Nippon Navigator #5 - SusHi Tech Tokyo and Japan's AI catch-up manoeuvre

In the latest episode of the Nippon Navigator podcast with Gregory Glanzmann and Maximilian Böger, we take a deep dive into the topic of innovation and artificial intelligence (AI). In particular, it's about SusHi Tech Tokyo, a central meeting place for start-ups and venture capital from Asia. This episode is divided into two parts: Firstly, it reports on the dynamic SusHi Tech Tokyo and then reflects on artificial intelligence as a means of overcoming the digital cliff in Japan.

Nippon Navigator: Innovation and AI in the heart of Tokyo

In the latest episode of the Nippon Navigator podcast with Gregory Glanzmann and Maximilian Böger, we take a deep dive into the topic of innovation and artificial intelligence (AI). In particular, it's about SusHi Tech Tokyo, a central meeting place for start-ups and venture capital from Asia. This episode is divided into two parts: Firstly, it reports on the dynamic SusHi Tech Tokyo and then reflects on Artificial Intelligence as a means to overcome the Digital Cliff in Japan.

SusHi Tech TokyoTradition meets innovation

SusHi Tech Tokyo, opened by Tokyo Governor Yuriko Koike, attracted creative founders and tech visionaries for the second time. The name ‘SusHi Tech’ stands for Sustainable Hightech and symbolises the combination of sustainability and technological innovation. Governor Koike presented an ambitious vision: a tenfold increase in Tokyo's start-up landscape, supported by an investment of USD 1 billion over five years.

The conference provided an impressive platform for start-ups and established companies. With food robots making coffee and AI analysing live ping-pong matches, the atmosphere was both futuristic and inspiring. The variety of technologies on show was particularly fascinating, from form digitisation to energy transfer via the air.

AI and digitalisation: Japan's path to the future

In the second part of the podcast, Gregory and Max discuss the challenges and opportunities of digitalisation in Japan. The country is facing the Digital Cliff 2025, a critical deadline to drive digitalisation forward. Without sufficient progress, Japanese companies could fall behind global standards.
A central point of the discussion was the role of AI in this catch-up manoeuvre. The Japanese government is investing heavily in AI, supporting start-ups such as Sakana AI and incentivising international collaborations. One notable example is the opening of OpenAI's first Asian office in Tokyo. This shows that Japan is not only technologically but also strategically well positioned to grow in the AI sector.

International cooperation and European perspectives

The international presence was also very noticeable during SusHi Tech Tokyo. Countries such as France and Switzerland presented their innovations and took the opportunity to forge partnerships with Japanese companies. These international co-operations are crucial to further advance Japan's technological development.
A particular highlight was the pitch competition, in which the Japanese start-up Furmen Station impressed with its innovative idea for upcycling biomass. Such success stories show the immense potential of the Japanese start-up scene and the importance of sustainable innovations.

Ein Blick in die Zukunft

Japan hat alle richtigen Komponenten, um ein globales Deep-Tech-Powerhouse zu werden. Mit der Unterstützung durch die Regierung, einer starken Start-Up-Kultur und internationalen Kooperationen ist das Land auf einem guten Weg, die Herausforderungen der Digitalisierung zu meistern und in der globalen Tech-Welt eine führende Rolle zu spielen.

Listen on Spotify

Listen on Apple Podcasts

Transcript

I'm excited about the future of Japan, especially because I'm a deep tech enthusiast. I think there are many right components for Japan to become a powerhouse and a deep tech base. Welcome to the Nippon Navigator with Gregory Glanzmann and Maximilian Böger. A European view of Japan's business world.

This is the podcast in which Max, as a business model expert, and I, Gregory, as a Japan expert, dive into current topics in the Japanese business world. We discuss special features and look at what we can learn from them.

After the last guest episode with Fumino Rikunji, today is a special episode of the Nippon Navigator podcast and it will be all about innovation, AI, straight from the heart of Tokyo. The last two days have been characterised by lively exchanges and inspiring encounters at SusHi Tech Tokyo, an important meeting place for start-ups and venture capital from Asia. Our episode today is divided into two parts.

