Brain Power Pays Off With Japans Intellectual Property Exports

Intellectual property is generating soaring revenue for Japan, jumping by 74 percent over the past five years to a record in 2017, according to the latest government data.

Developing and protecting it is a key element of Prime Minister Shinzo Abe’s long-term growth strategy, which calls for greater investment in innovation to create wealth as the nation’s workforce ages and shrinks.

Record-Breaking Rise

The first 11 months of 2017 are already higher than any full-year result

Source: Bank of Japan

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Intellectual property, which applies to intangible assets including brands, copyright, patents and industrial designs, covers everything from Japanese cultural icons like Super Mario and Hello Kitty to robotics advances by Fanuc Corp.

While Japan doesn’t break down its IP exports by sector, automakers and high-tech manufacturers are earning revenue in the sector, according to Yuki Masujima of Bloomberg Economics. He expects IP-related services in areas like robotics and medical care to generate a lot more growth for Japanese firms.

The nation ranked second behind the U.S. in IP exports in 2014, the latest year for which complete data was available, according to the Organization for Economic Cooperation and Development.

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"The income transfer from overseas to Japan should come through services, including these intellectual properties, rather than goods," said Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo.

Food and beverages, motor vehicles, computers and electronics products, and machinery and equipment are among categories ranking highest in income globally from intangible capital, according to the World Intellectual Property Organization.

Given the importance of IP to their economies, Japan and other advanced nations such as the U.S. are trying to strengthen protections in this area.

Japan nearly saw its preferred IP protection regime realized in the Trans-Pacific Partnership, until President Donald Trump’s decision to pull the U.S. out of the agreement threw the pact's future into doubt.

The remaining 11 TPP members have suspended multiple IP-related provisions from the original agreement. Meanwhile, another large trade deal championed by China, the Regional Comprehensive Economic Partnership, doesn’t address IP to the satisfaction of Japanese businesses.

"Intellectual property and the technology-intensive industries that generate it are a larger and larger part of the economies of the advanced industrial nations," said Lee Branstetter, a senior fellow at the Peterson Institute for International Economics who specializes in intellectual property. "Making sure that intellectual property is well protected in the global economy has been an increasingly central trade policy objective."

— With assistance by Maiko Takahashi, and Hannah Dormido

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