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Roshan Kumar Kundalya

20 October 2016

The Healthcare Sector Likely to Boost Japans Service Industry


Executive Summary:
The necessity of advancement or modernization in the health sector and aging
world-wide demographic including Japan is likely to create a market for medical
equipment, care and health services. 1 Government policies, like National Health
Insurance (NHI) and social security system, will help create a healthy and cost
saving healthcare market. Rapidly speeding trends in the era of economic
proliferation is helping Japan to expand its trading and investment accord with the
countries of North America, Asia, and Europe. 2 Japans GDP is dependent on two
major sectors service and manufacturing industry. With the availability of cheap
labor, advanced industrial technology and low tax rates, the healthcare industry in
Japan is likely to develop ahead of other major industries like nanotechnology,
automobile, defense and mining industry. 3
Discussion:
The aging global population is
growing exponentially with a
parallel increase in chronic and
communicable diseases. More
than 40% of the Japanese
population is over the age of 60. 4
5 Japans spending in healthcare
will likely increase by almost 70
percent due to advancing medical
technology, increasing economic
wealth, ageing population and
continuous changing treatment
protocols (Figure 1). 6 The
healthcare
perspective
has
changed
drastically
from
conventional,
decentralized
access to clinical and financial
operations to one focused on
consolidation, convergence, and
connectivity. 7

Figure 1: Future Projection of Japan


Healthcare Expenditure

Source: Ministry of Health Labor and Welfare


https://goo.gl/fUWSqM

The cost of health care per capita has always been a major issue that can be
minimized by taking advantage of technology. Technologies, such as Big Data and
Business Intelligence, prove that data can be utilized to reduce the cost of

treatment. 8 Big data analysis is used to predict epidemics, cure disease, improve
quality of life and avoid preventable deaths, and business intelligence helps in
intuitive analysis of patient case. 9 Providing feedback Intelligence from big data to
individuals helps understanding of diseases more precisely. 10 Microsoft, a
technology expert is providing many technological products in the field of
healthcare. Collaborative utilization of these products simplifies data analysis for
big data and enables intuitive reporting. 11

With the worlds population increasing and along with the desire to living longer,
models of treatment delivery are rapidly changing, and many of the decisions
behind those changes are being driven by data. 12 The drive now is to understand
as much about a patient as possible, as early in their life as possible hopefully
picking up warning signs of serious illness at an early enough stage that treatment
is far more simple (and less expensive) than if it had not been spotted until later. 13
The government approach to safeguard the healthcare system led to introduction
of National Health Insurance (NHI), accepted in more than 90% healthcare
organizations. 14 The NHI helped in cutting the cost of healthcare expenses by
70%. 15 Japans reform of social security system made the healthcare not just
limited to medical technology and equipment, but also the investment scope for
care providers and rehabilitation service. 16 This approach is further supported by
local banks namely Chiba Bank, Mizuho Bank, and Bank of Yokohamawho
agreed to set up a healthcare fund worth 10 billion yen. 17
The below chart shows Japanese governments average spending of 3000 USD on
healthcare per capita in the last ten years (Figure 2). 18
Figure 2: Healthcare expenditure per capita in major countries

Source: The World Bank, http://data.worldbank.org/

The second industry with substantial growth is the manufacturing industry. The
emergence of new countries in development, advancement of domestic market and
relative rise of domestic production cost, the Japanese companies have been
shifting toward foreign developing market, which in turn results in decreases in
manufacturing jobs within Japan. 19 New and changing environmental policies are
also causing manufacturers to shift their market outside Japan. 20

Nanotechnology is a worldwide emerging industry, and Japan is not far behind in


the race for developing nanostructures. 21 With official investment of around 745
million USD in 2005, Japan laid a strong foundation for competing directly with
USA. This attracted various private organizations and public universities to invest
in the research projects. As a result, Japan had the second largest number of patent
approvals after USA in 2005. 22 The nanotechnology industry has to deal with many
social and ethical issues that impede its success in the present market where
investors prefer to obtain the highest success through minimum investment and
low risk. 23.

A number of favorable STEEP elements supports investment in healthcare in Japan.

