April 2023
Digital Policy Forum Japan

　In a data-driven society where data collection, storage, analysis, and utilization play crucial roles, its characteristics (such as zero marginal cost, nonrivalness, and a network effect) significantly accelerate the concentration of data as wealth, thereby increasing the market dominance of data holders. This concentration of data has led to the emergence of surveillance capitalism by giant platform operators in the former Western Bloc. At the same time, thorough government monitoring of citizens in nations such as China and Russia has resulted in authoritarian nationalism, making the contest between convenience/efficiency and privacy a significant challenge.
　Meanwhile, two trends are emerging to counter this challenge.
　One of these trends is seen in Europe. Revisions of competition law to respond to giant platform operators, the introduction of regulations on digital services, strengthening of personal information protection, the drive for federated authentication infrastructure, and further examination of data laws are underway to explore a new market model (the search for a third path) that minimizes the concentration of data as wealth.
　The other trend is the search for a new business model. With the emergence of Web3, a decentralized business model utilizing distributed ledger technology, a new trend can be seen in various fields, which counters the concentration of data as wealth and empowers individuals. There is also a rapid trend to incorporate generative AI into services, which has become a significant factor driving the transformation of the digital market.
　Focusing on the two trends that bring about a significant shift from concentration to decentralization, the Digital Policy Forum Japan (DPFJ) aims to take a step forward by defining Japan’s vision of a digital nation while further examining the social and economic impact of a data-driven society.
　In the process, we will pay close attention to the impact of the world’s major challenges, including geopolitical risks such as the conflict in Ukraine, increased uncertainty in the global economy due to material shortages in oil, semiconductors, and food, as well as the rapid increase in challenges caused by environmental damage. the DPFJ will examine these situations from the standpoint of flexibility, preparing urgent proposals if necessary.

1. Concrete vision for a data-driven society

　We will discuss rulemaking in a digital society, emphasizing the diversity of countries and cultural spheres rather than simply adhering to the European approach, which differs from the surveillance-capitalism or authoritarian-nationalism models. The key question is the balance between trust and control, as well as freedom and diversity, in a future digital society. We will examine the optimal blend of concentration and decentralization in a digital society.
　Moreover, as a decentralized business model is expected to spread rapidly in the future, there are concerns that the drawbacks of concentration in Web 2.0, such as the possibility of competition-restrictive acts by platform operators, will emerge in different forms, as well as how the government should be involved in such business models. Therefore, we will discuss the decentralized business model from the perspective of international competition and international regulations, as well as a desirable form of digital society.
　Additionally, even as a decentralized business model becomes more widespread, it is crucial to ensure cultural uniqueness and diversity. Therefore, promoting the contribution of Japanese creators and users in the content market, which is inseparable from culture, is vital. We will discuss a concrete vision for a data-driven society where international acceptance becomes widespread and values and systems are flexibly in harmony.

2. Basic regulations for a data-driven society

　We will examine the relationship between the state and civil society in a society based on digital technology. One crucial topic of discussion for the future construction of a digital society is connecting a data-driven society’s expanding ecosystem with civil society’s governance, which is not yet firmly established in Japan. We will examine the direction the basic rules of a digital society in the Japanese model will take by comparing it with the American model based on small government, the EU model based on historically rooted civil societies, and the Chinese-Russian model based on authoritarian nationalism.
　In light of Russia’s invasion of Ukraine, we will further examine the rights of citizens during times of emergency, specifically those concerning the gray zone (a stage before military action involving attempts to impose one side’s claims and demands, including cyber attacks in the run-up to armed conflict, with a blurred line between normality and emergencies). In addition, we will examine the involvement of public entities, such as the government, in the Internet, taking a multifaceted approach from the perspective of Internet governance, based on the fundamental principles of the Internet: autonomy, decentralization, and coordination.
　We will drive the discussions above by inviting experts in international relations, security, and foreign policy to examine the issues. With a focus on the Japanese-style digital triangle, where citizens, industry, and the government collaborate closely, we will conduct a comprehensive discussion on a global scale, including ensuring the rule of law.

