Pandemic Forces Digital Change on Japan’s Businesses

(Bloomberg) — The coronavirus pandemic may be a drag on economies across the globe, but in Japan it’s bringing long-overdue change in work habits and tools.

About 90% of Japanese refiner Idemitsu Kosan Co.’s non-manufacturing employees have worked from home. Department-store chain Isetan Mitsukoshi Holdings Ltd. is using video chats to offer shopping suggestions online, while smaller enterprises are emracing digital tools. Digital signatures are finally taking hold, replacing official stamps and seals.

Despite being at the forefront of technologies ranging from imaging chips to electric-vehicle batteries, Japan ranked 23rd out of 63 nations in digital competitiveness last year, according to the International Institute for Management Development. While a chronic labor shortage caused by a declining population was already spurring businesses to automate, the Covid-19 outbreak is pushing the transition to the digital workplace into higher gear.

“Many companies small and large have talked about digitization as being important, but put it off,” said Miku Hirano, chief executive officer of Cinnamon Inc., a provider of AI-based business-solution services. “Now, the pandemic is making them take up the mission.”

Although Prime Minister Shinzo Abe lifted Japan’s state of emergency in late May, companies such as Hitachi Ltd. and Nippon Telegraph and Telephone Corp. plan to keep work-from-home measures in place for better operational efficiency. Earlier this month, Fujitsu Ltd. said it would halve its office space over the next three years, encouraging the electronics maker’s 80,000 staffers to work primarily from home.

Small- and mid-sized companies, which make up more than 90% of the nation’s enterprises, are also embracing change. While it closed its doors during April and May, the Szechwan Restaurant chain used the time to ditch manual schedules and set up spreadsheets instead, and hold meetings via video chats. “A quick shift to digital tools wasn’t possible without the pause, because we were too busy with regular restaurant operations,” said deputy director of marketing Ayami Kotani.

Japan’s government is also playing catch-up, with plans to to upgrade the digital infrastructure of ministries and public services next year after the pandemic revealed the dated nature of its administrative operations.

And industries such as real estate and retail, which once sought out third-party providers to develop tools, have started to look for their own engineers to develop in-house software and systems, according to Shiro Hayasaki, a manager at Recruit Holdings Co., a staffing and internet services company. Recruit Sumai Company Ltd., a related unit, said in April that 47% of employees and public servants are teleworking, up from 17% in November.

The push to work more efficiently is also forcing companies to be more decisive, according to Shinji Asada, the former head of Salesforce Ventures in Japan who recently started his own venture firm, One Capital. “For digital companies, the infrastructure is in place to make quicker decisions,” he said.

(Corrects title of restaurant employee in sixth paragraph.)

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