Japan vies to be ‘number one again through web3 innovation’

Once recognised as a global leader in car manufacturing and electronic goods, Japan’s economy has been stagnant since the 1990s. Now, the Japanese government has outlined a national strategy aimed at reclaiming its top position through web3 innovation. On this week’s episode of The Crypto Mile, our host Brian McGleenon speaks with Sota Watanabe, the founder of Astar Network and a member of the Japanese Government’s web3 task force. Watanabe explains that Japan missed out on the web2, lacking its own versions of Google, Meta, and Amazon, unlike China, which boasts Tencent, WeChat, and Alibaba. He suggests that due to an aging population and a contracting domestic market, Japanese companies need to refocus on international markets. This episode explores how Japanese firms are attempting to compete with their East Asian neighbors, South Korea and China, through web3 and AI advancements. Watanabe asserts that Japan produces world-class intellectual property, but warns that without producing a groundbreaking web3 company, the nation’s economy could contract further.

Video Transcript

Known as the Japanese economic miracle, Japan experienced rapid and sustained economic growth after the end of World War II. But since the early ’90s, the economy has fallen into stagnation, eclipsed by Asian Tigers like South Korea and the rise of China. Now a Japanese entrepreneur called Sota Watanabe is working with the government with an ambition to make Japan number one again, this time in the burgeoning crypto and Web3 industry.

Sota Watanabe, welcome to this week’s episode of Yahoo Finance’s The Crypto Mile.

SOTA WATANABE: Yeah, thank you for having me today. I’m super excited to be here.

What is the current situation of Web3 in Japan? Are there any exciting things that the rest of the world should know about?

SOTA WATANABE: Yeah, I think that’s a good question, sir. A lot of the Japanese companies, especially the big companies such as Toyota, or Sony, or NTT would like to work on Web3. And the Japanese government made Web3 as a national strategy back in last September. And the Japanese government also published, actually, during party, published the White paper budget, too, which includes a lot of the cutting edge opinions in that paper. And it is also approved by the government already.

I see a lot of the enthusiasm, and I see a lot of the energy in Japan right now, especially big companies. The reason is very simple, I guess. Japan used to be number one, recognized as number one, in terms of car, in terms of electric goods, and so on. Right? But we completely missed Web2. So we don’t have a Google, Meta, Amazon. We even do not have Alibaba, Tencent, and we even do not have a Ryan. Ryan it comes from Korea. Right so we missed Web2.

So our decision makers right now in Japan know the age of Japan was number one. And we are losing right now. And Web3 is the next big opportunity for the Japanese companies as our country. And a lot of the people are talking about AI. But in terms of the volume of the data, I think English is much more than Japanese. And Japanese company does not have a much data, because we don’t have a big Web2 company. So Web3 is the next opportunity for Japan itself.

Could you elaborate on the ambitions to make Web3 innovations that are currently happening in Japan to the rest of the world?

SOTA WATANABE: Japan is recognized as the leading creator country. So we have a lot of the electronic goods. We have a lot of the manufactured stuff. But this is like hardware. Right? So as a country, I think Japanese people and Japanese companies need to invest more in software. So in this sense, I think making a platform, a lot of the Japanese companies are interested in making platform itself. Maybe they are on blockchain, or they are the blockchain, and e-wallets. I think this is what they have to do.

Japan is the big market. This is the issue itself, because the market is big. The company provides service and the product only in Japan, and they can make money. But problem is this market is shrinking. And the Japan is one of the elderly society. Right? So we need a company, or we need a founder, we need products that make money outside of Japan to grow the economy. This is what I think the entire country has to do.

Are Japanese manga, anime, and computer game creators making any inroads into Web3, or deploying their creations on the blockchain?

SOTA WATANABE: Yeah, absolutely. A lot of the creators, gaming companies, and also manga, anime creator would like to work on Web3, especially NFT. But the problem is they don’t know how to. Right? And Web3 is global from day one. So we don’t have a lot of the people who understand the global business. We have a bunch of other people who understand Japanese business we can speak Japanese, but we don’t have much people who understand the global business and who can speak English very well.

So this is the issue. But I think situation is changing a lot. And from the government perspective that some of the politicians said, we have great content like IP. But this IP doesn’t make money outside of Japan.

OK. I had heard that Japan has a vision to become number one again, this time in Web3. Can you elaborate on this ambition?

SOTA WATANABE: I named Astar back in 2020. The meaning is a star. So we would like to be a hope in our global market, especially Japan, because I’m a Japanese founder. So as I said, we have a bunch of the great companies in Web1, before Web1. Right? But we don’t have many global companies in Web2. In the age of Web3, we have to make something new. We have to make a very innovative company that can be bigger, just like Sony, or just like Toyota.

If we cannot make it, I think our economy is going to shrink. In terms of like a Japanese culture and the mindset, people follows the successful use case. But it is very tough to make successful use case. I think Japanese people is very conservative compared to American, or maybe some of the European. So it is really important for Japan to make one successful use case. And the idea we would like to be one of the successful use case.

And there is a chicken and egg problem, in terms of law and tax. We need use cases to change the law.

So What should the Japanese government do to encourage the Web3 sector within Japan?

SOTA WATANABE: Definitely a tax and law, because as an entrepreneur, it is really hard and difficult to enter the gray zone. If it is white, we should go. If it’s black, we shouldn’t go. Right? But if there are a lot of the gray zone, then a lot of the entrepreneurs hesitate to enter the market, especially founders who are using their name. Right? No one would like to be arrested.

Why has the Japanese economy been stagnant for so long? What obstacles could stop Japan from achieving its ambition to become a world leader in Web3?

SOTA WATANABE: So I think the reason why economy is shrinking a lot is that we don’t have a successful global use case recently. I mean, we had Sony, and we have Toyota. I think Japanese people are very proud to see, let’s say, Toyota car in London, or Sony, people using Sony headphones in London. So I’m very proud, proud of it. But the problem is, after Toyota and Sony, a lot of the people are providing service only in Japan.

And a lot of the people started from Japan, and win in Japan, and go to the US. This does not work in internet era, especially in Web3, because it is borderless and global from day one. In Japan, if we have a very great product, there is a similar service in the US, and just scalability much faster than products in Japan. But this is a problem. So we have to increase number of the global entrepreneurs who are providing the service across the globe from day one.

But maybe Japan is going to be the last country to enter for the Japanese founders. If we have a bunch of the entrepreneurs who are providing services out of Japan, then once law and tax are fixed, everyone comes back to Japan. And then we can make a global company or product. And this kind of use cases, these kind of people are really needed in Japan right now.

All right. Sota Watanabe, thank you so much for coming on this week’s episode of Yahoo Finance’s The Crypto Mile.

SOTA WATANABE: Thank you very much.