The Game-Changing Fix to Japan’s Deep Tech Industry

More money is getting the same results in Japan’s deep tech innovation pipeline.  Taking the pharma vertical of deep tech for example, Japan's commitment to pharma research has remained robust as government R&D spending consistently ranks among the world's highest at 3.3% of GDP — significantly above the OECD average of 2.4%. Yet this substantial investment has failed to translate into meaningful pharmaceutical breakthroughs. Much ink has been spilled to convey how scientific innovation rarely translates into commercial innovation in today’s Japan.

While Japan allocates ¥4.2 trillion ($29.4 billion) annually to research and development, the country produces remarkably few viable drug candidates that reach clinical trials, let alone market approval.  According to research at The Tokyo Foundation by Philippe Fauchet and Dr. Kenji Shibuya, the Japanese pharmaceutical market has declined sharply.  In the early 1980s, it accounted for over 25% of the global market in the early 1980s.  Yet China and others have overtaken Japan. In 2023, Japan’s share had dropped to 4.4% of the world market.

Approximately 2,200 biotech ventures in America and 1,000 across Europe get venture funding every year. Britain accounts for about 400 annual deals. Despite having double Britain's population, Japan records fewer than 100 such transactions annually, showing how Japan is falling behind. This reduced deal volume and limited early-stage funding in Japan translates to fewer clinical trial initiations.  China and South Korea have surpassed Japan in clinical trials started per year. 

This paradox of high input with low output points to how Japan's scientific ecosystem needs a game-changing way to convert research into commercial innovation. Funding decisions for pharmaceutical projects should come from the global market, not from government officials. 

Despite the good intentions behind them by well-intentioned policymakers, public grants are fundamentally flawed for five main reasons:

1. Seeking needed funding, academic scientists routinely "dress up" their research as potential startups without genuine commercial intent.  Scientists, incentivized by grant requirements to demonstrate business relevance, create superficial business plans and spin-off proposals that bureaucrats approve but industry would never fund. These pseudo-startups consume resources while lacking the foundational commitment to navigate the arduous path from laboratory to market. According to analysis by the Japan Science and Technology Agency, only 12% of university spinoffs launched between 2015-2020 achieved any meaningful revenue within three years. Most failed to progress beyond prototype development.

   
   

2. Grants only require bureaucratic approval, not market feedback. Unlike Boston and San Diego’s ecosystems where venture capitalists and industry partners provide early validation, Japanese research proposals are evaluated primarily by government officials and academic peers who lack commercial expertise. University technology transfer offices, where they exist at all, lack the deep specialized industry networks that global investors have. Many institutions still lack dedicated TTOs entirely, leaving researchers to navigate commercialization independently. This isolation from market realities means research projects can advance for years without encountering the brutal but necessary feedback that eliminates non-viable ideas early in the development process.

   
   

3. Given geographic and language barriers, Japanese scientists maintain fewer international academic collaborations compared to their global peers, limiting exposure to emerging trends and cutting-edge methodologies. 

   
   

4. Research labs struggle with public funding restrictions that prevent hiring adequate staff, while the bureaucratic burden of grant applications consumes months of researchers' time that could be spent on actual innovation. 

   
   

5. Perhaps most critically, Japan lacks sufficient business managers capable of translating scientific discoveries into viable commercial strategies.

   
   

6. Japan’s angel investor ecosystem remains underdeveloped, creating a funding gap between laboratory proof-of-concept and market entry.  Relative to its economy size, Japan has 1/6th the angel investment capital of the United States.

Is there a Solution?  

Fortunately, decentralized science (DeSci) is becoming one of the solutions to overcome the challenges above. DeSci is an open-to-all platform built on blockchains for scientists to raise funding, run experiments, share data, distribute insights, and prove scientific discovery.

Merito Network, founded in Fukuoka in 2024, is the first Japan-incorporated business to plug the country’s scientific talents into the DeSci system.  Merito’s game-changing approach to science commercialization relies on the wisdom of the crowds, not bureaucratic validation.  Merito connects Japanese researchers directly with international networks of industry partners and investors who provide market-driven feedback from project inception. 

Merito’s platform serves as a community-built technology transfer office, leveraging global expertise to evaluate and support only market-viable deep tech ideas. Through decentralized science (DeSci) funding mechanisms, Merito ensures that investment flows exclusively to projects with genuine commercial potential, excluding purely academic research that lacks market applications. Merito’s platform's online community, including active chat groups, creates the collaborative environment that Japanese researchers have historically lacked. 

Merito's model transforms biotech ventures by introducing champions — Merito’s scientific advisory council and token holders who are financially incentivized to find resources, partners, and talent for promising projects. The council includes biotech professionals from global pharma companies, the chief scientist of RIKEN, former university tech transfer officials, global science communicators, and the R&D director of Germany’s leading Max Planck institute.  These champions can recruit business managers to research teams and provide ongoing advisory support through Merito's quality-filtered council system. 

Champions provide resources to fill a critical gap in Japan's innovation landscape: scarce human skills needed for startup creation and management. These champions can bring in external experts to accelerate knowledge transfer and stimulate market scouting for Japanese-origin innovation. 

Merito also only requires a simple white paper from scientists and lets them set their own budget priorities–far from the cumbersome grant requirements of public funding in Japan.  This helps to overcome one challenge found by the Tokyo Foundation where the AMED grant system “should be simplified to preserve the operating freedom of startups and their VC investors as much as possible. This would involve reducing scope restrictions, minimizing paperwork, eliminating the requirement for a separate bank account to track fund usage, and easing reporting obligations.”

By combining international connectivity, market validation, and aligned incentives, Merito offers Japan a pathway to finally convert its substantial research investment into the pharmaceutical breakthroughs.  The question is whether Japan's scientific establishment will embrace this market-driven, decentralized alternative to its unsuccessful centralized funding model.

For a consultation with Merito, write brandon@merito.network