All in on AI?: How Japan is Betting on Artificial Intelligence for its Future
Introduction
Last week, we examined the current state of Japan’s newly established AI Act and the government’s evolving approach to AI regulation. This time around, we will comb through the Ministry of Internal Affairs and Communications’ (MIC) 53rd Annual ICT (information and communications technology) White Paper to analyze how they position AI within their larger ICT framework. Released back in July 2025, the ICT White Paper provides insights into the government’s positioning on what Japan aims to achieve through AI adoption and how it plans to get there. Together, the AI Act and this white paper offer a window into Japan’s broader digital strategy, showing how the government sees AI as a tool to boost national competitiveness, redefine its global role, and address existential challenges while still managing to be wary of the technology’s potential negative implications. While our previous piece focused on how Japan is regulating AI, this analysis explores the multi-faceted reasons behind Japan’s strategic choice to become “the most AI-friendly nation in the world.”
Messaging
In his opening message of the white paper, the current Minister of Internal Affairs and Communications, Seiichiro Murakami writes that “...the explosive progress of AI technology in recent years is remarkable, with new technologies and services announced daily that significantly impact our lives and economic activities.” However, immediately after that sentence, he cuts in with a dark existential look at the future writing, “Meanwhile, globally, geopolitical uncertainty is rising, and climate change is intensifying extreme weather and disasters,” and goes on to directly mention Japan’s declining birth rate, reflecting the importance of the role that this technology is set to take to the global stage.
The Minister writes that 2025 marks both a symbolic turning point and a crossroads toward 2050, with the central challenge being how to manage the risks of digital technology while leveraging it to address societal issues. He highlights concerns such as dependence on foreign providers, the spread of online misinformation, and emerging AI risks. This framing underscores Japan’s cautious approach to AI, encouraging innovation while remaining alert to potential dangers. Part one of the white paper, and the focus of this analysis, is titled ‘Digital as an Expanding Social Infrastructure’ and examines digital technologies as core societal infrastructure, how AI could strengthen this foundation to tackle Japan’s challenges, and the risks inherent in adoption. This dichotomy displays both the optimism that the government views new technology in the context of Japan’s current unsteady position.
“Falling Behind”
To begin with, MIC acknowledges that Japan is currently “falling behind” on AI, saying that from a global perspective, Japan’s presence in the field is not particularly well pronounced. Stanford University’s 2023 AI Vibrancy Ranking, which evaluates countries’ overall AI capabilities across indicators such as research output, talent, investment, and industrial application, placed Japan 9th in the world. While a top-10 ranking indicates that Japan remains a significant player, the country still trails behind global leaders such as the United States and China, both of which continue to dominate in scale, innovation, and market influence.
The report also notes that socially, Japanese people have been less accepting of AI in their daily lives, leading to slower adoption rates compared to other countries. According to a 2024 MIC survey, the percentage of respondents who answered that they use or have used in the past some form of generative AI service was 26.7% (a nearly 18% increase from the previous year). Adoption is quite low compared to those found in the United States, Germany, and China, where AI adoption is more widespread and the percentage of those with experience using generative AI services stands at 68.8%, 59.2%, and 81.2%, respectively. Among those who answered that they do not use or have never used text generation AI services in Japan, common reasons included “not necessary for my life or work,” “don’t know how to use it,” and “no attractive services,” indicating that significant usage barriers remain. When asked about awareness of AI-related risks, a relatively high percentage expressed that they “feel it is very risky” in contexts such as malicious criminal use, being deceived by sophisticated fakes, and the possibility that AI-generated responses may be inaccurate (i.e., hallucinations). At the business level, around half of SMEs in Japan reported that they do not have clearly defined policies regarding AI. When asked about the status of generative AI use in business operations where its adoption is expected, 55.2% responded that they are using generative AI in some capacity, compared to all the other aforementioned nations who are all in the 90% range. While Japanese usage of AI may currently take a different form than compared to other nations, the MIC anticipates growing demand, noting that “...as AI continues to evolve and permeate all areas of digital technology, the likelihood of it becoming a foundational element supporting digital society is increasing.”
