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The Japanese economy now faces extremely severe situation, in response to which the government is taking general economic measures and other measures to stimulate demand immediately.

The supply-side potential GDP growth rate, which determines the economy's medium to long-term growth trend, is exhibiting a downward tendency. Although raising productivity is an important prerequisite for raising the potential GDP growth rate, Japan's rate of productivity growth has been slowing down in recent years. Such were the circumstances that prompted the drafting of the Strategy for Revitalizing Industry and the convening of the Conference for Industrial Competitiveness.

Forty percent of Japan's private enterprises express concerns over declining competitiveness in their business outlook.

In each principal nation, the service industry accounts for an increasing percentage of overall industry. In Japan, however, R&D expenditures for the service industry have been limited to only a small percentage of total R&D expenditures, giving rise to concerns about the competitiveness of the service industry ( Fig. 2 ).

Fig. 2: A percentage of R&D expenditure in service industry

Japan's postwar economic recovery was due in large part that the manufacturing industry produced internationally competitive low cost and high-quality products by using scientific and technological power. Today, Japan must again make maximum use of the power of science and technology to create new, internationally competitive products and services and to found new industries.

The outcome of research executed at the National and quasi National Institutes, is useful for the private sector as seeds of new products, services, and industries. The further promotion of the transfer of it is important. It is also important to improve the research environment in ways that promote the creation of new products, services, and industries.

It is hoped that regional industries will also develop new products and services using their peculiar resources of production. It is more important to promote regional science and technology through such measures as expanding R&D activity at laboratories, universities and other institutions founded by the local government, and promoting the use of findings the obtained through their R&D.

It is being afraid Japan's service industry may become less competitive, and so must become more sophisticated through application software development and the creation of new financial products using simulation analysis based on mathematical theory, for instance.

In view of the trend toward the international standardization spurred by economic globalization, Japan must actively and strategically participate in the determination of the international standards that affect the international competitiveness and profitability of Japanese industry.