1.Government and Public Organizations

Council for Science and Technology Policy at the Helm
The government launched the Council for Science and Technology Policy in January 2001 in order to advance science and technology (S&T) policy in a comprehensive and well-planned fashion. The council is chaired by the prime minister and has 14 members, including the minister of state for science and technology policy and scholars from relevant fields. The council carries out basic S&T policy planning and overall coordination from a level above the government ministries and is thus at the helm of S&T in Japan. (Figure 1)

Global Issues Are the Main Theme
The drive to increase national power by promoting S&T is seen not just in Western countries but also across Asia. At the same time, with global-scale issues like population, food, the environment, and energy coming to the fore, S&T is becoming ever more important as the means to enable humankind to achieve sustainable development. Given this international situation, the Council for Science and Technology Policy aims to ensure that Japan is among the leaders of the industrial countries in terms of S&T. At the same time, it creates strategies so that Japan is not overtaken by Asian countries that are in pursuit, and it forges S&T policies that will benefit the national interest. The Council for Science and Technology Policy is clearly a vitally important council for the nation. (Figure 2)

Increasing the S&T Budget
The government's S&T budget for fiscal 2007 is 3.5113 trillion yen, with 1.3462 trillion yen earmarked for S&T promotion. The budget for the Ministry of Education, Culture, Sports, Science and Technology, which oversees S&T administration in Japan, has been rising over the last few years; it will be appropriated 2.3121 trillion yen, with 852.6 billion yen for S&T promotion, out of the government's total S&T budget. S&T is given special treatment despite the strained fiscal circumstances because its promotion is an essential national strategy for Japan, which has few natural resources, and because S&T is the foundation for manufacturing. The budget for S&T promotion is allocated to foster outstanding achievements and to create systems to apply them, as well as to encourage strategic research into S&T fields with future potential. It is allotted to researchers at universities and research organizations.

Independent Administrative Institutions Are the Core of the Nation's Essential Technology
Independent administrative institutions (IAIs) carry out important work in the four areas of life sciences, information and telecommunications, the environment, and nanotechnology and materials, which the government has designated as priority areas for promotion, as well as in energy, manufacturing technology, social infrastructure, and frontier sciences, which are designated as other areas for promotion. In addition to these areas, IAIs are also working to develop a supercomputer and to complete the assembly of Kibo, Japan's experimental module for the International Space Station, by the end of 2008. Also, in a four-year plan from September 2007 until 2010, the Integrated Ocean Drilling Project will send the deep-sea drilling vessel Chikyu to Kumanonada, a marine area off the Kii Peninsula with frequent undersea earthquakes, to clarify the mechanisms by which earthquakes occur. Capable of drilling to collect samples 7,000 meters into the Earth's crust from a depth of 2,500 meters under the ocean, the Chikyu is among the most advanced vessels in the world, and is testament to Japan's technological advances.

(Figure 1)



(Figure 2)
http://www.mext.go.jp/b_menu/hakusho/html/hpaa200601/003/001/0201.htm

2. Government Policy (1)

Establishing World-Leading S&T
The Science and Technology Basic Plan was originally a policy introduced to reconstruct the research sector. Japan enjoyed continued, high economic growth until the start of the 1990s, when the economy collapsed. There was a decline in the number of research and other institutions forming the underlying infrastructure for S&T, and the number of researchers also fell. The government developed the Science and Technology Basic Plan from the realization that it was necessary to shore up research institutions, while at the same time giving researchers freedom to carry out research, in order to reestablish a system of S&T research that would reverse the decline and put Japan back on par with other industrial nations .

Establishing a Nation of Innovative S&T
The Science and Technology Basic Plan was formulated in 1996, and the first phase of the plan went into effect the same year. A 5-year plan that looked 10 years ahead was drawn up, and this advocated establishing a nation of Innovative S&T. It started by increasing the budget for research and development, which up until that point had been shrinking, in order to shore up the universities and other research institutions that formed the S&T infrastructure and that fostered researchers. Progress was made in the provision of competitive funds for young researchers, but there were shortages in the budget for equipping research institutions. The first phase of the basic plan was essentially a takeoff period, after which the second phase, involving full-fledged shoring up of the nation's S&T, commenced in 2001.