The report does note that there are domestic companies working on advancing LLM (large language model) research in Japan. Though Japanese models remain relatively small in scale compared to the world’s most advanced systems, the white paper highlights the potential of small-scale LLMs, pointing out that this is an area where Japanese companies and organizations can excel. These include meeting the need for model diversity, enabling customization for individual companies, and offering advantages in responding to power constraints and handling highly confidential information.
The white paper also highlights the Japanese government’s own initiatives to accelerate AI research and development, positioning them as central to closing the competitiveness gap. One major example is the GENIAC Project, a flagship program launched by the Ministry of Economy, Trade and Industry (METI) in collaboration with the New Energy and Industrial Technology Development Organization (NEDO). GENIAC focuses on building foundational AI models tailored to Japan’s industrial and societal needs and strengthening the domestic AI ecosystem across research, deployment, and commercialization.
A key pillar of Japan’s AI strategy within the halls of MIC is the work being carried out by the National Institute of Information and Communications Technology (NICT). Recognizing that high-quality training data is the backbone of LLM development, NICT is leading efforts to collect, curate, and expand massive datasets with a particular emphasis on Japanese-language-centered data. By organizing and making these datasets available to domestic developers, the government aims to level the playing field for Japanese companies and researchers, enabling them to build competitive LLMs that reflect Japan’s linguistic, cultural, and societal context.
While Japan may not currently be leading the global AI race in terms of scale or international visibility, its approach is consistent with a broader pattern seen across many of its industries: a deliberate focus on serving the domestic market first and tailoring technologies to meet the country’s specific needs. This inward-focused strategy is also seen as a way to build strong foundational capabilities and regulatory confidence at home before scaling outward, while at the same time preventing the Japanese market from being oversaturated with foreign AI technologies—a consideration closely tied to the economic security concerns that dominate contemporary policy discourse. Over time, this domestic-first approach could provide a stable base from which Japan can expand its AI influence internationally, offering specialized models and applications that reflect its strengths in precision engineering, safety, and societal integration.
AI: Our Savior for Societal Problems?
For Japan, the technology isn’t anticipated as just a tool for economic growth or national competitiveness but is being positioned as a potential breakthrough for solving major societal challenges such as an aging workforce and regional decline. It’s globally known that Japan faces a severe labor shortage driven by declining birthrates and a rapidly aging society all of which hit rural areas the hardest. According to Chuo University, Japan will have a projected labor shortage of 17.75 million hours daily (equivalent to 3.84 million people) by 2035. These demographic pressures, combined with a stagnating economy relative to global growth, have intensified the need for transformative solutions. AI adoption is increasingly promoted as a paradigm shift that revitalizes regions, enhances disaster preparedness, and sustains social and economic systems amid structural population changes.
The Japanese government is hoping that AI can act as a pressure valve to release some of the pent up anxiety around labor concerns, writing “…it is expected to bring significant benefits, including improvements in productivity and the resolution of labor shortages, and global attention to AI’s potential is increasing markedly.” As Japan’s labor shortage grows increasingly severe, the country faces a choice between accepting more foreign workers or adopting technologies to perform tasks once handled by human labor. Amid heightened social tensions around immigration, the government appears to be leaning toward the latter, choosing to employ robotics instead. While there are concerns abroad that AI is stealing jobs from a willing and able workforce in other countries, the promise of AI doing tasks in the fields of manufacturing, customer service, and maintenance can’t come soon enough for Japanese companies.
Moreover, while some AI skeptics warn that automation could lead to a more fragmented and isolated society, the Japanese government is actively framing AI as a “friendly,” non-invasive helper designed to support and enhance “human dignity (人間の尊厳), trust (信頼), and societal well-being (社会全体の幸福).” This people-centered vision is clearly reflected in the Cabinet Office’s Social Principles of Human-Centric AI and in METI’s AI Guidelines for Business, which both emphasize that technology should remain in service of human needs and societal cohesion.