Firstly, we immerse ourselves in the world of SusHiTech Tokyo, which has attracted creative founders and tech visionaries for the second time. They were a clear signal of the dynamism and potential of the start-up scene in Tokyo. In the second part of our podcast, my co-host Max and I reflect on AI as a catch-up manoeuvre to the digital cliff in Japan. So, let's start with SusHiTech. The conference is called SusHiTech.

Yes, there was also sushi, but SusHi stands for Sustainable Hightech in this context. So the prefix of the two words has been mashed together and a marketing slogan has been developed. Quite clever, actually. And Governor Yuriko Koike opened the event. She is the governor of Tokyo and presented a powerful vision that promises a tenfold increase in Tokyo's start-up landscape.

The whole thing will be supported by an investment of USD 1bn over 5 years. And her words were not just a call to action, but also a strong commitment to innovation and sustainable development. She was transparent about more than half of the budget, but it has already been raised. She already has 550 million of the billion in SAM. Let's listen briefly to the Governor's welcome address.

This is a 10-Ford task from start-ups in Tokyo. A 10-Ford task from start-ups in Tokyo. And a 10-Ford task from public, private, collaborative projects with start-ups. Collaborations in Tokyo and a tenfold increase in global unicorns emerging from Tokyo. The last goal is probably the most ambitious. The goal of public and private collaboration was already achieved in the first year, because these five years started a little over a year ago.

How did SusHi-Tech feel on site? The atmosphere was cool, international, a bit tacky.

And you could really feel the enthusiasm and optimism of Governor Koike and the other speakers. You could tell that money had been poured into the event. And not just because of the atypical free tetrapack water and green teas, but also the overall design. Far more hip than a CES. And now in comparison to the Tokyo Motorcycle Show, where I attended the same venue a few weeks ago.

A totally different world that has been created there. A really big remodelling. Food robots that made coffee. AI that analysed live ping-pong matches. And a large number of start-ups on site. And here are a few impressions that I took right there and then.

You have the face, you are a total grinder!

Today is an important moment in the collaboration with our two nations, reflecting our collaboration with innovation, sustainability and technological process.

So, after the opening earlier, I've already had a chance to look around and see what's going on here. A lot of start-ups that are somehow using the hashtag AI. It ranges from forms and digitalisation to a photo and even very sophisticated energy transmission technologies that transmit energy over the air, so to speak. It's all collected here. And not just Japanese start-ups, but also international ones.

I had a look at the participants on site. Definitely an international audience with a high proportion of local people, so a lot of suits, more than expected. But if that's the biggest obstacle to the start-up culture in Tokyo, then I'm optimistic that things will progress. As far as the tech topics on site are concerned, I have to say that the challenges that the start-ups had set themselves were not always the most groundbreaking topics. Many AI start-ups with image to text solutions for document automation. Also a sign that digitalisation is not quite there yet in Japan. For example, what stood out for me was the digitisation of forms. The fact that a paper form that already exists can simply be converted into a digital form with a photo. I think that speaks for itself a little. Of course, there were also corporates there, such as Mitsubishi, Entity Data and JR East Railway, each of which came up with emphatically innovative or sustainable projects. On the subject of sustainability, I was really impressed by the prototype hydrogen train from JR Railway, because there is a real need. They still have around 20% of their trains, mainly goods trains, that still run on combustion engines. And replacing these would definitely make a major contribution to a positive CO2 balance and the test runs are already underway. So the train is definitely already rolling. The satellites from Axle Space were manufactured in the city of Tokyo. This is a young company that makes satellites that weigh 100 kilograms and are not simply left as space debris at the end of their life cycle, but are simply reintroduced into the atmosphere and burn up there.