The Second Phase: Full-Fledged Shoring Up
The Council for Science and Technology Policy was established in January 2001, charged with taking a pivotal role in the Science and Technology Basic Plan. The council evaluated the first phase of the Science and Technology Basic Plan in order to carry out the remaining tasks; at the same time, it aimed for a higher level of technology in Japan by assessing the direction of S&T initiatives around the world. In particular, as very few papers published by Japanese researchers were being cited in other countries, encouragement was given to researchers to write high-level papers. The four priority areas for promotion and the four areas for promotion, which address issues of national and social importance, were decided. The five-year budget was increased from 17 trillion yen to 24 trillion yen.

The Third Phase: Stepped-up Research in the Priority Areas
The third phase of the Science and Technology Basic Plan, which started in fiscal 2006 and will last until fiscal 2010, places a special emphasis on fostering human resources. In particular, an environment is being created in areas of basic research to permit researchers to give free reign to their ideas, and this is expected to contribute to the creation of new innovations. Research is to be stepped up in the four priority areas for promotion and four areas for promotion with an emphasis on enhancing S&T that will bring benefits to the Japanese people. Also, work will be carried out on the development of a next-generation supercomputer and a space transport system, which are to be key national technologies. The government's five-year budget is 25 trillion yen. (Figure 3)

(Figure 3)
http://www.mext.go.jp/b_menu/hakusho/html/hpaa200601/003/001/0101.htm

2. Government Policy (2)

Four Priority Areas for Promotion and Four Other Areas for Promotion as the Foundation for Japan's Survival
With the end of the second phase of the Science and Technology Basic Plan, the third phase is giving even greater weight to the selection and prioritization of research, with efforts being directed to the government's four priority areas for promotion (life sciences, information and telecommunications, the environment, and nanotechnology and materials) and four other areas for promotion (energy, manufacturing technology, social infrastructure, and frontier sciences).
These eight areas are particularly important for the everyday lives of the Japanese people, in addition to which they are an essential foundation for the nation's survival. (Figure 4, Figure 5)

Life Sciences: Targeting Areas of People's Interest
The Council for Science and Technology Policy compiled "important research and development issues," "strategically important S&T," and "promotion measures" for each of these eight research areas. The Japanese people are greatly interested in the area of life sciences, one of the four priority areas for promotion, and are hoping for significant advances in this area?for its importance from the point of view of S&T as well as for its huge economic and social contributions. The council has narrowed down the areas for government initiatives in life sciences to areas of particular social and economic impact, and is selecting research that actively targets these areas. (Figure 6)

Telecommunications: Fostering Human Resources
Research in the area of information and telecommunications represents a new IT reform strategy, with a focus on the development of technologies underpinning the creation of a society in which anyone can benefit from IT, anywhere, and at any time. However, a major problem is the shortage of human resources directly involved in technology development. It has been pointed out that universities are not fostering the human resources that industry needs, in addition to which the fields of electronics and information have suffered a decline in popularity in recent years. This is a result of the trend away from the sciences in Japan, and measures to counteract this trend are needed. During the third phase of the Science and Technology Basic Plan, fostering human resources is being addressed as an issue of particular importance.

Watching the World: the Mission of S&T
Environmental problems came to be viewed as a common challenge among the countries of the world during the latter half of the twentieth century. In the field of S&T, the environmental changes impacting upon people's everyday lives are major research topics, and investigating climate change and developing energy sources that do not release carbon dioxide are incorporated in the four priority areas for promotion. Japan is constructing a global observation system and is grappling with global warming and other problems from satellites high in the sky to ocean floors down below.

