Opportunities for foreign companies in Japan's medical sector: a seminar hosted by Ibaraki Prefecture, LINC Media & J@pan Inc.

According to the UN's World Population Prospects White Paper 2000, 35.7 percent of the total population of Japan will be senior citizens by the year 2050, meaning that only 50% of Japanese will be of working age. As a result, many private research institutions such as McKinsey & Company Inc., Japan, are estimating that while the aging of Japan threatens the country's economy, it also opens the way for a projected [yen]4-trillion growth of the Japanese Healthcare Market over a five-year period between 2002 and 2007.

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In view of the above estimated projections, it goes without saying that there will be an ever-increasing demand for healthcare services. As observed by JETRO, the following three sectors in particular show signs of strong growth in Japan: Welfare Services; Medical, Health Management and Security Services; and Nursing Care Services. The first two sectors alone are expected to be worth [yen]6.7 trillion by 2010, which certainly means that businesses and entrepreneurs around the globe cannot afford to ignore the wealth of opportunities presented by the growth of healthcare services in Japan.

In this regard, the Ibaraki Prefecture Government, LINC Media and J@pan Inc. held at the Imperial Hotel in Tokyo on March 25 a seminar for foreign managers and professionals from the medical and related industries. John Wocher, executive vice president of Kameda Medical Center, one of Japan's largest and most respected private hospitals, gave the keynote speech on Japan's healthcare industry. This was followed by a demonstration of the most cutting-edge cybernic technology used to make a hybrid assistive limb (HAL) by Professor Yoshiyuki Sankai, of Tsukuba University in Ibaraki.

The large turnout was indicative of the extensive foreign interest in the health sector with professionals from various industries eagerly looking forward to the emerging opportunities that the second largest medical market in the world offers. In the 90s, many foreign medical companies worried that Japan's struggling economy would shrink demand for their products in the country. However, two trends have reversed and tipped the scales in their favor.

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The first of these trends is a growth in demand. As Japan's population grays, the need for high-quality, cost-effective medical equipment from abroad will continue to grow. Given that Japan's domestically manufactured medical equipment is among the most expensive in the world, the country has traditionally looked to foreign suppliers for innovative alternatives.

The other trend resulted from the Japanese Government's deregulation of the medical sector in 2000. The Nation's Health Insurance System, which is overly burdened by the rapidly aging population, and its notoriously regulated medical market will no longer be sustainable, given the system's annual deficit of over US$7.7 billion since 1998. Deregulation reflects the government's realization that Japan needs a more efficient, more cost-effective and, hopefully, a more transparent healthcare system.

Major reforms in the medical industry began in May 1998, when Japan decided to relax some of its product testing and approval regulations for imported medical devices. Under this initiative, it encouraged the acceptance of foreign clinical trial data and introduction of new, innovative, foreign medical products to raise cost efficiency and to improve the overall quality of health care. The time it takes to get reimbursed for medical products, in particular, high-tech devices, was shortened and insurance coverage under the National Health Insurance System was extended to some leading-edge equipment.

In recent years, the Ministry of Health and Welfare (MHW) has also been reorganized, merging the departments for drug safety measures and general medical practices to establish a new Pharmaceutical and Medical Safety Bureau. This move separates the regulatory and industry promotion functions, thereby making the provision of medical products and services more efficient.

The Japanese Government appears committed to continuous deregulatory and liberalization reforms of the healthcare industry (as stated in "The 3-year Program in Promoting Regulatory Reform in December 2002"), with the hope of creating a trickle-down effect, both direct and indirect, that will have a favorable impact on the overall economy and improve the quality of life.

With the above trends reinforcing policy initiatives by the Government, the opportunities for foreign companies who can deliver cost-effective, innovative and state-of-the-art products and services are indeed abundant. This was further reiterated by John Wocher, in his presentation, "Implementing Global Trends in Healthcare--Where are the Business Opportunities?" One of Wocher's examples was in the area of risk management, where there are plenty of opportunities for malpractice reinsurance, ISO consulting, etc.

Apart from deregulatory initiatives adopted at the central level, prefectural governments are also riding on the wave of opportunity and actively courting foreign investments in areas such as advanced bio-medical research facilities and sophisticated medical technologies by offering attractive incentives and tax structures. One such body is the Ibaraki Prefecture Government.

Ibaraki Prefecture offers superior infrastructure and logistical advantages such as proximity to port facilities, easy access to Tokyo International Airport  in Narita (80 percent of its products are exports) and Tokyo and other major markets in the Kanto region. Furthermore, it has a highly educated and trained workforce with an excellent academic research institution conducive to foreign medical companies who are looking to relocate or site their facilities in Japan. (For more information, go to http://www.pref.ibaraki.jp/bukyoku/seikan/kokuko/en/). With strong support from prefectural governments, foreign medical companies can expect a smooth transition and relocation process.