Bits and bytes take a great big bite of Japan's market

By Hau Boon Lai, The Straits Times, 17 September 2000

Japan, often criticised for being slow in taking advantage of the IT revolution, is experiencing belatedly an Internet and electronic boom. The Sunday Times wraps up the last of a four-part series with a look at what's in store for Japan's consumer scene as its tech-savvy people embrace the digital age.

TOKYO—A quiet revolution took place about a month ago. A subway train operator rescinded its ban on mobile phones on its vehicles instituted earlier this year because commuters were displeased with it.

An official appeal to uphold the ban—that pacemakers would stop when a mobile phone is in use nearby—fell on deaf ears in a society known for its partiality to authority.

Japanese people are buying mobile phones, or keitai, by the busloads and they want to use them wherever they are.

In our surveys, commuters were strongly of the opinion that they should be allowed to use their keitai even when they are travelling on the trains, said a spokesman for Keio Railway Co in announcing the rescinding of the ban.

It is a parable of the times Japan is in. The electronic revolution has already taken place here.

Computers the size of a palmtop and keitai which look more like little toys than communication devices are selling like the proverbial hotcakes.

With its Internet access capability, the mobile phone, especially, is making its presence felt in popular culture and becoming as much a part of one's clothing as the shirt.

Take Ms Hitomi Shibata for instance. To the 25-year-old office clerk, life can be divided into pre-keitai days and now.

She is one of the 60 million keitai owners in Japan, many of whom confess that they cannot imagine a life without it or imagine being uncontactable 24 hours a day.

Their numbers exceeded the land-line telephones earlier this year, a development which received little fanfare but has great implications for Japan's future as a hub for e-commerce.

More than 10 million keitai phone users are hooked up to the Internet. Telecom giant NTT DoCoMo has a stranglehold on this particular niche of the market, with some 80 per cent of subscribers of its i-Mode function.

By March this year, there were some 29 million Internet users. It has been estimated that since then, some 45,000 new personal computer users and 75,000 new mobile phone subscribers access the Internet every day.

Both PCs and keitai are flying off the shelves.

It is no exaggeration to say that there is a mobile phone sales booth at every street corner, and off it too.

A survey by advertising giant Dentsu found that PCs ranked top among women as their must-buy and came after cars for men.

E-commerce is making big strides—one in five Japanese make at least one purchase through the Internet each month.

Any company worth its salt is making a stab at it, beautifying their sites with cartoon characters to attract the attention of users and buyers.

Thousands of companies have set up websites which conform to the i-Mode web page requirements. Research is going on over how orders for goods can be made through the keitai Internet page.

The PC penetration rate is still considered low by American standards, with Japan's 20 per cent to the US' 41 per cent but in today's parlance, this is seen as a sign that the boom will go on for some time.

One can hardly find anyone carrying a pager these days, noted Mr Kiyohisa Ota, Merrill Lynch Japan's telecom analyst.

Voice communication is reaching saturation point. The future for Japan is data communication, he predicted. And Japan is in a good position to benefit from such a development, with its mobile phone Internet technology.

The PC and mobile phone booms are also fuelling the advance of related products and industries. Even companies dealing with the ringing tunes for keitai have sprouted.

Sales of products like mini-printers, Internet music download software, Sony's memory stick and digital cameras have seen increases of up to 300 per cent, thanks to the desire to send pictures, download music and print out the pictures received.

My keitai bills are about 10,000 yen a month, but it's worth it, said frequent mobile phone user Ms Shibata.

People like her are giving the telecom industry a big fillip in an economy gripped by a malaise for the past decade from which it has yet to recover.

Each e-mail sent through the keitai costs just two to four yen (three to six Singapore cents), but Ms Shibata sends more than 100 e-mails a month. She also receives just as many e-mail replies.

She also logs on regularly to the Internet, checking out the latest websites available.

New entrants like entertainment giant Yoshimoto have worked on providing as much value as possible within the small frames of mobile phones, like its own cartoon characters for users' downloading.

Giving an example of how data communication can make money for many, Merrill Lynch's Ota noted that NTT DoCoMo charges 9 per cent in commission for any transaction done over the i-Mode.

He argued that many websites will be able to attract advertising revenue, and push data communication into the profitable stratosphere—soon.

The government has also been playing a vital role in the current boom. An ambitious five-year plan announced recently envisages all public schools to be linked to the Internet by next year and PCs in every classroom by the year 2005.

Laws governing e-commerce are also being fine-tuned, and liberal tax incentives given to Internet start-up ventures.

The results are already being felt, and seen.

In Shibuya's so-called Bit Valley, a loose association of Internet-based ventures operating in the fashionable district, young, jeans-clad millionaire entrepreneurs are fast rising in numbers, focusing attention on the electronic revolution.

Prime Minister Yoshiro Mori's recent trip to India's Silicon Valley in Bangalore was in part due to a high demand for IT sector workers in Japan, where the demand for them is fast outstripping supply.

Keio Railways may be doing the Japanese economy a clear service. Before long, commuters may be utilising their time on the company's trains to complete their purchases over their mobile phones.

The buys may be of physical goods or original and cute cartoon characters.

Whatever they are, Japan would have taken one more step towards realising the potential of e-commerce.