Modern Meiji Revolution - A 21st Century Japan Investment Thesis
The Modern Meiji Revolution: An industrial quantum leap driven by strategic monetary policy and adoption of e/acc tech - AI, nuclear, biotech, and crypto
The Modern Meiji Revolution Thesis
In the past 200 years Japan has already gone through two major economic restructurings - the Meiji period from feudal to industrialized and post-WWII from industrialized to modern. Both of these rapid societal transformations put them at the forefront of global technology at the time, where only a few years before they had been dominated by The West. These transitions were driven by strong government, clear visions, and cut-throat implementation to achieve their goals. Japan's history demonstrates a unique capacity for rapid, top-to-bottom societal realignment—a cultural trait. Can they harness it for another industrial quantum leap in the 21st century?
The core components of the thesis consist of:
Paradigm shifts in monetary policy to support economic restructuring
Enacting strategic and innovative policies faster than other countries, especially developed western ones
Explosive adoption of accelerationist technologies like AI, nuclear, robotics, longevity, and crypto
The Great Unwinding:
Japan's Monetary Revolution
The Bank of Japan's (BoJ) decision to raise interest rates above 0% for the first time in decades, and the subsequent sharp market reaction, demonstrate Japan's significant influence on the global economy, even purely from a financial perspective. If Japanese monetary policy can add $1.4 TRILLION to the US stock market from firms unwinding yen carry trades. then how much can BoJ increase the JP stock market through improved policies. This is, of course, easier said than done and not a direct correlation. For example in Japan, there is no startup ecosystem with IPOs over decades for people to inject capital into. Nevertheless, rather than effectively fueling foreign entities with cheap rates to boost their economies, the BoJ can change monetary policy in favor of funding domestic industry. And now they have direct data to prove how valuable these policies can be to their economy.
BoJ was willing to challenge monetary policy status-quo by persisting with negative interest rates for decades, continuing through COVID when even the ECB buckled. This combination of a long-running unconventional strategy followed by a rapid, decisive shift shows the government is capable and willing to take extreme steps to fundamentally reconstruct the Japanese economy. The broader implications of these rate changes are yet to be fully seen. This is only the start. How much will they impact the economy and how far is the BoJ willing to take it?
While the recent market downturn raises concerns, it should be viewed within a broader historical context. Major economies, including the United States, have weathered significant market crashes (e.g., 1987, 2008, 2020) en route to long-term growth.
Notably BoJ increased rates because they see positive development in the economy. Increased rates signal confidence in the economy and may attract foreign investment, or deter divestment as we saw with the JPY carry-trade deleveraging. "Normalizing" monetary policy may bring long-term financial stability and more foreign capital entering the market with competitive lending rates creating a boom instead of a slump. Positive rates will also force zombie companies in lagging sectors of the economy to finally restructure or exit the market to open up human and financial capital for better uses.
On the other hand, higher rates might slow growth further. Yen price increases and decreasing exports are contributing factors to the market downturn due to it being an export economy - for now. This may be a manageable headwind if the strategic goals include facilitating a structural transition away from labor-intensive industries or achieving greater geopolitical leverage through a stronger yen and more favorable trade balances.
The principle of “following the money” here implies something deeper than the mere flow of capital into JPY and around the Japanese economy. A fundamental shift is happening in the societal understanding and function of money from a safe, immutable store of value during negative rates into a new dynamic environment where people must spend time and resources growing for the future to beat inflation. What are the reverberating implications to an economy and society where the reality of money itself is changing?
Policy & Governance Innovation
In addition to making dramatic changes in monetary policies Japan is starting to experiment with new governance models and ways of creating new policies.
Anno Takahiro ran for governor of Tokyo and used git to crowd source policy changes from voters. Version controlled policy has been a dream of cyberneticists for decades. As a leading AI engineer and entrepreneur, he also plugged an AI chat bot into the updated policies so people could ask questions about his platform in the upcoming election. He placed 5th with ~150k votes. This style of campaign is unheard of in the West but based on his success in a major election, it may catch on fast in the Japanese politosphere.
The Japanese government is also experimenting with collective decision making with cryptoeconomic tooling such as Quadratic Voting/Funding and DAOs. Plurality Institute, a multinational economic and governance policy research group is helping Japan implement changes with their learnings from Taiwan and other markets. Shibuya City, a subset of Tokyo, is proactively experimenting with how to redesign themselves for more public social spaces, industry, mixed-use architecture, and similar urban development initiatives designed to position it as a futuristic city and attract top talent.
More responsive policymaking, informed by public input, leads to faster implementation of novel solutions with broad long term support for strategic e/acc initiatives.
e/acc Adoption
Japan has a level-headed approach to researching and adopting new technologies. They balance practicality, economic viability, scientific progress, environmental stewardship, and social issues.
