 2nd for wireless broadband, 2nd in world robots distribution (business agility), 2nd in software piracy, 4th in high-tech patent grants (scientific concentration), and 4th in robots in education and R&D (scientific concentration), 4th in E-participation, and 5th in Educational assessment PISA - Math.  

Japan's digital competitiveness score, overall performance
Image source: IMD World Digital Competitiveness Ranking 2022

Japan’s technology factor improved in all subfactor categories compared to the previous year’s ranking. However, the knowledge and future readiness factors have declined.

The knowledge factor is comprised of talent, training and education, and scientific concentration. Of these sub-factors Japan’s talent score is the most telling. The Ministry of Economy, Trade and Industry (METI) estimates that there will be a shortage of 450,000 information technology (IT) human resources by 2030, according to reporting by Kosukei Toshi, Nikkei’s DX editor.

Current initiatives to push digital competitiveness forward in Japan

Japan’s Digital Agency is focused on digitizing government processes and doing away with obsolete technology. For example, the government plans to abolish the hanko (personal seals) and streamline Japan’s notorious paper-based requirements, which earned Japan a 106th placement in the “starting a business” category of World Bank’s Ease of Doing Business rankings.

Additionally, the Digital Agency has been tasked with paving the way for digital measures, such as the expanded use of the My Number (Individual Number) system, including integration with driver’s licenses in 2024.

Other initiatives include government-funded business subsidies over the last several years to nurture this necessary digital evolution. 

Businesses looking to shed weight by transitioning some or all of their operations to virtual can apply to the following government subsidies.

  • IT subsidy. This program focuses on subsidizing software and IT solutions that improve office employee productivity, operations efficiency, and new customer acquisition. E.g., improving labor management systems and inventory management systems and software that promote business automation. The program subsidizes the cost of software and tools that cover any of these aims. Subsidy amount: up to 1/2 of costs with a limit of 4.5 million yen. 

  • Manufacturing subsidy. Among other aims, this program supplements the cost of capital investment for changes to work style, management innovation costs, improvement of production processes, productivity process improvements, etc. Subsidy amount: based on business size categories (up to 1/2 of investment for SME businesses; 2/3 of investment of small businesses, also dependent on further sub-categories that one applies under). 

In closing

Japan’s current digital rank is unimpressive, but what’s for certain—ready opportunities exist for foreign talent and digital-centered businesses that can help pull Japan into a better global digital competitiveness position. 

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