R&D Through a Long Winter | Why Has Japan's R&D Budget Been Reduced?

In this video, Representative Tamaki of the Democratic Party for the People pointed out that while R&D spending in the university sector has increased over the past 20 years in other countries (the U.S., China, and South Korea), it has decreased in Japan to 0.9 times its previous level.

In particular, it can be observed that there was a significant decline around 2008 to 2009.
This appears to be largely due to the re-evaluation of projects through the government's 'project screening' process under the Democratic Party administration that took power at the time.
Since then, the budget amount has been gradually returning to the 2008 fiscal year level.

I would like to consider why Japan's R&D budget has been on a downward trend and what it should look like in the future.

◆ Is the sluggish economic growth due to a lack of R&D budget?

Why is more R&D budget needed?
Isn't this the kind of thinking that comes to mind for many people?

Japan's economy has been stagnant for the past 30 years.
One of the major reasons for this is that technological innovation did not occur.
Even among developed countries, the U.S. has grown dramatically.
And the U.S. invests a large R&D budget.

Therefore, Japan also needs more R&D budget for economic growth.

Is this correct?

Since it is difficult to look at it in terms of GDP economic growth rate, I will look at it in terms of stock prices instead.

From around 2008, when the Lehman Shock occurred, to the present, the S&P, a representative U.S. stock index, has seen phenomenal growth of more than about 10 times.

And it is said that more than 30% of the S&P is accounted for by seven giant companies called the 'Magnificent Seven.' In fact, these seven companies have accounted for more than 40% of the S&P's gains this year, 2025 (up to November).

These seven companies are Apple, Microsoft, Alphabet (Google's parent company), Amazon, Meta, NVIDIA, and Tesla, but it is thought that the core technologies that form the center of these companies' value are limited in terms of what was derived from government R&D budgets.

If I had to name one, it would be the search algorithm (PageRank) that supports Google's search system. Others are basically technologies and competitive advantages that have grown through private investment.

As for technology common to all companies, there is the Internet, and since Internet technology is said to have originated from an agency under the Department of Defense, it can be said to be government-supported in a sense.
However, this origin dates back to around 1970 and cannot be a factor in the gap between Japan and the U.S.

In terms of core technologies:
Apple has the iPhone and its design and UI
Microsoft has the Windows OS and standard software
Amazon has its massive logistics centers/distribution network, customer recommendation systems, and AWS (cloud)
Meta has Facebook, an SNS that has spread across the world
NVIDIA has a system that has captured AI-related developers through its chips and the CUDA library tied to those chips
Tesla has electric vehicles with a focus on the battery business

It can be said that none of these were centered on government development support, but rather grew as private business decisions.

In other words, it is hard to say that the cause of the stagnation in economic growth was the reduction of the R&D budget.

◆ Results of government-supported R&D

Even though it is said that the R&D budget has been decreasing over the past 20 years, a certain amount of support for R&D has been provided every year.

So, what kind of results have been achieved when looking at this within Japan? I asked ChatGPT.

• IGZO/TAOS (Transparent Amorphous Oxide Semiconductor) Displays
  Practical application and product use of IGZO (=TAOS-based) for power-saving, high-definition displays. It is still partially used in large panels today.

• iPS Cell (Induced Pluripotent Stem Cell) Technology
  Although clinical research is underway, it has not yet reached practical application due to cost issues.

• K computer / Fugaku: National Project-Class Supercomputers
  The computing infrastructure is utilized for COVID-19 countermeasures, high-precision weather forecasting, and support for new drug discovery.

• Microwave Discharge Ion Engine (Electric Propulsion) for the Asteroid Explorer 'Hayabusa'

• Residential Fuel Cell 'ENE-FARM'

Looking at it this way, it seems that R&D is focused more on fields with a certain level of public interest or public nature, such as medicine, space, and energy, rather than for businesses that generate large profits.
Displays are business-oriented, but the method adopted in smartphones is different.

◆ Why has the R&D budget been decreasing?

Government-supported R&D seems to be producing certain results. I will consider why the budget is still decreasing.

1. Single-year budget system vs. R&D that takes a long time to produce results
   Budgets are basically based on a single-year system. On the other hand, there is almost no R&D that produces results in one year; it takes a long time.
   Although the budget is designed to accommodate multi-year requirements, there is a premise that the nature of the two is fundamentally incompatible.

2. Budgets concerned with performance indicators vs. R&D that is difficult to measure by B/C
   Related to point 1, budgets demand results within a single year. On the other hand, R&D is basically pre-market, so it has the characteristic of being difficult to measure in value.
   Also, while R&D is uncertain until you try it, government support, which uses public funds, has the disadvantage that failure is difficult to accept.
   As a result, it tends to be limited to R&D where results are already visible and easy for others to imitate, making it difficult to find the unique value of that research.

3. Budgets that require promotion vs. R&D that is poor at promotion
   When seeking a budget, it is necessary to promote the ability to produce excellent results. However, researchers who are well-versed in their own research tend to avoid embellishing their results, and as a result, the lack of appeal to the listener is also a factor in the budget decrease.
   The government screening process (jigyo shiwake) around 2009, which led to a significant reduction in the R&D budget, is one example of this.

◆ The intersection of R&D and business

So, is it difficult for government-led R&D support to bring large profits as a business?

First, the primary answer would be Yes.
After all, the government provides support for public reasons.
If it were to succeed as a business, the logic would be that it is something the private sector should have invested in originally.

Even so, there is a non-zero possibility that government R&D can generate innovation as a business.
Therefore, at the end of this post, I will consider how the government can provide R&D support that leads to innovation.

1. Orders from the top
There are hurdles to multi-year support, and in fields that are difficult to measure by performance indicators, it is difficult to decide through normal administrative processes, so decision-making by the top is necessary.
If the method of orders from the top can be adopted, it will be easier to advance projects that do not rely on multiple years or performance indicators.

2. Support under public-private partnership
The government is poor at business, and it is highly likely that good business will not be born if the government follows up.
Therefore, it is conceivable to involve the private sector, which has the know-how, but if the private sector is simply involved, they will treat it as someone else's problem.
Therefore, a method can be considered where there is joint investment with the private sector, and the private sector also participates in the follow-up as its own business.

3. Reduction of administrative paperwork
Related to 2, if conventional administrative paperwork is required, the investment target will have its man-hours taken up by paperwork.
Therefore, it is conceivable to reduce administrative-type paperwork as much as possible and fulfill accountability through coordination with the private sector's follow-up.