Spotlight Boston - August 25, 1998

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Japan slow to take Y2K precautions

by Bill Burke/BusinessToday staff

Japan may be an island in more way than one.

When it comes to the Year 2000 computer problem, Japan is distinctly lacking in a sense of urgency.

For the world's second-largest economy, that's alarming.

Much of the world is now facing up to the fact that it's not a matter of if there's going to be Y2K-related difficulties, but how severe it will be. Yet Japan continues to lag behind.

Developing countries, according to Frances Cairncross, senior editor of "The Economist," are used to things not working. They're used to the "workaround" idea of doing things.

But Japan is not a developing country. It's one of the most computerized countries in the world.

So why the inactivity?

As Cairncross said, when you're going through the most traumatic economic period in recent memory, it's hard to be concerned about something that's still 18 months away.

"Japan is significantly behind everybody else in terms of Y2K preparedness," said Michael Harden, author of 'Failure is Not an Option: Declaring War on the Year 2000 Problem.' "And if you look at the financial situation there on top of everything else, it starts to look very scary."

Cairncross, taking part in the online Year 2000 Action Day conference last Wednesday, said the Asian economic crisis -- a situation that affects the daily lives of those in its throes -- seems a great deal more immediate than some computer glitch looming months away.

That, and when it comes to marking day and date, Japan is yet again an island unto itself. The Japanese calendar is based on the years of an emperor's reign. Emperor Hirohito died in 1989, which gave Japanese banks a chance to deal with date changes and its computer systems years before most people had even heard of the Y2K problem.

At the same time, however, the rest of the world does not operate on the Japanese calendar. In fact, Japan doesn't always operate on the Japanese calendar.

Business transactions are based on the Gregorian calendar. So what happened in 1989 that didn't tip the Japanese off to the importance of dealing with the millennium?

They dropped the ball, Harden said.

"Most Japanese businessmen don't feel it's a problem," he said. "They think, 'Our calendar is only eight years old.' But they've got to realize that software doesn't run on the emperor's reign."

Harden estimates that Japan is where the U.S. was five years ago in terms of Y2K awareness.

Merrill Lynch Japan released a report that said Japanese banks have set aside from $30 to $70 million each to deal with the problem.

Compare that with local estimates that range in the hundreds of millions. For example: as of mid-May, State Street Corp. estimated that the total cost of its Year 2000 Resolution program could be as much as $200 million, according to filings with the Securities and Exchange Commission.

Is State Street overreacting? I tend to doubt it.

Perhaps a recent posting on comp.software.year-2000 put it best: "We all just need a foreign BIOS transplant."