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kumon - March 1, 1999

"Is Japan Ready for Y2K?"

March 1, 1999 [ kumon ] このエントリーをはてなブックマークに追加

1999, March 17

Hotel Okura Executive Luncheon Meeting

Shumpei Kumon

First, let me just say a few words about the nature of this problem even though I trust that most of you are well aware of what the Y2K problem is. It began as a form of date coding. In the early 1960s, the core memory of computers was very expensive, almost one million times more expensive than it is today. Therefore, the date field had to be cut to only two digits.

Most programmers, I'm sure, thought that this kind of date coding convention would not matter by the year 2000. But this system remains intact today. It was much easier to add new programs, systems, and devices on top of something which had already been proven to work. That is the strategy of almost any living creature or social system. Our brains, for instance, are built so that at the very base we have the brain of a reptile. The brain of a bird is overlaid, and then the brain of a primate, and finally we have the brain layer for human beings. In the same way, all computer systems are written over something old and new ones are added.

Japan is a peculiar country in the sense that not only mainframes, but also office computers--a somewhat smaller and limited kind of computer--are in wide use in this country. I have heard that hundreds of thousands of office computers are so old that they are not Y2K compliant even at the level of hardware, let alone software.

Another peculiarity about Japan is that our financial year begins in April. Quite a few accounting programs will stop working when the new year arrives because if you subtract the value April 1, 99 from March 31, 00 you get a negative value and the data will be rejected. Two weeks from today, many firms in this country will be having serious problems.

The Perils of Non-compliance
If mission-critical computers and programs receive no Y2K remediation at all, what will happen is very clear. Most tax processing systems will stop working, as will the pension system, the Medicare system, and the mortgage payment system. All these programs will simply stop working or go haywire because of the Y2K glitch. However, with at least partial remediation of such systems, there should be fewer disruptions.

In the case of the power industry, if there is no remediation, production of electricity may be OK but management systems will not work. Also, without at least partial remediation, oil refinery systems will stop working.

All these programs will stop working or go haywire because of Y2K.

In the airline industry, the FMS (flight management system) is in trouble, and it has to be remedied. On the other hand, the booking system of the Japanese airline industry has never used two digit date inputs, so it doesn't need any major remediation. Airlines are accepting bookings for the year 2000 already.

The bullet trains of Western Japan are centrally controlled from Tokyo Station with a system called ConTrack. Again, it is known that this system is not Y2K compliant. If there is not at least partial remediation, bullet trains will stop running in the year 2000. There are also about 170 centralized wide-area traffic control systems in Japan, none of which are Y2K compliant. In about 24 prefectures and metropolitan Tokyo, remediation work has been postponed until fiscal 1999 because of budget problems. But these are all known problems, and with the exception of traffic control systems, already a lot of remediation work has been done or is in the process of being done.

Regarding Y2K remediation phases, the most time and effort should be placed on testing rather than on repairs. But you have to test the system from all possible angles, which takes quite a lot of time, and most probably you will find many problems that were overlooked initially, or new bugs introduced in the process of remediation. That is why we cannot be certain that a system is Y2K compliant until we see the outcome of tests.

Day by day, the situation changes. This is one of the main reasons why it is so difficult to make accurate predictions about what will happen in the year 2000. And, of course, we don't know how long the problem will last or how global the problems will be.

Particularly for a nation like Japan, which is dependent on external sources of oil, natural gas, and grain, it is critical for trade lines to be kept safe. But in most developing nations the Y2K compliance situation is not good. Of 154 countries surveyed by the World Bank, only 54 were aware of Y2K, and only 21 governments were taking some positive action to cope with it. So there is good reason for us to be very worried about our foreign trade, and particularly about imports of natural resources.

The Remedies
There are three main courses to be taken to cope with this problem. One is to recode date-sensitive programs, or to remediate those programs, but that is not enough. We have to be ready with contingency plans. But at the same time, I would like to emphasize the importance of still another course of action, which is to replace existing systems with systems that are totally Y2K compliant. To simply replace office computers with PCs will not be good enough.