3. Competitive framework in a data-driven society

　We can expect cyber-physical systems (CBSs), which deploy diverse services by fusing and coordinating data and information across physical and cyber spaces, to become the basis of a data-driven society due to the digitalization of industrial structures.
　In a society that has implemented CPSs, various issues may arise, such as the adverse effects of the large-scale and widespread acquisition of data, the ambiguity concerning responsibility for judgments made by AI, and the exercise of dominance by giant platforms. However, to ensure that the innovative nature of the market is maintained, agile governance and goal-based regulations are considered effective rather than pre-regulation. We will discuss future directions, including the challenges of such approaches.
　In addition, while the Japan Fair Trade Commission primarily focuses on B-to-B transactions in terms of competition policy, consideration of the required framework for B-to-C transactions will be necessary. We will examine a new theoretical framework based on this awareness of the issues.
　Furthermore, to encourage responsibility for preventing platforms from hindering free competition and to achieve public objectives such as green transformations (GX), cooperation and data sharing between competing companies may be effective. Conversely, we will also discuss how such practices should be addressed from a competition-policy perspective.

4. Distribution of integrated content in a data-driven society

　We can expect DAOs (decentralized autonomous organizations), Web3, the metaverse, and fan communities to expand globally. However, hierarchical or vertical relationships such as major and indie, professional and amateur, and platform and content will likely continue to exist for now.
　However, since their roles and relationships are expected to change significantly, without a comprehensive look at mutual relationships and career paths for individual creators, the media/content sector may become a field where individuals do not see it worth risking their careers and livelihoods in the medium to long term.
　Recognizing the above, we will conduct discussions from all aspects of production, distribution, utilization, and consumption while gathering insights from various stakeholders regarding (1) the realization of flexible content production and distribution, (2) ensuring media diversity without limitations due to transmission channels, and (3) addressing global challenges.

5. Establishment of rules to accelerate a data-driven society

　The EU is at the forefront of developing rules to accommodate a data-driven society. In addition to legislation on personal data protection and intellectual property that focus on data protection, there are concrete efforts to develop legislation for data utilization based on the proposed Data Act that aims to promote extensive data sharing, such as IoT-generated data, and the Data Governance Act scheduled to come into effect in the fall of this year. In addition, full-fledged enforcement of the Digital Services Act (DSA), a comprehensive form of platform regulation that includes measures against misinformation, and the Digital Markets Act (DMA), the complementary competition legislation, are expected to begin.
　We will discuss the state of legislation and their implementation in the EU and trends in the US and UK, while drawing on them to examine the approach to rules needed in Japan for a data-driven society.
　Furthermore, the discussion on the development principles of AI so far has mainly been based on ideological perspectives. However, in the real world, the use of generative AI is rapidly expanding and is being incorporated into various services. Taking these trends into consideration, we will examine the social and economic impacts and new challenges brought about by AI.
　The rules for a data-driven society are difficult to establish solely at the national level and require diverse methods such as public-private collaboration, including joint regulation, as well as international rule-making through economic partnership agreements between nations, and frameworks such as the G7 and OECD. Considering the appropriateness of the purpose and means, we will examine the effectiveness of these methods.

6. Impact of a decentralized business model

　The widespread adoption of decentralized business models, exemplified by Web3, may bring about a significant shift in the previous centralized business model that relied on platforms. Restoration of balance between concentration and decentralization is taking place and has the potential to impact our socio-economic system significantly.
　Therefore, we will first examine the trends in Web3 business models and identify key challenges, such as the governance of organizations, the impact on financial systems, and the possibility of introducing a decentralized business model in authoritarian countries. Based on these findings, we will also consider important perspectives for understanding these trends and conducting further research.
　In particular, new technologies and concepts related to the decentralized business model, including Web3, are still underdeveloped in many aspects, making it challenging to accurately predict future developments and the value of such a business model.
　To become a pioneer in the decentralized business models, exemplified by Web3, Japan must outline new growth strategies and promote close collaboration between industry, government, and academia to work towards developing the necessary technologies and creating a suitable ecosystem. Therefore, we will discuss the ideal form of the decentralized business model, which encompasses Web3, from a multidisciplinary perspective that includes technology, finance, and law as part of a growth strategy. We will also examine the direction of new industrial policies based on the decentralized business model.

7. Ensuring cyber security in a digital society

　As the Internet becomes increasingly vital in our socio-economic infrastructure, ensuring cybersecurity has become a crucial issue directly related to economic security. There is a growing need to consider a comprehensive cybersecurity strategy incorporating various perspectives, including economic, diplomatic, and political, rather than just a technical one.
　Furthermore, ensuring data integrity has become the most critical component in a data-driven society. In particular, we must consider legislation that encompasses mechanisms to ensure data integrity throughout the data supply chain. To this end, we will examine legislation incorporating data quality assurance mechanisms by data intermediaries and facilitating data distribution, such as the EU’s Data Governance Act and the proposed Data Act, while considering data security and the data supply chain.
　Moreover, we will set in order new challenges related to cybersecurity in the digital society and examine methods of social implementation aimed at resolving these challenges.

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