(Economic) Security
At the geopolitical level, AI is seen as a new arena in which Japan can reassert itself as a global technological trend setter. The white paper spells it out as much, saying that “the government intends to set priority areas from the perspective of strengthening international competitiveness and ensuring economic security...” Currently, Japanese companies hold only a small share of the global digital market, and the country is facing what METI calls a “digital cliff,” a scenario in which businesses could lose around 12 trillion JPY (approximately 80 billion USD) annually by failing to adopt digital technologies.
Due to the advancement of digital utilization in social life and corporate activities in Japan, and the low international competitiveness of Japan's digital industry, the deficit in Japan's digital field balance of payments is trending upward. MIC writes that if Japan's sluggish international digital competitiveness and dependence on overseas operators in important digital areas persist, the country risks losing opportunities to incorporate the fruits of the rapidly growing digital field into its economic growth, stating that “as digital infrastructure is one of the critical infrastructures on which national life and industrial activities depend, ensuring economic security in this field is essential for maintaining national competitiveness.”
Another shift in the global markets that makes the Japanese government uneasy is how rapidly Chinese companies have expanded their market presence in this space, raising concerns about the risks that come when an adversarial state such as China gain access to hordes of Japanese data. As seen worldwide, technology firms such as Meta and ByteDance wield significant political influence, sometimes even surpassing that of governments, and in China’s case, where companies share information with the state, Japan is wary of exposing itself to digital coercion from hostile nations. The white paper reads, “...there is a need to secure digital infrastructure that can handle increasing demands for communication, computational resources, and electrical power. However, against the backdrop of the current unstable global situation and intensifying disasters, there is a risk that access to, and use of critical digital infrastructure may become difficult, or that security may be compromised.”
Japan faces challenges including concerns about the safety, transparency, and openness of digital infrastructure due to population decline and market environment changes, leading to decreased development investment by domestic telecommunications operators and increased dependence on foreign vendors. With the explosive increase in AI demand represented by the rapid development of generative AI and the special demand for constructing safe and reliable digital infrastructure to support robust AI demand occurring not only in Japan but worldwide, the Japanese government sees that is necessary for domestic companies to capture this demand for growth and improve international competitiveness, thereby reducing excessive dependence on foreign vendors and eliminating economic security concerns.
Reward Does Not Come Without Risk
While AI is envisioned to revitalize the Japanese economy and strengthen its global positioning, the white paper remains cautious about the technology’s potential dangers. These fears, such as the creation and spread of false or misleading information on social media platforms and growing threats to cybersecurity are evidenced by the aforementioned polling around AI adoption as compared to other countries. As the document notes, “it is important to continue promoting further technological development and utilization while simultaneously addressing threats that may expand due to the advancement of digital technology and its usage.” These concerns become even more pressing as AI continues to evolve and as the paper says, may one day advance toward Artificial General Intelligence (AGI), which would introduce new and greater risks. If, or until that day comes, in order for society and businesses to fully benefit from the progress of digital technology, the white paper emphasizes the need to pursue technological development and application while carefully managing the threats that emerge alongside these advancements. The Japanese government is attempting to toe this fine line between innovation and safety that we so often see in other policy plans and positions.
So far, the country has taken action in protecting Japanese consumers by calling on major telecom operators and industry groups to strengthen phishing countermeasures and scam phone calls that are enabled by AI, requesting transparency and safety from AI operators in their AI Act, and leveraging the Personal Information Protection Commission (PPC) to oversee data privacy and protection rules applicable to AI systems handling personal information.
Conclusion
The narrative elaborated in MIC’s white paper reveals not only how the Japanese government views AI as a technology, but also how it interprets the existential challenges the country faces—an aging and shrinking population, the pressures of global competition, and the imperative to maintain economic vitality. The policies and strategies emerging from Tokyo reflect both optimism about AI’s potential to drive growth and caution about the risks that accompany such transformative tools. Whether these ambitions will ultimately materialize, however, is up in the air and will depend on factors far beyond even the best government planning. How the Japanese government positions itself is one thing, but the choices private companies make in their investments, the ways citizens accept or resist AI in daily life, and the pace of the technology’s own evolution are going to make the final decision. The trajectory of AI in Japan will thus be shaped by a dynamic interplay between state vision, market forces, social attitudes, and the unpredictable pace of technological development.
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