Japan’s ‘Digital Deficit’ Swells to ¥5.5 Tril. in 2023; Large Portion Going to U.S. Tech Firms

The Yomiuri Shimbun

16:03 JST, February 20, 2024

Payments for imported digital services by Japanese companies and others are rising, causing the nation’s “digital deficit” to swell further amid the increasing market dominance of U.S. tech giants in cloud and other services.

According to Mitsubishi Research Institute, Inc., the digital deficit reached about ¥5.5 trillion last year, an increase of approximately 160% from 2014. The outflow of national wealth caused by Japan’s inferior position in the digital field is becoming a serious issue.

The balance of digital payments is the difference between payments made by Japanese companies and others to foreign providers of digital-related services and the amount Japanese firms receive from overseas businesses. Digital payments include those for computer services as well as copyright and other royalties.

In 2023, Japan paid ¥9.2 trillion to businesses in foreign countries while Japan received ¥3.7 trillion from them. The digital deficit last year increased by more than ¥0.7 trillion from about ¥4.8 trillion in 2022.

The figure was about ¥2.1 trillion in 2014 and has continued to rise. The main factor behind the increase is Japan’s growing dependence on U.S. tech giants for digital services.

The balance of digital payments is believed to cover areas in which U.S. tech giants dominate the field such as cloud computing, internet advertising and smartphone app stores.

In Japan, Amazon.com Inc. and Microsoft Corp. account for large shares in the cloud market, while Alphabet Inc.’s Google and Meta Platforms, Inc. have large market shares in the internet advertising business. Apple Inc. and Google lead in app operations.

Payments to the U.S. firms are particularly high for some items including computer services.

Mitsubishi Research Institute estimates that of the about ¥3 trillion in payments to foreign companies for digital-related services in 2023, more than ¥1 trillion was paid to U.S. firms.