With the advent of a “Modern Meiji Revolution”, they may ignore or repeal stringent regulations blocking their path, following a more “e/acc kamikaze” path of rapid development and adoption while mitigating adverse outcomes. They are already showing more eagerness to adopt accelerationist technologies compared to other leading economies.
AI
Japan has been at the forefront of AI since its inception in the 80s. The Japanese government released the "Social Principles of Human-Centric AI" in 2019, 3 years before ChatGPT and most of the world woke up to AI. It targets intelligent systems that promote:
Latent Talent - AI should be used as a tool to enhance human abilities and creativity, not to control or overly depend on it.
Novel IP - AI should be developed and deployed in a way that flexibly includes diverse perspectives to create new values.
Sustainability - Utilizing AI to generate new businesses and solutions to solve economic and market inefficiencies, social disparities and global challenges like climate change.
These principles and their wording exemplify the well-rounded nature of Japanese e/acc policy. They focus on individuals acquiring AI literacy, business use cases, cultural digitization, reduce risks associated with generative AI such as disinformation and privacy, while promoting the beneficial use of AI technologies in various sectors. The AI policy 2023 whitepaper and the 2024 retrospective from the Liberal Democratic Party are recommended readings.
Biotech
Japan has some of the best scientific institutions in biotech excelling in research, manufacturing, distribution, and translating to clinical treatments. They are pushing even harder with a Biotechnology Transformation (BX) program lobbying for investment and regulations for synthetic biology, biomedicine, and gene/cell therapies.
(graphic included for the power rangers but the whole industry report is good too)
Japan already leads cutting edge biotech like longevity with Yamanaka winning the 2012 Nobel Prize and Ohsumi in 2016 for medicine. Gene and cell therapies, or “Regenerative Medicine”, are available in private clinics for advanced therapies like stem cell injection. The national healthcare system has approved 20 regenerative medical products and insures them allowing any resident of Japan to access cutting edge treatments.
Nuclear
As an island nation with little natural resources, energy dependency is a major economic expense and geopolitical threat. For example, China wouldn't even have to invade Japan, if they can blockade them long enough until their power grid shuts down.
Before a tsunami caused the Fukushima nuclear reactor meltdown in 2011 - which was the biggest since Chernobyl - 30% of all energy consumed in Japan was produced from nuclear. After the crisis they took a cautious hiatus and production fell to 0. Now they have signed off on the Strategic Energy Plan bringing nuclear power back to 20% by 2030. This would put it back in the top 10-15 countries by the percentage of their electricity generated from nuclear power in the next 5 years. As the 5th largest energy consumer on Earth, Japan would be producing the most nuclear in the world trailing only China and USA.
There were no direct fatalities attributed to radiation exposure from the Fukushima incident and subsequent estimates suggest several thousand indirect deaths from evacuations and health complications. If "loss of life years" is the risk to be mitigated, Japan is losing many more life years from lack of economic development and population degrowth than even 10 nuclear meltdowns so they may decide to push nuclear initiatives even further.
Crypto
Japan's regulatory framework for cryptoassets is, at a minimum, clear and understandable in terms of personal/corporate finance and taxes. In contrast to the United States, where multiple government agencies have asserted jurisdiction over the same cryptoassets, Japan has a robust cryptoasset framework regulating them differently based on their function. They have lagged behind in the industry because of tax implications for launching tokens in these policies in addition to other problems stunting their startup ecosystem.
On the other hand, the Japanese government just approved USDC under their official stablecoin framework to be used by banks and exchanges nationwide. Osaka city is supporting the launch of a digital exchange for tokenized real world assets built by a coalition of major banks. Sony launched their own Ethereum L2 network called Soneium focused on IP like gamin, NFTs, and entertainment. Enterprise scale crypto companies like these are making news more and more, potentially leap frogging the countries that invented them in adoption and value capture.
Conclusion
History does not repeat, but it rhymes. Twice in its modern history, Japan has responded to existential pressure with breathtakingly rapid reinvention. The arrival of Commodore Perry's Black Ships forced the Meiji Restoration, a quantum leap from feudalism to industrial might. The devastation of the Second World War catalyzed a post-war miracle that made Japan an economic superpower. Both transformations were dismissed as impossible by outsiders, right up until they became undeniable reality.
The world sees nine million abandoned homes and diagnoses decay. These structures do not symbolize tombstones of a bygone era, but immense, dormant capacity. The most profitable investments are born from a chasm between perception and reality created by information asymmetry. The consensus narrative on Japan—a story of decline, demographic despair, and intractable stagnation.
However, a new reality is taking root hidden in plain sight.