Nanotechnology: a Rapidly Developing Base
Nanotechnology and material science is an area covering a wide spectrum of S&T. It is indispensable for the development of artificial organs and also for the rapid control and processing of high-capacity signals in the field of telecommunications. Giving high priority to technological development in the area of nanotechnology will allow Japan to create a technological base that contributes to sustainable economic development. The four areas for promotion are just as vital to the everyday lives of the Japanese people as the four priority areas, and giving proactive promotion to research and development in all eight areas will establish Japan as a world leader in innovative S&T.

(Figure 4)
http://www.mext.go.jp/b_menu/hakusho/html/hpaa200601/003/001/0201.htm


(Figure 5)
http://www.mext.go.jp/b_menu/hakusho/html/hpaa200601/003/001/0201.htm


(Figure 6)

3. The Flow of Research Funds

The government's S&T budget for fiscal 2007 is 3.5113 trillion yen. Broken down by institution, 1.2194 billion yen is earmarked for universities (universities, higher technical and professional schools, and research institutes), 1.1348 trillion yen for independent administrative institutions, and 1.1571 trillion yen for ministry bureaus (agencies and ministries) - roughly one third of the budget each. (Figure 7)

The overall flow of funds for R&D in fiscal 2005, obtained by combining the government budget with R&D funding from private businesses, is shown in the Figure 8 (“Report on the Survey of Research and Development,”Statistics Bureau, Ministry of Internal Affairs and Communications). Research funding from national and local public bodies is divided roughly half each between universities on the one hand and NPOs and public institutions on the other. Only 4.4% of this funding goes directly to businesses. Private funds goes mainly to businesses, but 1.6726 trillion yen of such private funds goes to universities.




(Figure 7)
http://www.stat.go.jp/data/kagaku/pamphlet/k-04.htm

(Figure 8)
http://www.stat.go.jp/data/kagaku/2006/pdf/18ke_gai.pdf

4. Human Resources in Research

Private Businesses Employ 58% of Researchers in Japan
There are 790,000 researchers in Japan; of these, 57.6% are in private businesses, after which universities account for 36.8% and public research institutions for 4.3%. The situation in the United States is similar to Japan in that large numbers of researchers are in private businesses, but in Europe human resources in research tend to be concentrated in public research institutions. The reason so many researchers in Japan work for private companies is because industry regards R&D as an important part of management strategy. Breaking the number of researchers down by type of industry, most are in telecommunications machinery and appliances manufacturing, followed by transportation machinery manufacturing, electrical machinery and appliance manufacturing, machinery manufacturing, chemical manufacturing, electrical component and device manufacturing, software and information processing, and pharmaceutical manufacturing. (Figure 9)

Urgent Need for Uptake of Foreign Researchers after the Baby-boom Generation
The researchers involved in key private-sector R&D had been the baby-boom generation; this generation is now reaching retirement age and leaving the workplace, causing a vacuum at the center of business. Public institutions and universities are also facing a similar situation, as talented Japanese researchers leave Japan for the United States and other countries. Japan needs to put a system in place for accepting foreign researchers and to attract outstanding researchers from overseas. There is also a need to proactively encourage the uptake of female researchers.

Many Doctorates in Healthcare
The number of people in Japan with postgraduate qualifications in natural sciences continues to rise as a result of the enrichment of the nation's graduate schools. Breaking down the numbers from fiscal 2002 by area of specialization, the highest number of master's degree holders was in engineering, with 28,893, while for doctorates it was healthcare, with 6,853. The number of postgraduates in the United States was far greater than in any other country - three times as many as in Japan. Looking only at the number of doctorates, compared to the other major countries the number of postgraduates in Japan in the physical sciences is extremely low.(Figure 10)

Low Employment Rate for Doctorates
It is to be hoped that researchers who have studied at the undergraduate or graduate level will be readily accepted after completing their studies into private-sector businesses or research institutions, where they can play an active role. However, the employment rate for doctorates who have specialized in the physical sciences or agriculture is low, and a high proportion - over 30% - cannot find a career.