Social factors (Appendix 1)

Control over corruption- Japan maintains a good control over corruption which is
a considerate factor for any investment. (Chart 1)
Labor force availability- Labor is the life line of any industry and availability of
adequate labor in Japan helps investment grow at faster rate. (Chart 2)
Unemployment rates- The unemployment rates is a measure of prevalence of
unemployment and Japans low unemployment rates states a positive social climate.
(Chart 3)

Technological factors (Appendix 2)

Investment on research and development (R&D)- R&D is important for service


industry and Japan being highest in R&D investment is a positive factor for
healthcare industry. (Chart 1)
Connectivity Index- Global connectivity plays an important role in service sectors
and Japan having a favorable rank in connectivity is a positive factor. (Chart 2)
Economic factors (Appendix 3)
GDP contribution- Japan service sector is a major contributor in its GDP (Chart 1)
Inflation rate- Its a sustained increase in the general price level of goods and
service. Japans low inflation rates attract Foreign Direct Investment and in a
positive factor for investment in healthcare. (Chart-2)
Environmental factor (Appendix 4)
CO2 Emission- Protecting environment is a major concern for every government
and Japanese government ability to keep the CO2 emission low is a result of strict
waste disposal rules and efficient waste management system. (Chart 1)
Political factor (Appendix 5)
Government effectiveness- Government efficiency is important factor to attract
foreign direct investment (Chart 1)

Appendix 1: Social Factors

Source: World Bank Data, http://data.worldbank.org/

Source: World Bank Data, http://data.worldbank.org/

Source: World Bank Data, http://data.worldbank.org/

Appendix 2: Technological Factors

Source: World Bank Data, http://data.worldbank.org/

Source: Global Connectivity Index, http://www.huawei.com/minisite/gci/en/

Appendix 3: Economic factors

Source: World Bank Data, http://data.worldbank.org/

Source: World Bank Data, http://data.worldbank.org/

Appendix 4: Environmental factor

Source: World Bank Data, http://data.worldbank.org/

Appendix 5: Political factor

Source: World Bank Data, http://data.worldbank.org/

Analytic Confidence:
Analytic confidence for this assessment is moderate. The analyst used data from
highly reliable sources, in addition to a structured method of analysis (STEEP).
There was very little conflict between sources and information updated within the
last week. The analysts expertise is minimal and mainly worked alone with some
casual discussion among peers. The task complexity is extremely complex and the
time constraint was sufficient.
For questions or comments, please contact the author:

Email: info@roshankundalya.com
Tel. #: (814) 218-2256

http://www.japan.ahk.de/en/japan-info/market-trends/growth-sectors (high)
http://web-japan.org/factsheet (high)
3 http://www.tradingeconomics.com/japan/gdp-growth (high)
4 http://www.un.org/en/development/desa/population/publications/pdf/ageing/WPA2015
Report.pdf (high)
5 http://www.stat.go.jp/english/data/jinsui/tsuki/ (high)
6 http://www.mckinsey.com/industries/healthcare-systems-and-services/ourinsights/improving-japans-health-care-system (high)
7 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3294155/ (high)
8 http://www.intel.com/content/dam/www/public/us/en/documents/white-papers/big-datahealthcare-tokyo-paper.pdf (high)
9 Ibid
10 Ibid
11 Ibid
12 https://www.fightaging.org/archives/2016/01/there-is-widespread-desire-for-extendedlongevity-provided-it-brings-more-healthy-youthful-years/
13 http://www.forbes.com/sites/bernardmarr/2015/04/21/how-big-data-is-changinghealthcare/#dd8846232d91 (high)
14 http://japanhealthinfo.com/japanese-healthcare-services/japanese-health-insurance/ (high)
15 Ibid
16 http://www.japan.ahk.de/en/japan-info/market-trends/growth-sectors/ (high)
17 http://www.investmentinjapan.com/news-and-insights/opinion/japans-healthcare-sectorproviding-opportunities/ (high)
18 World Bank Data (high)
19 http://www.meti.go.jp/english/policy/mono_info_service/overall/overview.pdf (high)
20 http://web-japan.org/factsheet/en/pdf/e45_environment.pdf (high)
21 https://www.foresight.org/Conference/MNT05/Papers/Sienko/index.html (high)
22 http://www.japan.ahk.de/en/japan-info/market-trends/growth-sectors/ (high)
23 http://www.nanotechproject.org/process/assets/files/7060/nano_pen16_final.pdf (high)
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