SIX years ago the Koizumi government adopted a biotechnology strategy intended to guide Japan back to leadership in the field. Itwas not the first such national policy initiative and we are on theverge of another as the current administration tries to capitalise on an exciting stem cell breakthrough.

Since 2002, however, Japan has lost ground relative to other leading countries.

The Office of Pharmaceutical Industry Research reported last year that Japanese biotech drug development, as a ratio of overall drug development, lagged the US, Britain, France and Germany by about 50 per cent.

The disappointing performance in applied biotechnology is often attributed to Japanese science's alleged weakness at radical innovation; though it's a generalisation not borne out well by measures such as international scientific patents or Nobel prize-winners over the past 20 years.

However, it goes some way to explaining the surge of official optimism that has built up behind Shinya Yamanaka's induced pluripotent stem (iPS) cell research team at Kyoto University's Institute of Frontier Medicine.

It remains to be demonstrated, however, that ministers and officials understand their contribution to previous shortcomings: ponderous and intrusive forms of regulation and administrative guidance that hobble Japanese scientists in fast-moving areas of medical and biological R&D.

In the late 1980s, Japan was widely expected, even at senior policy levels in the US, to become the dominant nation in the exciting new field of biotechnology; among other reasons because of its excellence in science education, a high level of government commitment, and track record of converting research into commercial and clinical innovation.

That never happened and one reason is that a high level of official commitment to an undertaking usually comes with intense bureaucratic supervision.

Stem cell research programs can wait 12 months for government approvals and once under way, pharmaceutical and biotech companies complain, grant-funded research is inflexibly administered. For new drugs and clinical procedures, approval procedures are far lengthier than in the US and most other Western countries.

However, iPS cell research appears to have opened a fantastic opportunity for Japanese leadership in biotech.

The Yamanaka team's work seems to have signposted the path to the summit of biotechnology: stem cell therapy with its enormous promise to treat conditions such as Parkinson's, diabetes, heart and spinal cord damage - but unencumbered by the ethical difficulty of using cloned human embryos or eggs to create embryonic stem cells.

In June, Yamanaka announced success in using four genetic "transcription factors" to reprogram mice skin cells into becoming stem cells.

In November, Yamanaka's team and a group from University of Wisconsin described producing human iPS cells and soon afterwards Yamanaka's group succeeded in making iPS cells using only three transcription factors. The omitted gene, c-myc, had been causing worry because it is high in causing tumours.

This rush of innovation has focused worldwide attention on Yamanaka and, naturally enough, national admiration. But in many reports here, what begins as news of further advances in the science or more government support for developing the technology almost invariably turn into a glum recitation of previous shortfalls in Japanese biotech.

And unfortunately it's not hard to see why. Yamanaka moved into iPS research in part because though Japan permits embryonic stem research, it imposes the heaviest regulatory conditions of any country that does so. He has complained about the government's "terrible regulations and crazy policies that crush any long-term projects".

Last week, Yamanaka told reporters in Tokyo that aspects of the iPS discovery - though not stem cell therapy, which may be a decade away from clinical application, even if the research continues going well - have reached another breakthrough point.

"The other applications like toxicology and drug development, it's ready to go," he said.

"We can use iPS cells in these applications today, if somebody can pay a lot of money, like pharmaceutical companies."

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