IP: EMERGING JAPANESE ENCRYPTION POLICY

[Dave Farber <farber@central.cis.upenn.edu>]

     A longer version of both pieces can be found at 
     "http://www.us.net/~steptoe/welcome.htm";
     
     
     
     EMERGING JAPANESE ENCRYPTION POLICY
     
     by
     
     Stewart A. Baker
     Steptoe & Johnson
     sbaker@steptoe.com
     http://www.us.net/~steptoe/welcome.htm
     
     Japan's encryption policymaking is in its early stages, but there are 
     strong signs that encryption is increasingly seen as a key technology 
     for improving Japan's penetration of the Global Information 
     Infrastructure.  A highly selective (and possibly biased) sampling of 
     informed Japanese opinion on cryptography suggests a growing 
     determination to treat cryptography as a national Japanese economic 
     priority.  
     
     In the United States and Europe, encryption policy is formed by a mix 
     of interests.  Advocates of business, national security agencies, and 
     more recently the police -- all play a large role in the policy 
     debate.  This policy triumvirate is difficult to see in Japan.  For a 
     variety of reasons, commercial interests are predominant in Japanese 
     government thinking about encryption.  Time after time during my 
     interviews, I was reminded that Japan was an island nation that has 
     not had to defend itself for fifty years and so has not had to 
     confront the national security concerns associated with encryption.  
     And Japanese police face severe political and constitutional 
     constraints on wiretapping, so the prospect of losing this criminal 
     investigative tool seems not to be as troubling to the Japanese 
     government as to the United States and many European nations.
     
     That leaves business interests in command of encryption policy inside 
     Japan.  And business interests increasingly see encryption as an 
     enabling technology that is critical for Japanese success in a world 
     suffused with information networks.  Cryptography is seen as a key 
     technology for a variety of network payment problems, from ensuring 
     the identity of each party to the transaction to providing an 
     electronic receipt without creating a risk to the privacy of 
     electronic transactions.
     
     Just below the surface of Japanese government comments on encryption 
     policy there seems to lie a suspicion that U.S. government concerns 
     about national security and law enforcement are an excuse to 
     perpetuate what is increasingly seen as U.S. domination of a strategic 
     industrial technology.  Some officials insisted that all 
     encryptionsystems can be broken, suggesting that the solution was to 
     fund better police decryption technology.  Others suggested that the 
     solution was to have two levels of encryption -- reserving the most 
     powerful for government and national security while encouraging 
     commercial encryption standards that are less strong.  This approach, 
     however, has proven to be a dead end in the United States, where any 
     cryptographic strength deemed exportable has immediately been 
     condemned as insufficient by business and cryptography experts.
     
     All in all, the emerging Japanese consensus on cryptography could pose 
     a major challenge to U.S. (and perhaps European) government hopes of 
     striking a compromise between commercial and governmental interests 
     with respect to cryptographic policy.  If Japan puts the weight of its 
     government and industry behind strong, unescrowed encryption, 
     competitive pressure will quickly doom any attempt to influence this 
     technology through export controls and standard-making.  Governments 
     will be forced to choose between overt regulation in the Russian and 
     French manner or laissez-faire policies of the sort that now prevail 
     in the domestic markets of countries like the United States, Great 
     Britain, and Germany.
     
     Whether Japanese policy will in fact coalesce around a purely 
     commercial approach to cryptography remains to be seen.  In response 
     to the analysis above, one senior MPT official stated that the U.S. 
     and European concerns had not been well understood in Japan until the 
     OECD meeting and that the MPT's study group would be giving special 
     importance to the issue in its review of electronic payment systems.  
     Thus, it is apparently still possible that Japan will join with the 
     U.S. and European governments in seeking to shape a more accessible 
     encryption standard.