The production of the private satellites is part of their business model, but the more exciting thing is actually a subscription model, where you actually subscribe to the images and the high-resolution images that they shoot are mainly used, for example, in war situations before and after images or in disaster environments or even after earthquakes, for example, before and after, in order to be able to draw comparisons. What I found super exciting and I also talked to Max a bit about the topic of VCs, even though our conversation took place before SusHi-Tech, was the perspective of foreign VCs on start-ups from Japan. And the Licken Wellymann and former ambassador to the US, John Rose, emphasised the positive aspects of Japan's affinity for technology and things like thinking about alcohol and global from the beginning, using English as a way to fight for global relevance, celebrating entrepreneurs so that young people would be uplifted. And those who have the chance to identify the risks would rise up as if they were eating on their backs.

We have already discussed the son who founded Softbank here in the podcast. Or Rakuten founder Mikitani, for example. So there are those who are celebrating more, who are actually inspiring young entrepreneurs even more and who are also focussing on tackling the world's important problems. At first glance, that was something that was missing from the exhibition space.

The pitch event in the afternoon. It showed that a lot is happening in the biotech sector, including in the field of cancer research. Some prizes were also lost. The winning pitch, however, was won by the Japanese start-up Furmen Station. So Furmen Station, they also ferment and distil. Their idea is to upcycle biomass so that it can be utilised in cosmetics, soap and food. This is biomass that is not usually utilised in the nanosketch or is left over and they want to replace petrochemical ingredients with more sustainable or active fermenting substances, for example. These are the start-ups that venture capitalist Michael Jackson envisions. I think it's something that should stop more. You're selling a dream if you're an entrepreneur to convince people to come into your business. It's hard to do that if you're not very optimistic about selling that. I think that's something that unfortunately is not from the Japanese ecosystem. As an entrepreneur, it's a hard sell, it's not necessarily the biggest soluble thing, but you really believe that you're bundling the future and you really believe that you're not using anything in anything. To do that, you have to be ambitious and optimistic. It would be great to see a bit more of that knowledge and positivity in the ecosystem.

So it exists, the start-up world in Japan. We see it growing. The city of Tokyo is definitely at the forefront, but Sapporo, Osaka and Fukuoka also have their clusters where people are working on AI. It's an important topic to help Japan catch up with digitalisation. Finally, of course, I can't resist taking a brief look at the participants from Europe. So we had France, which had a national pavilion. Switzerland also had a pavilion. As far as I know, the only other countries that had pavilions were Hong Kong and Taiwan. Bavaria was on site with a stand and the Austrian Chamber of Commerce was also there. But Switzerland definitely brought 12 start-ups from Switzerland to its SwissTech stand in cooperation with SwissNext.

There was definitely one or two exciting things in there, where over-the-air electricity is beamed, for example. Ambassador Baum opened the stand, which was very exciting. It was good to see that the Japanese market is seen as a market for partnerships or possibly also as a market for sales for various B2B applications. So much for the special content from Tokyo and now to the conversation between Max and me.About AI and its role in digitalization in Japan.

We had a guest last time, our first guest, Fuminori Gunji. He talked to us about corporate innovation and start-ups in Japan. We are still at the very beginning of this topic, although we had a really exciting discussion with him for an hour. Yes, I think for me, I also posted it on LinkedIn, the story of the Softbank founder pouring petrol on himself was omnipresent, everything comes back to me whenever I think of Fuminori and this story. But of course the topic of the clean slate is also exciting. Simply culturally and organisationally, what we have there again. Yes, and I think what has remained so omnipresent is that we have talked a lot about corporate innovation, including start-ups and the whole issue of digitalisation. Yes, I think many people think of Nintendo, Sony and other companies that are known for their consumer electronics when they think of Japan, but there is much, much more to digitalisation and Japan. And that's where we want to start today with the topic of technological innovation. How is the topic of digitalisation in the business world in Japan?

