The Japanese innovation system is said to be outdated. The increase of international patents, international scientific citations or the positive technology trade balance all do not alter the fact that the Japanese innovation system has distinct weaknesses: it is weak in giving birth to radical innovations, and is strong only in giving birth to more incremental innovations. This weakness is perceived as problematic since it may hinder welfare in the long run: firms become routine entrepreneurs, unable to read the competitive environment, and simply unable to produce innovative ideas. Indeed, Japan lost markets of leading-edge technologies to the USA in the 1990s, such as biotechnology or information and communication technology. In leading international rankings, Japan is placed low, compared to other Organisation for Economic Co-operation and Development (OECD) members in the last years. One of the reports, which was especially sobering for Japan, was the Global Information Technology Report of the World Economic Forum of 2004, which placed Japan at no. 20, far behind the leading OECD members. Obviously, the estimation of the Japanese innovation system is not too high. The international pressure on Japan to generate original knowledge of its own and to take responsibility for the international community in the production of knowledge and technical progress gives additional incentives to reform the established innovation system.