A New Phase for the World Economy Combining Globalization with Digitalization

Spring is here again, and a new fiscal year is beginning. In recent years I have felt that it was hard to take an optimistic view at the beginning of a new fiscal year. Fortunately, there have been no major hiccups in the world economy so far. I never want to be like the boy who cried wolf in Aesop's fable, but this year I feel strongly even more than in the past, that we have to roll up our sleeves and get started. As a global company I think there will be quite a need for us to move with quick reflexes.

Meanwhile, structural changes in the world economy are still progressing steadily. The wave of globalization since the fall of the Berlin Wall in 1989 has brought about major successes overall but it has also created winners and losers among the various countries and regions of the world. This has spread feelings of antipathy and backlash against globalization itself around the world.

Reflecting back on modern history, there have been similar trends many times in the past. For example, the First and Second World War can also be summarized as consequences of the inability to smoothly adjust to frictions arising between various countries and regions as a result of globalization. Even with such setbacks, however, ultimately we have arrived to the present day without globalization coming to an end.

So how, then, will the globalization of the future differ from that we have seen until now? Surely one new and distinctive feature is the co-existence with the digitization that is underway. The remarkable progression of information and communication technologies has changed the way in which we use and exchange information dramatically over the past 30 years. Until now, globalization was more visible in the world of physical products. Moving forward, it will surely spread into the world of services. Much of the information around us, such as characters, sounds and images are now being digitalized, and they will be able to be transferred in increasingly larger volumes, and at greater speed.

In this way, work styles will also change greatly. In the manufacturing workplace there will be a progressive shift towards automation and unmanned processes. Also in the service domain, it will no longer be necessary for people to always gather together in one place. The gig economy, in which independent individuals receive orders from multiple customers (rather than a single employer) for services, will also expand and develop into a more sophisticated field. The provision of services in virtual reality (VR) making effective use of artificial intelligence (AI) will also be carried out across borders. New competition similar to products will surely take place in more sophisticated areas of service like legal practice, accounting, medical treatment and education.

As a result, the movement towards anti-globalization may become increasingly intense, even among white-collar workers, who as yet have been comparatively unaffected by the negative effects of globalization. But history has shown us that there is a strong possibility that globalization may overcome such major frictions and continue to progress as it has done to date.

From a business viewpoint, the focus lies in how we can cater to the needs for technologies and devices that will realize this new form of globalization, combined with digitalization. For individuals working in developed countries--including Japan--there will probably be an increase in the number of people who will no longer be able to stay in the same jobs that they have done up to now; and this applies not only to manufacturing, but also to the provision of services.

To respond to these changes, it will be important, more than anything else, to engage in the education and training of human resources capable of adapting rapidly to these new environments. Without these, only resistance to the progress of the world economy towards this new phase will increase, and the time when many people can fully enjoy the fruits of these new technological advances will be delayed. For the moment, it seems we might face quite a difficult new fiscal year, but also in the longer term, it appears major challenges for the future lie before us.