Big data may help guide Japan economy through pandemic pain

As well as postponing the Tokyo 2020 Olympics, the coronavirus has hit Japan’s economy, but big data is helping to get a clearer picture of the path to recovery. (AFP)
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Updated 24 July 2020

Big data may help guide Japan economy through pandemic pain

TOKYO: Big data is providing some surprising results for the Bank of Japan and helping ease concerns about pressure on the economy during the coronavirus pandemic, which could influence the way the BoJ manages the world’s most radical monetary stimulus.

By tapping data provided by Google showing people’s movement via mobile phones, the BoJ found that households’ discretionary spending rebounded faster and more vividly in Japan than in other countries after lockdown steps were lifted in May.

Other big data also showed a marked rebound in durable goods sales such as personal computers, which offset some of the weakness in spending on services including leisure, eating-out and travel.

The revelation helped convince BoJ policymakers to conclude the economy has past the worst and did not need immediate, additional monetary support. “We expect the economy to recover gradually and steadily,” BoJ Governor Haruhiko Kuroda said after the bank’s decision this month to keep monetary policy steady.

“Service sectors, such as sports and other events, may not recover to pre-COVID-19 levels easily . . . But consumption and production of goods have hit bottom and are now rebounding sharply,” he said.

Long seen as one of the most conservative central banks when it comes to data, the BoJ is now marshalling a 180-member statistics team to troll through cargo freight movement, traffic data collected from smart phones and satellite images of human activity around factories, for better insights into the economy.

HIGHLIGHTS

Big data helped to boost BoJ’s conviction of economic recovery.

Team of economists troll through traffic data, satellite images.

Task force created to reflect big data in economic assessments.

Non-traditional data may also affect the way the BoJ gauges success in meeting its elusive 2 percent inflation target.

An index tracking real-time trends using private data showed prices of some goods rose steadily even as services costs slumped, suggesting price moves may not be as deflationary as the official consumer price index (CPI) suggests.

The findings prompted the BOJ to warn in its quarterly report in July of the need to look at both the inflationary and deflationary impact COVID-19 could have on prices.

While CPI will remain the BoJ’s key price gauge, its policy may become more detached from the index with more alternative information available, some analysts say.

“The BoJ knows its conventional approach of simply tracking CPI won’t work. While they won’t change the 2 percent target, they will start looking at a wider range of data,” said Tsutomu Watanabe, a former BoJ official and a pioneer of big data in Japan.

“Policymakers will have to fully rely on big data. That’s already happening across the world and will only accelerate.”

Major central banks are increasingly turning to real-time data to make quick calls on the pandemic-hit economy, as traditional indicators such as monthly retail sales and unemployment figures arrive too late to give a reliable picture of the impact of COVID-19.

The Federal Reserve has led the drive, tapping numerous high-frequency data and exploring new ways such as creating online polls and an index gauging changes in human movement.

The BoJ is playing catch-up.

Last year, the bank created a task force to better reflect big data findings into its economic projections — a small but significant departure from the 140-year-old institution’s traditional emphasis on theory and models.

It also introduced its version of a weekly index the New York Fed uses that combines frequently updated consumer and industrial activity data into a gauge of gross domestic product.

Kazushige Kamiyama, the BoJ’s top economist who spearheaded the changes, says the bank is ready to hire and develop data scientists who can streamline data collection and analysis. His mission is gaining steam because of the pandemic.

“In times of shock, uncertainty over the state of the economy and its outlook heightens. It’s like driving without your lights on,” Kamiyama said.

“That’s when non-traditional data that gives us quick information, including high-frequency data, become really valuable.”


INTERVIEW: Hummingbird Technologies and Saudi Arabia team up on food security

Updated 25 October 2020

INTERVIEW: Hummingbird Technologies and Saudi Arabia team up on food security

  • UK agri-tech entrepreneur explains how SALIC has invested in sustainable farming

Will Wells, CEO of Hummingbird Technologies, is scrutinizing our food, right down to the lettuce on a supermarket shelf.

“Every time somebody buys lettuce in Europe, the chances are that Hummingbird has analyzed that lettuce,” he told Arab News. Since last year, the Saudi Agricultural and Livestock Investment Company (SALIC) has probably had a good look at it too.

Last year SALIC — owned by the Public Investment Fund with a mandate to optimize investment in food and farming in the Kingdom and around the world — became a big investor in Hummingbird with a £7 million ($9.1 million) financial injection into Wells’ company.

It was an investment with big implications for agri-tech — the fast-growing sector that applies advanced digital technology to farming and food production — but also for global food security and Saudi Arabia’s plans to become more self-sufficient in sustainable foodstuffs.

Hummingbird, which Wells described as “my baby” after he set it up four years ago, develops the software used by drones and satellites to produce high-resolution maps that farmers can use to forecast crop stress, identify diseases, pests and weeds, and optimize food yields.

“If you’re an agricultural company and you say to me ‘I want you to show me every single soya bean in Brazil, or every single sugarcane plant in India,’ we could do it in a millisecond,” he said.

“Think of us like an MRI scan for plants. We use satellite data, robots, and drones to help farmers see problems in their crops. The result is immunotherapy, not chemotherapy. By analyzing millions and billions of pixels of crops from space, we can help people use fewer chemicals, improve supply, and monitor the entire digital food supply chain,” Wells said.

With a team of 65 people — mainly scientists — in his London office, Wells uses artificial intelligence (AI) techniques to analyze billions of pixels to prevent such problems. The technology he has developed can also assist in making food production more sustainable by measuring and evaluating agricultural techniques that minimize carbon-intensive practices.

