Our Senior Japan Economics Advisor discusses Japan’s systematic
approach to AI and the lessons it offers for other markets.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Robert Feldman, Senior
Advisor at Morgan Stanley MUFG Securities in Tokyo. Today I’d
like to discuss Japan’s crucial contributions in global AI
development.
It’s Tuesday, June 17, at 2 PM in Tokyo.
Japan has always been a world leader in advanced technology
infrastructure and robotics. So it comes as no surprise that
Japanese devices and materials play critical roles in the global
AI supply chain. For investors, however, it's vital to understand
Japan's unique systematic approach to AI and the lessons it
offers other countries.
In Japan, AI has historically developed through this symbiotic
interaction of four elements: Hardware, Software, Data, and
Ethics. Japanese technology advances not only evolve, but they
co-evolve – meaning that advances in one element make advances in
others more urgent. And when those latter advances occur,
chokepoints arise in yet other elements. However, unlike
co-evolution in nature, where chance mutations just happen to
reinforce each other, co-evolution in AI is driven by human
intent. That is, humans see a chokepoint and address it with
innovation.
These chokepoints – or bottlenecks in development – they’re
crucial to the way we think about AI. Identifying the chokepoints
allows firms and industries to innovate. And Investors should
also pay particular attention to these chokepoints because that’s
where the investment opportunities are.
For example, at a recent event, we asked a medium-sized Japanese
retail food manufacturing company president – who is an energetic
AI advocate – which factor was the biggest chokepoint for his
firm. And he replied unequivocally, immediately, “Data.” His firm
has some data; so do his competitors. But there is no common
protocol for recording the data, contributing information to a
common database, and still maintaining anonymity. So clearly, the
chokepoint around Data suggests that this company will need
innovative data solutions so that it can then take advantage of
the other three key elements: the Hardware, the Software, and the
Ethics.
Ethics is crucial because people won’t use AI unless there is an
ethical basis. So in terms of this element – the ethics element –
Japan's commitment to ethical AI development has been very
flexible. On one hand, Japan has robust legal frameworks, like
the Act for the Protection of Personal Information and subsequent
amendments. These laws ensure that AI advances within a secure
and ethical boundary. And the laws are not just on paper. They
are actively enforced. A few years ago there was a landmark court
ruling that upheld data privacy against unauthorized AI use.
However, Japan also is flexible. The data rules are tweaked, to
allow more practical approach to developing large language
models.
Another unique part of Japan’s approach to ethics is the
proactive emphasis on AI literacy. From corporate giants to small
businesses, there is a concerted effort to train personnel not
just in the AI technology but also in the ethical application,
and thus ensure this well-rounded acceptable advancement in AI
capability. This approach to training workers is not just
altruism; Japan faces a severe labor shortage, and AI is widely
viewed as a critical part of the solution. So good ethics are
bringing faster AI diffusion.
Ultimately, on a global macroeconomic level, the winners from AI
will be the corporations and the nations that do three things:
First quickly introduce the technology; second, rapidly innovate
new products and processes that use AI; and third, retrain labor
and reallocate capital to produce these new and innovative
products. With this macro backdrop, Japan’s intentional use of
the symbiosis between Hardware, Software, Data, and Ethics gives
Japan some unique advantages in accelerating AI diffusion and
spurring economic growth.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
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