Isaac Asimov's first law of robotics states a robot may not injure a human being or, through inaction, allow a human being to come to harm. Here, Miyuki Kashima, BNY Mellon head of Japanese equity investments, describes how current developments in Japan transcend Asimov's law
Picture the scene: in a darkened factory, the non-stop whirr of machines, of robots toiling to make… other robots in a relentless, ruthlessly efficient manufacturing cycle.
This is no dystopian vision of the future. Instead, it's an accurate portrayal of just one of the ways Japan is addressing its demographic headwinds. As Japanese society ages it will need to rely ever more on automation and new technology to bridge the productivity gap. That creates a requirement for robots to start taking on the jobs that people used to do - and if that also means robots building other robots in the night then so be it.
Employment data and labour force projections underline the point. The Japanese jobs-to-applicants ratio has soared while the unemployment rate has plummeted as the economy recovers from a post-bubble slump, which saw 20 years of stagnation and deflation and the country start to fall behind some of its competitors.
Meanwhile, even if (as is hoped) more women do enter the workforce, the number of people in work will plateau at best in the next decade. Together, the combination of a tight labour market and the structural trend of an ageing population create a real need for an automated future.
Beyond robotics, another technology-driven trend that has the power to transform the investment landscape is connectivity. Here, the Internet of Things (IoT) finds a natural home in Japan. Partly this is because of a cultural proclivity for both efficiency and hi-tech solutions to problems. The most obvious example, is the world-famous bullet train, which has a cumulative delay of just 0.9 minutes over the course of a year even despite running every single day.
This kind of efficiency also finds its way into more mundane areas. As just one example, the crime rate for both petty and serious crimes in Japan is among the lowest in the world. That's quite significant if you're thinking about how the IoT might operate in real life. Given its demographics, Japan offers the perfect marriage of clear demand and a suitable environment.
In turn, many Japanese firms are looking to capitalise on the global trend towards connectivity and automation. Crucially, the corporate sector is now in a good place to meet demand for new technologies. After decades of underinvestment and falling productivity Japanese firms are once again posting record profits, which means they have the capital to invest.
Now, with deflation reversing and in a recovering economy where Japan's nominal GDP - year over year - has now been positive for 21 straight quarters - the potential is there for the Japanese corporates to overtake their global peers. Japan hasn't really been at the forefront of connectivity - but given how patchy the record has been on first-generation IoT that's not necessarily a bad thing. It could now actually at last work to the country's advantage - perhaps allowing Japan to leapfrog other nations in the uptake and implementation of new technologies.
Miyuki Kashima is head of Japanese equity investments at BNY Mellon Asset Management Japan