We probably have the most punctual high-speed train in the world, I'll just say that. What, what is true and not so true about this myth and how digitalised are Japanese companies and how does that work with this deep tradition that Japan has for itself, yes, and digitalisation as a new purpose? But perhaps another little recap on the topic of start-ups and a comparison of how big the start-up projects in Japan are, Gregory, so that the listener can grasp this again. The general investment, international as it is, is not so present in Japan. I think it's 10% where investments outside of Japan are coming into Japan. Just in terms of start-up investments. On the other hand, it is positive that Japanese companies have now actually set up funds and are investing in the country. There are also public funds. One of the big AI companies, Sakana AI, is actually not big, in fact not big at all, very young even, but founded by ex-Googlers. They received large investments from the government very early on, I think around 30 million US dollars, in order to promote Japan as an AI location. And I think they also got supercomputer computing time, which is exactly what the start-ups need. It's not just about money. You're several months old, you only have ten employees, but you're already a beacon of hope. Insane, right? Rising stars, then. Where people in the USA would probably smile about it. But cool. Very exciting, actually. You said that 10% only comes from investments abroad. And yet the yen is the worst it's ever been relative to the dollar. I think Warren Buffett also said at the beginning of the year or at the end of last year that it could be interesting to invest in Japanese companies. Or I think he also invested and then revealed that. It's an exciting market, of course. But why are there so few foreign VCs? One issue is of course simply the accessibility of the market, language barriers and so on.

Of course, now with the weak yen it is an attractive topic. You get a lot for your money when you come to Japan. That's why all the tourists are here again. Oh, so negative now, tourists. I actually wanted to come here soon. Yes, see if you can still find a seat on the plane. Pre-corona level tourism is back everywhere in Kyoto.

The yen is now over 166 euros. Of course, the exchange rate also says something about a certain degree of uncertainty. Where investors are also looking, of course, and what was Warren Buffett doing there. Where he has invested is more in the traditional, actually in these gatekeepers, we had the topic of Sogo-Shoshah recently. So these are the trading giants that actually run the foreign business for the many Japanese technology companies, of which there are many, especially in the hardware sector. So they export for them, make sales for them abroad. Yes, and now we want to talk about the well-known or myths of the technological tradition. There are still some very good examples where one or two people in Central Europe would probably scratch their heads as to which technologies are still being used in Japan, right?

Yes, well, I mean, I always make a... how do you say it again? I'm breaking... a lance. A lance for Japan, thank you very much. Yes, but sometimes I have to say I'm taking up the cudgels. Yes, yes, I know. But I'll break it for a moment and then you can see what you do with it. Japan that commits to technology. And if it commits, then all in, right? That means ... all in and for the next 100 years, no matter what. Exactly. And then you stick to it. Because, right, you know it works. And that's why there are still fax machines. Not everywhere, but there are still certain government departments. Do you have a fax machine at home? No, no, of course not. Oh, now you're breaking a lance and then you don't have one at home yourself, do you?

I don't have to live everything, but I'm just saying that there are reasons why ... why the issues are the way they are. But what do you do when you have to send a fax, then you go to the copy shop? Because ... I haven't actually had to do that yet, never. You can just write it down ... I haven't. And then you can also send it by post. Which is even better.

No, but I've never had to do that before. I have had to ... Definitely these ... Well, I had to have a stamp made. You can't do everything with a signature. Sometimes you have to ... Well, it's called a classic hanko in Japan. It's a stamp. These business stamps that fold over and then ... Nah, they're here ... They're different here. It's such a nice family ... Well, the family name is engraved, so to speak. And then there's this red stamp. Maybe you've seen it somewhere before, so classic. And, um ... It's actually like the signature traditionally. There's no signature culture here, but this stamp culture. You don't have to sign over it anymore, so for the ZOA. Nope, nope, nope. You just make a stamp. If someone has your stamp, they can sign for you. Exactly. Yes. But your stamp is also registered.

But anyway. It's not necessarily the safest element. But it's not particularly message-proof, is it? Nope. But you can forge a signature. But it works. But it was also a challenge with Corona, because sometimes ... 100 per cent home office simply didn't work because certain documents still needed stamps. And the Digital Minister, Taro Kono, also lived abroad for a long time and has now been the Digital Minister here for several years. He has made it his mission to abolish fax machines on the one hand, but also to phase out hanko. Recently the last floppy discs, I think it was some tax office, the data on a floppy disc.

I think for any listeners who don't know what a floppy disc is, it's a floppy disk. As we know it from the old days. The younger ones among us probably won't know, but google what a floppy disc is. Before USB sticks, there were things like that, you put them in disc drives. Exactly. Back then. Exactly. That you even remember that, Max. Yes, yes. I think my first computer game was actually on a floppy disc.