(Figure 9)
http://www.mext.go.jp/b_menu/hakusho/html/hpaa200601/002/002/0101.htm



(Figure 10)
http://www.mext.go.jp/b_menu/hakusho/html/hpaa200601/002/002/0301.htm

5. Private Sector R&D-1

Substantial Increase in Private-Sector R&D Funding in Fiscal 2006
As one would expect, research funding in private-sector businesses is greatly affected by corporate performance. Companies greatly increased their level of research funding during the rapid economic growth of the bubble period, often rising at an annual rate of around 10%. After the bubble burst, funding levels have been falling continuously, although there was an increase in fiscal 1995, but from fiscal 1998 funding levels have once again been falling. Funding levels have been increasing since fiscal 2000, though, and with the current economic recovery spending is continuing to show year-on-year increases, albeit at a moderate rate. The forecast for fiscal 2006 is a growth rate that has not been seen for 15 years.

A study by the Ministry of Internal Affairs and Communications shows that total research spending by businesses in fiscal 2004 was \11.8673 trillion. The daily Nikkan Kogyo Shimbun conducted a survey of 224 major companies in June 2006 to determine the latest trends, which showed that planned R&D funding for fiscal 2006 was 7.3% higher than the previous year at \10.7688 trillion. (Figure 11, Figure 12)

(Figure 11)
http://www.stat.go.jp/data/kagaku/pamphlet/s-02.htm

(Figure 12)

Improved Quantity and Quality of Japanese Patents
In the area of trade in technology, which includes payments of royalties to and from countries, technology exports (acceptance of technology overseas) are growing year by year. There are two sets of statistics on trade in technology: international balance of payments statistics based on foreign exchange flows, and statistics from the Ministry of Internal Affairs and Communications focusing on the status of research activities. Both show a surplus of exports in recent years, although the surplus is lower in the figures for the international balance of payments. (Figure 13)

According to Ministry of Internal Affairs and Communications figures, exports for fiscal 2004 amounted to \1.7694 trillion, and imports (payments for technology) amounted to \567.6 billion. Although imports have more or less leveled off, exports are growing; as a result, technology shows a growing trade balance ratio-determined by dividing the value of exports by that of imports-which reached 3.12 in fiscal 2004. This reflects the growing focus on intellectual property rights and the growth in patent fees from overseas subsidiaries accompanying the expansion into other countries of Japanese businesses. (Figure 14)

In the United States, the citation of prior patents is mandated in patent examinations. Using citation data, the National Institute of Science and Technology Policy calculated that the relative citation index (the frequency with which preceding patents are cited in successive patents) has increased since 1990 and that Japan's patents (US patents for Japanese inventors) have increased, exceeding the number of patents by US inventors in 2002. This shows that Japan's patents are making substantial improvements.(Figure 15)

(Figure 13)
http://www.stat.go.jp/data/kagaku/pamphlet/k-04.htm

(Figure 14)
http://www.stat.go.jp/data/kagaku/pamphlet/k-04.htm

(Figure 15)
http://www.nistep.go.jp/achiev/ftx/jpn/rep073j/pdf/rep073j.pdf

Pharmaceuticals and Biotechnology Making Positive Strides
According to the Nikkan Kogyo Shimbun study, among the top 50 companies for R&D funding, those with the highest net sales are also the companies with the greatest R&D expenditure. Toyota has been at the top of the R&D funding list for the past five years, with Matsushita, Sony, and Honda also ranked among the top 10 in 2005. However, as an indication of how pharmaceutical companies are making positive strides, companies such as Takeda Pharmaceutical and Astellas Pharma showed increases in excess of 20% in R&D planning for fiscal 2006.(Table 1)

Among the top 50 companies in the ratio of R&D funding to sales, the pharmaceutical industry was at the top of the list; in the top 10 (11 companies, due to two companies sharing the same ratio), nine companies are in the field of pharmaceuticals or biotechnology, many of which had R&D expenditures in excess of 20% of sales. (Table 2)

(Table 1)

(Table 2)