They’re B-a-a-a-a-ck…

While the rest of the world idles in neutral, one country is putting the pedal to the metal in the race for global industrial leadership. Read on to see how they're doing it - and what it may mean for the rest of us.

Don’t look now, but the Japanese are doing it again - “it” being the implementation of strategies that will assure them a place at the front of the industrial pack for decades to come.

As the rest of the world stumbles about directionless, Japan is quietly and steadily laying the groundwork for what amounts to a “new and improved” country - a country in which innovation is supported by ample private and public funding and in which new ideas travel from lab to factory to Main Street with lightning speed.

The last time Japan trailed any major industrialized country in the ratio of R&D investment to GDP was back in 1988. Since then, the Japanese have consistently put a higher percentage of their national assets into research than the United States, Germany, Korea, the UK, France or China. Even when domestic consumer spending dropped almost to zero during their recession of the 1990s, even as the price of petroleum nearly tripled, even as Japan became the country with the world’s highest ratio of elderly to young people – even with all that, they kept investing in R&D.

And now they’re upping the ante.

While the U.S. and the European Union dither, Japan is launching a program called “Innovation Super Highway.” The intent of the initiative is to facilitate interaction among knowledge workers (both domestic and foreign), academia and businesses, thereby supercharging the processes of both invention and technology transfer. As a measure of how wide-ranging the effort will be, the government is even planning to subsidize “intellectual cafes” - broadband-enabled gathering places all over the country where individuals can exchange ideas either virtually or face to face.

The new initiative is an outgrowth of preliminary programs that were first launched in 2005. Those earlier efforts were intended to develop the world’s fastest patent examination system; reduce patent fees; increase trademark rights, protection of trade secrets and punishments for patent infringement; support intellectual-property strategies at the level of local government; and create curricula on intellectual property at law and graduate schools.

Neither the established programs nor the new initiatives have been undertaken in a vacuum. The administration of Prime Minister Shinzo Abe is also offering financial support to value-added industries and services in such forward looking arenas as nanotechnology, robotics and next-generation automobile batteries. In addition, a government panel on education reform is soon expected to propose a more stringent curriculum, a new teacher-licensing system and national achievement tests for the public schools.

The government is also allocating new funds for job training, aid to small firms, assistance to regional economies and more spending on pensions and health insurance. It is buttressing maternity leave and child-care opportunities in an effort to raise the national birthrate. And it is even debating a related subject that has hitherto been considered just this side of sacrilege in Japan: easing restrictions on immigration.

Of course, none of these programs would have been possible if Japan were not simultaneously addressing national fiscal and structural reform. Since 1996, beginning under then-Prime Minister Junichiro Koizumi, Japan has been moving aggressively to get its budget out of deficit and into balance. This is in stark contrast to the current U.S. and European models, which postpone substantive action on public debt until the advent of a largely unmentionable Date of Doom somewhere out there in the misty future.

So what does it all add up to?

In fiscal year 2005, R&D investments by Japanese companies, universities and government-supported research institutes hit a record 17.85 billion yen. That was an increase of 5.4 percent over 2004 totals and the sixth straight year of growth. When you consider the innovations that have come out of Japan during that period and then add in the probable effect of even greater R&D investments now and in the immediate future, you realize two things: (1) Their past investments served them very well indeed; and (2) their current research and development investments will likely slingshot them even further ahead in the pursuit of the 21st century’s big prize: intellectual property.

If that isn’t enough to give U.S. manufacturers the willies, consider the state of just one sector of the American industrial economy:

Over the past two decades, how much R&D investment has the domestic automobile industry put into the search for genuinely groundbreaking approaches to locomotion? Instead of producing endless variations on the SUV and minivan themes, why wasn’t Detroit concentrating more effort on developing truly new technologies that could result in fundamental improvements in the way we transport ourselves? And why couldn’t such efforts have been supported by substantive funding from a federal government that had made the hard decisions necessary to balance its budget and get the United States out of the red once and for all?

When gasoline is $12.50 a gallon instead of $2.50, will you really be concerned about the size, number and location of your vehicle’s cup holders? Or might you prefer your ride to be a super-efficient new car sporting technologies as yet undreamed of?

If you choose the latter, expect to see that new car sporting something else as well: a sticker that says “Made in Japan.”

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