Letter from... Japan

Julian Ryall reports on Japan's new initiative to encourage accountants to adopt new advancements in IT

For one of the most technologically advanced nations in the world, Japanese companies can be surprisingly old-fashioned in the ways in which they do business. While firms in other countries are investing in technology and embracing the paperless office, Japanese corporations still prefer the tried-and-tested routine of documents, snail-mail and filing cabinets.

It even remains common to see abacuses in use in many offices.

And while such business practices may have been sufficient for small and medium-size enterprises to get by in the past, the looming economic downturn, combined with increasing competition from Japan's Asian neighbours, has convinced the Government here that something needs to be done.

On 11 March, Prime Minister Yasuo Fukuda instructed his ministers to draw up a range of measures by the start of this month that will provide support to smaller firms. His predecessor, Shinzo Abe, had similar concerns about a key sector of the Japanese economy and was instrumental in extending a helping hand to SMEs. One of the cornerstones of the initiative begins this month.

'We have had policies to assist small businesses in the past but this is the first specifically designed to improve SMEs' information technology capabilities,' said Atsushi Yamada, deputy director of the Ministry of Economy, Trade and Industry's (METI) Commerce and Information Policy Bureau.

'Small companies often do not have the IT skills or money to purchase software and install it in their offices,' he said. The answer is the creation of a system that can simply be downloaded through the internet.

'It will be very straightforward, cheaper and these companies will not need IT experts.'

The initial applications will be in the fields of accounting and payroll and should be available in January or February 2009, he said, and the cost to a company will be less than Y5,000 (£25). Future programmes will be more specific and tailored to the needs of a narrower range of companies, such as architectural firms, he added.

Work on creating the new system begins this month, at the start of the fiscal year, and the project has a budget of Y1.8bn for its first year. METI hopes the Ministry of Finance will allocate a similar amount for its second year.

'These smaller companies are facing some difficult times,' said Moriya Gaku of the Ministry's Small and Medium-Size Enterprise Agency. 'It is difficult for them to borrow from banks to make capital investments, there is a large gap between the profits of large and small companies here, and rising oil prices are affecting their business.'

According to the Ministry, there are 4.33 million SMEs in Japan, accounting for 99.7% of the total number of companies. They employ 28.09 million people, 71% of the total, and their Y146 trillion in annual shipments is a mere Y4 trillion behind that of the larger firms, underlying their significance to the national economy.

Noriko Hama, a professor of economics at Kyoto's Doshisha University, believes the initiative is a positive step that will help smaller companies compete with the more established firms, particularly in terms of internal administration and using the internet to advertise themselves, but cautions that it may still be difficult to convince owners to evolve.

'No matter how much money the Government throws at IT, if companies do not have people who are interested in using it, then it will not get very far,' she said. 'In some firms, which have done business in the same way for generations, there is going to be resistance.

'A part of that is because the companies that they do business with may not be adopting new technology either, and they fear they might lose customers if they change. 'If the Government is really serious about this, they will need to also provide an army of nerds to go out and convince bosses and owners that this is the way forward,' she added.

METI believes that if 500,000 of the country's SMEs access the planned platform and upgrade their IT systems, it could increase productivity by 3% a year.

The companies that are the target of the initiative have welcomed the Government's proposals, and underlined the pressure that they are under.

'The economic situation of SMEs is entering a very dangerous phase,' said Ichiyo Miura, director of the Research Department of the National Federation of Small Business Associations. 'Oil prices are rising, raw materials are becoming more expensive, the US' economy is in decline, the yen is getting stronger and exports are falling,' he said. 'It is inevitable that we will feel the impact.

'It is not clear at this point how the IT project will help companies, but we do think it is a significant move,' he said. 'Being proficient in IT will help us promote ourselves and be more efficient, but at the end of the day, it is a company's products that will keep it afloat and safeguard the employees' jobs.'

Julian Ryall is a freelance journalist who has lived in Japan for 14 years, covering business, politics and social issues. Additional reporting by Akane Ichikawa.