But in any case, I think we can say that there is potential for digitalisation here. I also believe there is a need. In terms of bureaucratic processes and recurring processes, Japan is not yet as advanced in terms of automation as perhaps other markets are. And that is also a problem. There is the term digital cliff. The digital cliff is scheduled for 2025. The Prime Minister of Japan, Kishida, has said that if a certain level of digitalisation has not been achieved by 2025, given the development of demographics, population and IT specialists in particular, it will not be able to grow so quickly in line with demand. If companies have not digitalised themselves sufficiently by then, they will actually be facing the abyss because they will no longer be able to catch up. And that will indeed be the case, and I believe that this is also very realistic and very striking, it also means that you have to really step on the gas. And AI will certainly also play a role in catching up.

Now we've also talked to Fuminori about this old new thing and you're saying again that we're sticking with the old and now there are these initiatives. How is this old and new being received by the public? So how do people react to it? Yes, do they say, okay, we're following the new vision now, or do people tend to say, difficult, we're scared? No, people in Japan are already open to new technologies. You can't imagine having to say that. Open to new technologies from the country where the PlayStation comes from. And others. And the Discman. Yes. It's actually a controversy. It's not the end consumer. Yes, but there are certain established structures in companies that I mean, I lived in Germany for a long time. They exist in Germany. Enough of them. And some of them are perhaps still a little bit here, so it will take a bit more to break them up. And as I said, if you commit to a new technology - we've also used this Line app, WhatsApp, WeChat, Facebook, all in one from Japan - then you can also achieve good penetration. They have a penetration rate of over 94%. That's quite something, isn't it? 94% is really high. What about public services, i.e. things like offices, etc.?

So when I think of Singapore, 99.8% digitalised, how far along is Japan? Well, I... I'm in Singapore and I know there, for example... I can directly compare the online banks. Singapore was already... Ten to ten years ago now, certainly at least as far as Japan is now in terms of online banking. Offices themselves really need to step on the gas. I would really like to see Kishida take advantage of this now and really bring it to the streets with his digital agency, which he launched with the minister. If he stays in office for much longer, that's still a bit of an open question. But exactly, there is a need and I can well imagine that he is very forward, how do you say, forward-looking, so to speak. Thinking ahead. Also seeking dialogue with OpenAI. Also trying to position Japan as a place for AI. Yes, I've read that. OpenAI has opened its first office in Asia in Japan, yes? In Tokyo. That's right. So very recently. That's super exciting, yes.

I believe that this is not only because the government has endeavoured to do so and has certainly also created various conditions for OpenAI to find this exciting, but also because the market itself offers potential. We discussed the long-term nature of this in Japan. If we think about automation and AI, if we have to think about and train AI, then you want something that you can work with in the long term, because training is also a major endeavour. In other words, there are already business opportunities if you enter the market early on, where there is still a lot to automate in the processes and that certain steps could actually be skipped with AI. And if we can catch up, then I really believe that this is also a business opportunity for AI providers who have B2B and B2C solutions to help the Japanese. And the first step was for OpenAI to release a Japanese language version of Chat GPT.

Yes, I think that's super exciting. We've talked about this language barrier in all the episodes, including today. And with AI, it's no longer relevant if these versions exist. Which of course also gives Japanese engineers, who are very, very good, an extreme opportunity for future industries and markets, I would say. If, of course, Japan gets AI into the country, perhaps together with OpenAI. That was also one of the reasons, as I read, that OpenAI came to Japan, because there are simply super good engineers in the field. And my analysis would have been, okay, the language barrier is gone. We know it from tools like HeyGen, everyone can suddenly speak Japanese, or at least make it seem that way. That is of course really, really exciting. What do you think? Is it an opportunity because this language barrier that has always been there is now gone?

