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Making Japan a Science & Technology-Oriented Nation
- Directions for the Third Science and Technology Basic Plan -

May 06, 2005


Discussion of the Third Science and Technology Basic Plan has begun in earnest. The Basic Plan covers the five-year period fiscal 2006-2010 and, in view of the usual budget schedule, where drafting of the next fiscal year's budget begins about summer, it is likely that drafting of the Basic Plan is nearing completion.

Considering the background to the enactment of the Science and Technology Basic Law in 1995, namely, the urgent need to make Japan a science & technology-oriented nation as a means of regenerating its economy and industry, which arose from the severe recession that followed the collapse of the bubble economy, Japan is already making steady progress on this initiative. One example is the fact that, within Japan's international balance of payments, its balance of royalties on patents, etc., is now in the black. The attendant rise in non-price competitiveness can also be seen from the improvement in the business results of Japanese companies in recent years.

However, when considered in terms of its role as the keystone of medium-to-long term economic and employment policy, Japan's science & technology policy still has a few blind spots, given the spectacular growth that is expected in nanotechnology, fiber optics and other areas not closely linked with conventional technologies, and in view of the intensifying international competition in research & development. Three particular problems that cannot be overlooked are (i) the overemphasis on developmental research, (ii) the emphasis on application and developmental research among universities and research institutions and (iii) the weakness of cooperation between government and the private sector. A comparison with the United States of funding tendencies reveals the following traits.
(i) Overemphasis on development research
In its allocation of funding, Japan gives greater emphasis to developmental research than the United States, which stresses basic research. The low efficiency of basic research in Japan is also a problem.
(ii) Emphasis on application and developmental research among universities and research institutions The allocation of funding to research activities within Japanese companies is similar to that within American companies. However, Japanese universities and research institutions place a greater emphasis on application and developmental research than their American counterparts, which place greater importance on basic research. The United States takes a positive approach to cooperation between academia and industry and the allocation of funding makes the most of the characteristics of each entity funded, contributing to the efficiency of research.
(iii) Weakness of cooperation between government and the private sector
Although the government is the chief supplier of research funding in both Japan and the United States, there are significant differences in the distribution of funding. While the corporate sector receives 20% of all funding in the United States, it receives less than 5% in Japan. Moreover, in the United States, the bulk of the research funding allocated to universities goes to MIT, Stanford and other leading private schools. In Japan, by contrast, most goes to national and local public universities. Divided on public/private lines, 90% is allocated to government-affiliated organizations such as "special corporations" and to national and local public universities, while companies and private universities receive half each of the remaining 10%.

The Third Science and Technology Basic Plan must address a wide range of issues, including education and the creation of facilities. However, from the perspective described above, the three key issues would appear to be (i) a clarification of the positioning and mission of individual research bodies, (ii) the pursuit of competitive mechanisms and (iii) the establishment of LLC and other related systems.

For more information on the content of this report, please contact: Hidehiko Fujii Business Strategy Research Center Economics Department the Japan Research Institute, Limited.

Tel: 03-3288-4615

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