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“How to Navigate the Cyber-Physical Era” – What Kind of DX and Regional Design Should Local Cities Aim For?

Tatsuya Kurosaka, a member of the research group, provided an overview of the actions that local cities should take moving forward. A summary is below.

DX and GX are not end goals. One cannot escape digitalization—nor is it possible to simply opt out of it. Digitalization is an unprecedented experience for humanity, and should be understood as a continuous movement. Climbing the staircase step by step—that is what digital transformation truly entails.

Today, we see the rise of the digital twin. Technologies such as 5G, IoT, and AI are converging around this concept. Digital elements are increasingly entering the physical world—our bodies, our physical surroundings. This is not just about efficiency or cost reduction. The real essence lies in the expansion of opportunity. To achieve that, we must consider: how do we digitize space itself? Take this room, for example—it's not digitized at all. That means we can't control anything about it digitally. Even something like temperature is adjusted solely based on human perception.

The term “National Strategic Special Zone” sounds exciting—it makes one feel like doing something bold and innovative. But why does it sometimes fail to produce results? One reason may be the lack of a stakeholder perspective. While it's important for key actors to be passionate and committed, it's just as important for those affected by the initiatives to catch up quickly. This requires first identifying who is being affected—something that has yet to be done adequately.

There is a need to structure and systematize initiatives. Long-term projects involving many stakeholders must be sustained through proper frameworks. However, Japanese people are often not adept at systematization. Consider, for example, generative AI technologies from the U.S. Despite the hype in Japan, Americans are not using generative AI in their work as much as people might think. This is because their highly structured "framework culture" leaves little room for rapid adoption. That structured conservatism has its strengths—it allows people from diverse backgrounds to work effectively together. In contrast, Japan lacks such frameworks, and must build them.

At the same time, relying too heavily on endogenous efforts can lead to inertia driven by "local dynamics." Instead, leveraging individuals’ everyday intuition may be more effective. In fact, Japanese individuals have already achieved DX in their personal lives. What’s needed is a shift in mindset—a shared understanding that just one step beyond everyday experience lies something new.

Cross Talk Summary: How to Make Sapporo a More Attractive City

Facilitated by Research Group Member Mr. Azuma, a cross talk was held featuring five participants: Mr. Ishimaru, Mr. Asamura, Mr. Kurosaka, and Mr. Ochiai. The following is a summary of the discussion (titles omitted for clarity).

Azuma: Fukuoka gives the impression of being an exciting place to work. It’s often cited as a good case of regulatory reform, but what were the key considerations in city planning and institutional design leading up to that point?

Ishimaru: The organization I belong to, the Fukuoka Directive Council (FDC), deliberately operates loosely in terms of systemization. We connect insights and ideas from the ground level directly to policymaking. We’ve also spent nearly 15 years training policy professionals through the Regional Policy Design School at Kyushu University. Participants develop policy proposals and implement them in just seven months, and the FDC supports this process. Nearly 500 alumni have come out of this system.

Another important point is having a clear vision. It’s critical to consider how individual policies fit into a broader macro perspective, and to always be mindful of the time axis. Though the FDC focuses on the Fukuoka metropolitan area, we act within the Kyushu region by mobilizing frameworks, talent, and ideas.

Azuma: In terms of regulatory and policy reform, future society will require balancing agile governance with robust systems. What kind of management leads to good reform proposals?

Ochiai: On the relationship between agile governance and systems, while some areas of Japanese work remain unsystematized, administrative work tends to be relatively structured. Still, rigid risk management sometimes prevents adoption of new technologies. Even when people want to try new things, they can’t move forward.

In digital regulatory reform, it’s best not to make rules too detailed. There’s a well-known approach called “performance-based regulation.” For example, with drones, inspections are typically conducted visually, but within the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), some departments have created technical catalogs. When this was brought to the Regulatory Reform Promotion Council, there was discussion about having other departments and agencies do the same. When the Digital Extraordinary Administrative Investigation Committee reviewed case studies, it was suggested that such catalogs should be created across more fields. In Japan, too much specificity can block innovation, but saying nothing at all leaves people unsure. A mix of abstract goals, case studies, and guidelines is just right for Japan.

Communities also matter. Like Fukuoka, Tsukuba is known for its progressive stance, and it has also cultivated strong communities. Whether regulatory reform, organizational development, or talent development comes first is often a chicken-and-egg issue, but creating spaces for enthusiastic people to gather facilitates information exchange and accelerates progress. Regulatory reform shouldn’t be the end goal; it should serve to help organizations think through how to implement new ideas.

Azuma: What kind of aspirations or issues is Sapporo focused on right now?

Asamura: Sapporo is beginning to face population decline. Our generation must consider how to enhance and pass on the city’s value to the next. This can’t be done by government alone.