In any case. For people who have specific technology knowledge, the language barrier is massively reduced. In the Global Innovation Index, Tokyo, Yokohama, this metropolitan region, is still in first or second place worldwide in terms of science and technology clusters for research and development. There is so much expertise, very deep knowledge. Japan is also a country with a lot of patents. I think it also has one of the highest rates of patents globally. AI is definitely an enabler for this.

Yes, I think that can also be summarised from all our episodes. This is perhaps something that the people of Zurich can also learn from. This focus that companies create among their employees, but of course it's also a cultural issue that someone is so deeply involved in something. Yes? And so focussed, so you always say it's small-scale, but of course this small-scale also has a lot of advantages. So it's kind of this Made in Germany, the old Made in Germany, is so ... I think it's very, very nice, this focus on one thing over the years, right? And then, of course, to become the total market leader. So a bit behind champions. And if we were to ask the audience, hey, list ten innovative companies, they would probably stop after one or two. And that's why I think it's a learning experience to take a look at what's out there.

And also learning to say, hey, why don't you focus on specific topics again? We don't have to train all-rounders everywhere in every training programme, but really focus on them and carry them out with emphasis for a long time. You mentioned clusters earlier. When we met in 2017, the topic of ecosystems was relevant. I did my doctorate on it. Now that the EU has taken it up again, it's a huge topic. And in Japan, I think you can see exactly that in some projects, technologically. Yes, how these technologies and trends are merging more and more because, of course, customer requirements are also increasing. And a company that may no longer be able to meet these customer requirements on its own, Japan is now a technology pioneer, you mentioned patents. And there are smart city projects. Societal projects like Society 5.0, yes, where all these technologies come together. So now you have AI, IoT, robotics is of course a huge topic in Japan and other technologies, somehow also solving social problems. What are the initiatives there? And how can we in Europe perhaps learn from this to ensure that not everyone is just thinking about themselves and their organisation, and what is happening in Japan? Society 4.0 aims to increasingly connect the physical and digital worlds. In other words, that it becomes more or less one. And interaction with machines, with AI, is a perfect example of how this can work, because all these barriers between them suddenly fall away.

Exactly. And of course the topic of sustainability also plays an important role. It's called GX here, Green Transformation. So the X stands for transformation. There's DX, digital transformation, and GX, green transformation. So these are definitely two important topics and, actually, how do I bring cyberspace and physical space together?

It starts with the insurance card, where you now try to put everything on one card, i.e. my My Number Card, starting with the tax number, but you also pack various other pieces of information together with it, so that you don't have a digital twin yet, so to speak, but just the personal information with all the risks that this entails. Of course, if you bring it all together in one place, but where you try to create fewer barriers between all these portals, so I'm already quite busy with log-ins, I realise here, because everything is somehow its own separate system. And you try to bridge that a bit. Okay. And how does the population, again the questions go, how do they accept it, do they say, hey, that's good, we recognise that or do you stick to the old values? No, well, yes, I mean, the, if I take this My Number Card specifically, it had, er... a bit of teething problems, because there were somehow certain subsidies that were paid out to customers who had linked people to their Wine Number Card and then somehow 100,000 such cards were linked to the wrong account. And then there was a bit of a trust issue, a trust problem.

If you read about smart cities now, then of course Chinese cities like Shenzhen and so on are at the top of the list. There are also a lot of smart cities being built in the Emirates, especially in Saudi Arabia. Now the listener, who is following the whole thing attentively and perhaps also engaging a little more with the topic, will be able to see that there is a lot of interest in smart cities. Yes, in the end, a new city is always being created. Singapore is also a smart city.

The origins of what Singapore is today only really came about in 1960, and it has only really grown over the last 20 years. So it's all kind of new. But if you look at this list, you can also see Yokohama and Tokyo. Of course, it's a completely different challenge to digitise an existing system. But that's the fun of it all. I think we can give that much away. And as always, thank you for listening. Press the follow button or subscribe to our channel and give us a like. And on that note, we say goodbye as always with a Japanese Matane.

That was the Nippon Navigator, a European view of Japan's business world. If you like the podcast, please recommend us and click on subscribe. Hosts Maximilian Böger and Gregory Glanzmann and sound design Marceau Glanzmann.