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Japan’s Regulatory Sandbox Empowering Emerging Technologies

Japan is breaking through with a new piece of regulation, The Regulatory Sandbox Framework, is a bold initiative launched by the Government of Japan to fast-track the development of new technologies and business models. This forward-thinking approach allows businesses to conduct real-world demonstrations under the guidance of competent ministers, which could potentially lead to regulatory reforms. Established under the Act on Special Measures for Productivity Improvement in 2018 and made permanent in 2021, this framework spans a diverse range of industries, fostering innovation across sectors from mobility to healthcare. With over 30 projects approved so far, Japan's regulatory sandbox is setting the stage for a new era of economic growth and technological advancement. 

Source: Users of the Regulatory Sandbox

What does this have to do with foreign companies? As stated by Yo Okada, Counsellor of Japan's Cabinet Secretariat, foreign enterprises may face regulatory issues when entering new markets. With little knowledge about Japanese regulations, they may not understand what kind of regulations can be applied to their business, and regulatory hurdles could hamper entry into the Japanese market. The sandbox provides a way to overcome the regulatory hurdles through contact within the Cabinet Secretariat to provide support. This system has the potential to greatly benefit emerging foreign companies who may be unfamiliar with laws and regulations or concerned about potential regulatory obstacles. On top of this, foreign companies can test the viability of their projects in Japan.

The Demonstration Process

So what exactly happens in the sandbox? The Regulatory Sandbox System grants users feedback based on a thorough product or service testing demonstration. The regulatory sandbox was designed for companies planning projects involving new technologies that could interfere with Japan's current regulations. First, the committee provides a review of each application and a prior consultation with applicants before the formal application process begins. Testing projects under the regulatory sandbox is a way to test the waters, the flexibility of Japanese regulations, and help to ensure the success of new business models in the Japanese market.  

In many cases, organisations come to the Regulatory Sandbox to relieve concerns surrounding new projects that may or may not meet Japanese laws or regulations. More often than not, companies in collaboration with the sandbox are either able to prove that their project meets Japanese regulations or negotiate for regulation change.

Case Studies of the Sandbox

IoT: Panasonic’s Home Appliance Developments

Panasonic Corporation utilised Japan's Regulatory Sandbox to integrate IoT Power Line Communication technology into home appliances like power strips, lighting fixtures, microwave ovens, and more. Panasonic needed to ensure their IoT PLC-embedded devices could operate without signal interference or malfunctionsThe sandbox allowed them to conduct controlled tests to verify communication signals and safety standards. Panasonic's tests confirmed that their devices could coexist with broadcasting signals without leakage. They collaborated with regulatory bodies to ensure compliance and safety, conducting demonstrations within model homes.

The successful demonstrations led to the revision of the Electrical Appliances and Materials Safety Act, enabling the development of IoT PLC-embedded consumer electronics. Panasonic’s products were later deemed compliant with the ordinance's requirements, provided they met the revised safety levels. Panasonic’s initiative highlights the Regulatory Sandbox's role in fostering innovation, allowing the safe deployment of advanced IoT-enabled devices and driving advancements in the electrical appliances sector.

Healthcare: Gifu Pharmaceutical University’s Sandbox Project

Thanks to a groundbreaking initiative by the first pharmacy in Japan attached to Gifu Pharmaceutical University, facilitated by Japan's innovative Regulatory Sandbox, even the most remote villages can access healthcare.

Source: Dispensing Model for Remote Areas Using Disaster Countermeasure Pharmaceutical Supply Vehicles

In Japan's remote medical areas, declining populations often force clinic physicians to handle all aspects of patient care, which overburdens physicians and compromises the quality of care. To address this, Gifu Pharmaceutical University used Japan's Regulatory Sandbox Framework to test a new model. They deployed disaster countermeasure pharmaceutical supply vehicles for insurance dispensing in areas without insurance pharmacies. 

 This approach aimed to clarify the usefulness of conducting insurance dispensing and to improve healthcare access and quality while ensuring compliance with the Pharmaceutical Affairs Law. The sandbox provided a controlled environment to address these regulatory challenges. The project successfully demonstrated the feasibility and benefits of this model, offering a scalable solution for rural healthcare and disaster preparedness nationwide.

Mobility: Luup’s E-Scooter Solution

Certified in 2019, Luup was the first mobility sector company to utilize the sandbox for its e-scooter sharing service demonstration.

Source: CEO of Luup, Hyuga Ryo, and CEOs of two other companies who have utilised the sandbox. (Narumi Teizo, CEO of glafit, Okai Daiki, CEO of mobby ride)

Startups in the e-scooter sector faced challenges, such as requiring customers to wear helmets and have driver’s licenses. Through the sandbox, Luup conducted extensive demonstrations, collecting riding data and continuously collaborating with relevant ministries to study necessary conditions for safe e-scooter usage.

Based on data from these demonstrations, Regulations were eased in a phased manner based on data and information obtained from the demonstrations, which finally led to the revision of the Road Traffic Act. It enabled users to drive e-scooters on roadways and bicycle lanes without helmet usage and driver's licenses if 16 or above. The regulatory change created a new mobility service market as well as a substantial economic impact on the Japanese economy. Luup’s success showcases the Regulatory Sandbox's role in driving innovation and facilitating the adoption of new technologies in urban mobility.

With aims at easing the development of new business models and innovative technologies in Japan, the sandbox continues to accelerate the approval of projects, increasing investments.

About Trusted

At Trusted Corporation, our primary focus is helping you create sustainable solutions involving the European and Japanese innovation ecosystems. We are a global venture builder primarily focusing on creating solutions for carbon neutrality, renewable energy, ageing society, and smart cities.

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Alyssa Moen


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