Almost without noticing, we have reached the point where we cannot live without smartphones. Of course, I am no exception.

When I wake up in the morning, the first thing I do is check the Nikkei, but I rarely spread out the paper and read it anymore. The newspaper does get delivered to my door, but the convenience of my smartphone means I end up reading the digital edition instead. Incidentally, smartphones today run on either Apple’s iOS or Google’s Android, both from US companies.
After reading some news, I check my email. I use Gmail—yet another Google platform. When I arrive at the office, my work PC takes over from my smartphone as my partner for the day. When I start it up, I am reminded that my work depends entirely on systems and tools built by Google and Microsoft. I also use Slack for business communication and ChatGPT in my work. As I understand it, our company’s servers are hosted on Amazon’s AWS. And, of course, the company also uses Google’s search platform for its advertising.
During the day, I get around by taxi. The driver does not even glance at the car’s navigation system; instead, he tells his smartphone the destination. Google Maps provides remarkably accurate directions and arrival times.

At night, I get home and turn on the TV, but there is no news program on, so I take out my smartphone and open YouTube, which lets me keep up with the latest news as it happens. With television, you are tied to the broadcast schedule, but with YouTube, you can watch what you want when you want.
If you are into dramas and movies, you probably end up on Netflix. There, you can watch popular titles whenever you like. Today, people connect and share information primarily through social networks like Facebook and Instagram, which have captured a lot of our collective attention.

Almost without noticing, digital services—operating systems, apps, cloud services, and the like—have become indispensable to both our daily lives and business. And nearly all of these products and services are provided by US companies. There are some digital services from Japan, like LINE, but in reality there are very few.

Now, we pay fees for these overseas digital services, and that amount has been growing year by year into a massive sum. Viewed at the national level, these digital-related balance-of-payments deficits are collectively called the “digital deficit.” This deficit is said to have grown steadily from 2.1 trillion yen in 2014 to 6.7 trillion yen 10 years later, in 2024. This trend will almost certainly continue, if not accelerate.
In fact, some reports suggest that the deficit will exceed 10 trillion yen around 2030. Some have pointed out that this massive digital deficit, which is likely to keep growing, will make it harder for the yen to strengthen. It does make me worry about inflation, but there are surely other factors at play, and as a layperson I do not really understand foreign exchange.

I have gone on at some length here, but my point was not to stress how large Japan’s digital deficit is or what it might mean for the exchange rate. What we are giving up along with our money is something else: data.
And it is not only Japan that is handing over data; the same is true of many Western countries. US companies are likely siphoning off vast amounts of data from billions of individuals, private companies, and public institutions, and that accumulation is what will secure their future. By having these giant private companies under its umbrella, the US will likely continue to maintain its unrivaled position in the world.
China, another major power, refuses to hand over its domestic data to these huge US companies and instead has its own companies collect and store it. Given its population of 1.4 billion, China can build operations on a scale close to that of the giant US firms. And it could build out the same system in countries aligned with it as well.

Territorial disputes such as those in Ukraine and Palestine show no sign of abating, yet I cannot help but wonder how much “control of territory” will really mean in the world to come. Rather than “control of territory,” won’t “control of data” be the key to future global affairs? Seen from that perspective, it is easy to imagine the US and China dominating the world with overwhelming power.

According to Wikipedia, national power is “the sum total of the various powers a nation possesses in international relations.” If so, control of data—“digital dominance”—may be the source of national power in the years ahead.

Hirotaka Shimizu
Chairman and CEO
Kamakura Shinsho, Ltd.

Image material：PIXTA