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Welcome to Thoughts on the Market. I'm Robert Feldman, senior advisor at Morgan Stanley MUFG securities in Tokyo. Today I'd like to discuss Japan's crucial contributions in global AI development. It's Tuesday, June 17th at 2pm in Tokyo. Japan has always been a world leader in advanced technology, infrastructure and robotics. So it comes as no surprise that Japanese devices and materials play critical roles in the global AI supply chain. For investors, however, it's vital to understand that Japan's unique systematic approach to AI and the lessons it offers other countries. In Japan, AI has historically developed through this symbiotic interaction of four hardware, software, data and ethics. Japanese technology advances not only evolve, but they co evolve, meaning that advances in one element make advances in others more urgent. And when those latter advances occur, choke points arise in yet other elements. However, unlike co evolution in nature, where chance mutations just happen to reinforce each other, co evolution in AI is driven by human intent. That is, humans see a choke point and address it with innovation. These choke points, or bottlenecks in development, they're crucial to the way we think about AI. Identifying the choke points allows firms and industries to innovate. And investors should also pay particular attention to these choke points because that's where the investment opportunities are. For example, at a recent event, we asked a medium sized Japanese retail food manufacturing company president, who's an energetic AI advocate, which factor was the biggest choke point for his firm. And he replied unequivocally, immediately, data. His firm has some data, so do his competitors, but there's no common protocol for recording the data, contributing information to a common database and still maintaining anonymity. So clearly the choke point around data suggests that this company will need innovative data solutions so that it can then take advantage of the other three key elements, the hardware, the software and. And the ethics. Ethics is crucial because people won't use AI unless there is an ethical basis. So in terms of this element, the ethics element, Japan's commitment to ethical AI development has been very flexible. On one hand, Japan has robust legal frameworks like the act for the Protection of Personal Information and subsequent amendments. These laws ensure that AI advances within a secure and ethical boundary. And the laws are not just on paper, they're actively enforced. A few years ago, there was a landmark court ruling that upheld data privacy against unauthorized AI use. However, Japan also is flexible. The data rules are tweaked to allow a more practical approach to developing large language models. Another unique part of Japan's approach to ethics is the proactive emphasis on AI literacy. From corporate giants to small businesses, there's a concerted effort to train personnel not just in the AI technology, but also in the ethical application and thus ensure this well rounded acceptable advancement in AI capability. This approach to training workers is not just altruism. Japan faces a severe labor shortage and AI is widely viewed as a critical part of the solution, so good ethics are bringing faster AI diffusion. Ultimately, on a global macroeconomic level, the winners from AI will be the corporations and the nations that do three things first, quickly introduce the technology second, rapidly innovate new products and processes that use AI and third, retrain labor and reallocate capital to produce these new and innovative products. With this macro backdrop, Japan's intentional use of the symbiosis between hardware, software, data and ethics gives Japan some unique advantages in accelerating AI diffusion and spurring economic growth. Thanks for listening. If you enjoyed the show, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today.