Many of the most serious non-compliance problems are being taken care of, particularly by major industries like electricity and banking. But at the same time, unfortunately, Japan is very much lagging behind.

Let me briefly review what the Japanese government has been doing about Y2K. In May 1998, at the Birmingham Summit the Japanese government became aware of the importance of the problem. By September 11 of the same year an action plan by the government was issued. It is a fairly detailed plan, including a number of suggestions for private industries. Then, on September 27, 1998, Prime Minister Obuchi met with President Clinton in New York, and they came to an agreement on coping with the Y2K problem. In November 1998 the first Y2K progress report was published by the Japanese government. At the Manila Y2K Summit, Japan promised that by the end of March the government would provide a manual for contingency planning and make it public to the rest of the world. According to the Secretary General of the Y2K Council, Tsutomu Miyagi, the second progress report will be published in early April, by which time a major portion of the tests will have been done. That is what he says. But it is rather hard to believe that, only within a month or two, all the major testing processes will be completed.

It is rather hard to believe that, only within a month or two, all the major testing processes will be completed.

But the overseas assessment of Japan's efforts has been somewhat different. The most well-known assessment was made public in October of last year by the Gartner Group. They divided countries into four groups, from level one to level four. According to their definition, level one means that 15 percent of private companies will experience system failures related to Y2K. Level two--33 percent, level three--50 percent, and level four--66 percent. According to this October Gartner Group report, Japan is a level three country, together with North Korea, which was a shock to many Japanese. No Asian countries belonged to the top level, but Asian countries like Singapore, South Korea, and Taiwan belonged to level two. The Gartner Group has since collected more information about Japan and has revised their evaluation. According to the latest report, published just a few days ago, Japan has been elevated to the second level of Y2K preparedness.

What Progress is Being Made?
Information about Japan's Y2K compliance efforts have been lacking, particularly with respect to reports given in English. The government has now prepared a 20 or 30 page English language report about the Y2K situation in Japan.

With regard to individual industries, our telecommunications industry, particularly NTT, has made most of their systems Y2K compliant. They have adopted a four digit calendar system in their effort to digitize their whole telecommunication system. But the problem is that the whole telecommunication system is outdated. The industry seems to have been paying too much effort to constructing and deploying ISDN, which is very slow compared with recent advances in data communication.

Railways and airlines in Japan have been working on Y2K since the mid-1990s. Actually, it was Japan Air Lines that first discovered the existence of this problem in 1994, when input belonging to the year 2000 was rejected by their computers. At that time, Japan Air Lines had no information from vendors. It was only in 1995 that some organized information sharing effort began. Railways say they will be almost 50 percent compliant by June of this year, and are determined to make it 100 percent before January 2000. But there has not been any extensive testing yet, and until we know the results we cannot be certain. Contingency plans cannot be made on the basis of subjective assurance that "we are doing OK."

The same thing can be said with respect to electric utilities. I'm dubious as to how Japanese electric companies can be so certain that their production systems have nothing to do with calendar dates, when in the United States there are many reported cases in which date inputs in control systems were found to be a problem.

There are a number of differences between Japan's situation and that of other countries, particularly those nations assigned by the Gartner Group to level one--those least likely to experience Y2K-related business failures. First, the amount of customized software on mainframe computers may be much larger in Japan. Second, quite a few of our infrastructures are run by oligopolistic companies. For instance, there are only ten electric utility companies in Japan, whereas in the United States there are over 3,200. The situation is similar in telecommunications.

Another difference, which I really do not understand, is that I seldom hear the term "triage" in Japan. Even though it may already be too late, Japanese people seem to want to do everything possible until the last second to make all systems Y2K compliant, rather than abandon systems or programs that are not mission critical.

In conclusion, I would say Japan definitely has been lagging in Y2K remediation activities, and is still lagging in some respects. But at the same time, Japan is making some real progress. I will be keeping an eye on the outcome of remediation tests, about which information disclosure is critical. Information sharing and mutual trust are critical, not only domestically, but also internationally.