Japan needs to reform outdated business practices and revamp regulation in the telecoms and media industries if it is to regain its edge in these markets, according to a government minister.

Heizo Takenaka, Minister for Internal Affairs and Communications and architect of the privatisation of Japan’s postal system, said reform and deregulation could unleash a five-fold expansion in their annual sales.

“The media market is about Y4,000bn ($35bn), the telecoms market is Y16,000bn so together they are Y20,000bn. Instead of fighting frantically over this pie, there is an opportunity to grow it to Y40,000bn or Y100,000bn,” Mr Takenaka said in an interview with the Financial Times.

“Time Warner’s revenues alone are more than Y4,000bn, so the whole Japanese media industry is smaller [than Time’s] … despite having such a large presence in Japanese society. I think the potential is huge for both Japanese media and telecoms.”

Mr Takenaka said Apple’s development of the iPod and iTunes was an example of the kind of area where Japanese companies had missed the boat, adding that he intended to explore the reasons behind this failure over the next six months.

“Apple’s iPod provides a pointer to future possibilities as well as a lesson,” he said.

Although it would have been natural for a Japanese electronics company to have developed the iPod, “unfortunately, the concept of distributing music over the net did not take off in Japan, so it was Apple rather than Sony that developed the iPod”, he said.

Apple’s lead in the digital portable audio market dealt a blow to Sony. It came up with a digital player before Apple but it failed to capitalise on it because of obstacles in developing the music download market in Japan.

Mr Takenaka has now asked a special taskforce to develop recommendations on reforming business practices and regulation by the end of June. He believes outmoded business practices, vested interests and regulatory obstacles are preventing the full development of goods and services that take advantage of new technology and the internet. In some areas of Japan people still have only a few terrestrial TV channels, even though available broadband technology would allow them to receive more.

Mr Takenaka emphasised that responding better to consumer demand would by itself spur growth in the media and telecoms industries.

He added that a review of the two sectors could lead to a reorganisation of ministries, saying there had been calls for “the consolidation of responsibilities [for these sectors] under one roof.”

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