But we still lack a fully formed community for discussing the city’s future vision. Fukuoka seems to benefit from strong private-sector commitment, which sparks more creative thinking within government. Public servants must revisit the rationale behind existing systems and develop multidimensional thinking to shape the city’s future.

New ideas arise when we connect to private-sector realities and visions. Regulatory reform can naturally emerge from this kind of process. Today’s discussion really resonated with me. We want to deepen our internal discussions while actively engaging in dialogue with private stakeholders.

Azuma: Exactly—whatever you create should be something your own family would say “That’s great!” about. Hokkaido University is undergoing reform, and Japan is beginning to see academia-led talent mobility models. What’s your perspective, Mr. Kurosaka, from your time in the U.S.?

Kurosaka: American universities are like businesses. Faculty are evaluated based on how much funding and how many big projects they can attract. It’s sometimes criticized as going too far.

That said, when money, projects, and people are brought in, interesting people tend to gather. Attracting talented outsiders and launching local collaborations is critical at the start.

But eventually, these “interesting people” must be nurtured locally, and that takes time. Universities are very useful for this. Being able to say “You can become a professor or researcher” is a very attractive offer, and those who commit over time come to appreciate Sapporo—and bring others into the fold.

Azuma: We talk about “city planning,” but would you want to live in the city you’re planning? Outsiders must be committed enough to consider, “If I lived here, what kind of city would I want?”

Government work is divided by departments, but I once spoke with Mr. Murakami from the Digital Agency, who said, “We deliberately used a fuzzy term like ‘well-being’ because it isn’t owned by any one department. It encouraged cross-departmental idea exchange.” Problems can’t be solved by departments alone; you need teams—and even then, it requires organizations like the FDC to serve as third places, facilitating interaction. That fluidity of people is what makes Fukuoka exciting.

Ishimaru: The FDC is just one forum, but there are many such communities, all connected by individuals. On another note, after hearing Mr. Ochiai’s points, I was reminded of how hard it is to start with regulatory reform—it uses a completely different kind of thinking.

Ochiai: Absolutely. It’s tough to begin with regulatory reform. The Cabinet Office solicits proposals for region-based regulatory reforms without narrowing the policy field. So sometimes people just pick a buzzword like “drone” because they’ve heard it’s an issue. They might think, “Let’s say drone regulations are the reason the project can’t move forward. That’ll probably get us 80 points.” But these kinds of proposals often lack any real issue and are written just to avoid being rejected. These are typically judged boring by reviewers.

Even in cases where drone use is said to be restricted, unless it’s outright banned, the best approach may be to simply try it. Actually flying a drone may reveal proper handling methods, flight locations, and other practical issues that matter.

Expanding on ideas that “seemed interesting when we tried them” is key. As such efforts progress, even in Japan’s complex landscape of rules, you’ll inevitably bump into some regulation. But if the initiative stems from genuine curiosity and necessity, it often embeds justifications and legitimacy. That’s what reviewers should be looking for.

Ishimaru: Based on what I’ve just heard, it might actually be easier to just design policy directly. If it hits a snag during implementation, then you can raise it as a case for regulatory reform.

Azuma: Right. If you start from “What kind of city do we want?”, policy can follow. But if you begin by saying, “We have to propose something for a special zone,” the result risks drifting from the core issues.

Ochiai: For example, “dynamic pricing” is a buzzword that comes up in proposals. But often the proposers haven’t even decided whether they want to raise or lower prices.

If the goal is price increases, you must ask whether it’s acceptable for citizens to lose access to affordable public transportation. If it’s price reductions, you must consider issues like business sustainability or user equity.

When the core purpose is unclear, it becomes difficult to justify new initiatives or determine how to support them. Without clarifying the purpose first, proposals risk failing to identify institutional barriers that actually need reform.

Azuma: I often hear that privacy and personal data are the big regulatory issues—but what specifically is the problem?

Ochiai: When it comes to AI, people are told to “manage risk properly,” but as long as digital technology is being used within its current capabilities, very few legal obstacles arise.

Most of what’s perceived as scary isn’t actually illegal—it just “feels risky” or “might cause reputational harm.” It’s more a matter of risk perception and analysis than regulation.

Some things that seem scary truly are. But once you get closer and break the risk down, you start to understand what’s actually dangerous, what can be tolerated, and what must be avoided. That’s when countermeasures become clearer. This is the kind of hands-on approach that matters.

Asamura: I’m truly grateful to have had the opportunity to hear such valuable insights from this distinguished group. Some of the topics may have seemed complex, but I was reminded of the importance of reflecting on our own work and lives—and continuously asking ourselves how we want to shape this city while living and working in Sapporo.

Whether it’s regulatory reform or community building, I believe that engaging in dialogue beyond one’s administrative department—across various sectors—can lead to new inspiration. I encourage everyone to absorb what they’ve learned today and use it in their next steps. Individual actions like these will surely contribute to making Sapporo a better city. Let’s take today’s discussion to heart and work together toward that goal.