The year is 2026…
The Bank of Japan finally hit its 2% inflation rate target this year, after years of trying. Economists credit the BOJ’s historic achievement to applying artificial intelligence on monetary policy, coupled with phasing out paper currency last year.
Data scientists began mining vast digital currency transaction datasets in 2024, after introducing a parallel yen digital currency in 2022. The new fly-by-wire monetary lever automatically adjusts negative interest rates to just the right level, producing much needed controlled inflation.
This imagined Holy Grail monetary tool is, of course, only conjecture. Yet we are arguably at the dawn of an AI-driven technological revolution which will greatly improve the way man and computers work together. Yusuke Narita, a 34-year-old Yale assistant professor, MIT graduate and entrepreneur, aims to harness the power of data and algorithms to improve the design of Japan’s private and public sector services, including education policy and monetary policy.
Narita spoke as a panelist at the G1 Global Conference in October 2020 about future uses of new age technologies on monetary policy, by pointing to peoples’ ability to shift wealth from deposit accounts to vaults and mattresses. “Monetary policy… is now almost ineffective, as there is a strict lower bound on the nominal interest rate,” he says. Switching to digital currency removes the lower limit and opens the prospect, through AI, of harnessing information about the nation’s spending, savings and investment habits.
Towards achieving that end, Narita talks with government ministers and bureaucrats. Policymakers share many of his interests but are busy with more basic digitalization, he reports.
In September, Prime Minister Yoshihide Suga announced plans to set up a new digital agency, replace hanko (personal seals) and expand the use of My Number Card. These simple measures should free up public servants to work on more productive tasks. However, some economists believe they are only low-hanging fruit, i.e. quick and easy ways to improve public-sector productivity before next year’s Lower House general election.
In October, the BOJ said it would start testing central bank digital currency in early 2021. Experts believe the announcement underscores the institution’s conservative approach to making incremental, not transformative or disruptive, change.
While academics talk about building Smart Cities, introducing central bank digital currency and so forth, Japanese policymakers have no clear plans to actually achieve them. Yet only governments are big enough to undertake such challenging missions, as then President John F. Kennedy did when he pledged his nation to put a man safely on the moon within 10 years.
In truth, governments rarely take moonshots and typically are slow to act. Even small public policy changes take much time and energy, notes Narita. “In spirit, I’m with policymakers and they are with us,” he says. “In practice, they are still miles away from data utilization.”
As Narita became more aware of the challenges he faced, he began wondering what he might do to make big social changes in a more reasonable timescale. After talking to big companies, he started Hanjuku Kaso Co., Ltd, a firm whose name is inspired by a classic video game, Hanjuku Hero.
His startup helps big companies make important social decisions using the power of data and algorithms. Clients include Sony, mercari, ZOZOTOWN, Cyberagent and Gakken.
For Gakken, a large Japanese educational services company, and other education-related organizations, Hanjuku Kaso develops algorithms which monitor student behaviors, including test achievements as well as rich information—like facial expressions. The data is then used to set individualized goals based on each student’s intrinsic interests. The algorithms aim to improve educational goal setting practices by taking into account a wider set of variables beyond test scores.
Narita retains his grand vision to apply 21st century technologies—especially data and algorithms—to better design public services, institutions and policy. “That’s what originally inspired me,” he says, adding, “It’s not easy to work on these kinds of ideas right now.” He hopes his mix of entrepreneurship and policy interests will allow him to pivot into projects more aligned with his long-term goals.
Narita currently runs his Tokyo startup during the day. In the evening he teaches at Yale via Zoom. “I’m a nocturnal animal now,” he says.
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