“We can make the difference between sustainable and unsustainable agriculture. Technology like this can connect the dots,” Wells said.

“I want to emphasize the sheer quantity of software and hardware solutions in agri-food — weather stations, soil sensors, driverless tractors, robotic harvesting, spot-spraying weed devices. Hummingbird’s role — rather like the MRI scan — is to talk to all of that technology. We link up and integrate with everything else on the ground,” he added.

Hummingbird grew out of work done by scientists at London’s Imperial College and other technology organizations, and was backed by some prestigious investors in early-stage funding, including the European Space Agency and James Dyson, the British inventor and entrepreneur.

It has operations and clients across the world, from Latin and North America, throughout Europe and Russia, and down to Australia.

The Saudi connection came when SALIC opted to use Hummingbird technology for agricultural projects at farming land it owns and manages outside the Kingdom, including big investments in the Ukraine and Australia.


BIO

BORN: 1983, London.

EDUCATION: MA, Edinburgh University.

CAREER

  • Investment analyst, Highclere International Investment.
  • Founder and CEO, Hummingbird Technologies.

“SALIC was a customer first, but they liked the technology so much they decided to back it,” Wells said. SALIC’s £7 million participation in the last round of financing makes it a major investor in a start-up that is valued at more than £20 million.

But Wells has much bigger ambitions. “Can an AI business for agriculture hit the same unicorn status, like those in health technology and fintech, that we’ve seen in recent years? The potential size of the market we’re going after is absolutely enormous.

“We’re trying to disrupt a multibillion-dollar chemical market, and we’re trying to unlock a multitrillion-dollar carbon market. There are so many ways AI and data science can improve food and farming,” he said.

“We are doubling and tripling every year, and expanding fast. We analyze millions of hectares of farming land every month, and we see billions of dollars of efficiency in each market we look at. You don’t have to be a silver bullet to hit ‘unicorn’ status in those conditions. People who have expertise in AI and crops make up quite a small list,” Wells added.

SALIC has been investing for some time in agricultural assets outside the Kingdom. Two years ago, it made the biggest in a series of investments in the Ukraine’s abundant farming lands with the purchase of Mriya, one of the country’s largest farming landowners in the rich grain and vegetable producing areas in the west of the country, combining it with an agricultural asset purchased earlier.

Last month, SALIC imported and sold its first batch of grain from Ukraine, unloading 60,000 tons of wheat in Jeddah, as part of the Kingdom’s strategy to support foreign investments in agriculture and help to ensure food security in Saudi Arabia.

In 2019, SALIC bought more than 200,000 hectares of land in Western Australia, including its first foreign investment in sheep-raising land, in one of Australia’s largest-ever farming land deals. 

Hummingbird technology can be used at the new acquisitions to enhance productivity and eliminate disease. SALIC also has ambitions in Canada and India.

But Wells also sees “immense” opportunities within the Kingdom itself. Food security has always been a national objective, and is one of the pillars of the Vision 2030 strategy to diversify away from oil dependence.

Earlier this year, the National Grain Company was set up, a partnership between SALIC and the National Shipping Company to oversee trade, handling and storage of grains in the Kingdom.

“We are looking to expand and have a local agricultural presence. Saudi Arabia wants to grow more fruit and vegetables in the country, and to do so locally and sustainably. We have expertise in producing foodstuffs efficiently, and that expertise can be put to good use there,” he said.

Wells said that the Vision 2030 strategy “speaks to the needs of consumers everywhere.” He added: “Ordinary people and consumers everywhere, not just in Saudi Arabia, are increasingly asking where their food is coming from, and this is a major factor for a company like ours. We are an enabler of self-sufficiency.”

The Hummingbird business also fits in perfectly with the emphasis on high-technology and the knowledge economy that is central to the Vision strategy, nowhere more so than in the NEOM megacity planned in the Kingdom’s north west.

There are more immediate applications too. Wells is working on an algorithm for date-palm production across the Middle East region that he believes has great potential. “But ultimately we can analyze any plant from space, whether it’s in the middle of the desert or in a field in Brazil, and therefore we’re actively seeking local partners, especially university professors who specialize in plant pathology,” he said.

Hummingbird can also be critical to the Kingdom’s plans to reduce its carbon footprint as part of the Circular Carbon Economy strategy to tackle climate change.

“What we’re able to do from space is measure activities within food and farming that sequester carbon. To put it plainly, if a farmer or a farming business uses the Hummingbird map, and as a result of that uses less nitrogen as fertilizer, or sprays fewer chemicals, they have a lower carbon footprint, or potentially even a positive carbon outcome,” Wells said.

“By measuring things like biodiversity and soil health from space, we are able to distinguish between a farm that is sustainable, and a farm that’s not. At the heart of it is a ‘green’ outcome,” he added.

At some stage, Hummingbird will come back to the investor table for more funds. “We’re a high-growth start-up and in due course we will be seeking new investment. It is part of our journey and we have many more market opportunities too,” he said.

“Some people might call it a ‘land grab’, but we’re expanding into geographies where there are millions of hectares of farmland that have not yet been analyzed like this. It’s still very much a frontier market,” he said.

The link-up with SALIC could just be the connection that takes Hummingbird along the way to being an Arabian unicorn, but there is a broader ambition beyond the financial — to change the way the global food and agriculture business is seen.

“Food and farming has been demonized as a cause of climate change by many people. But there is a way to produce food efficiently and sustainably. It’s our job to sit right in the middle of that. 

“The aim is to take a sector that has been blamed for climate change, and make it carbon positive. That is the goal here,” Wells said.