Japan launched a $6.34 billion initiative beginning in fiscal year 2026 to bring industrial robotics together with next-generation artificial intelligence, targeting automation across heavy industry, transport and infrastructure as companies face labor shortages linked to an aging population.
Automation and the labor shortage
The government plans to use autonomous AI systems to manage Tokyo’s heating and cooling infrastructure. Japan’s effort centers on building “physical AI,” which puts AI into robotics and machinery, and expanding sovereign AI deployment while the United States and China lead development of core AI.
Companies are modernizing and building AI capabilities in response to the labor shortage, the article said. It didn’t detail how automation might affect specific workers or jobs. Nor did it report union responses, strikes or other organized labor activity around the government’s plans.
Dr. Takahiro Tsuchiya of Kyoto University said Japan hadn’t kept pace with the United States and China in core AI. He spoke to reporters at the Japanese Embassy in Washington, D.C., and to people attending his lecture at the Japanese Consulate in Boston, saying Chinese companies dominate Japan’s domestic market in part because their AI products cost less than those from Japanese companies.
Public money and domestic suppliers
Japan’s AI Act took effect in June 2025. According to Hello World Japan, the government adopted a formal AI Basic Plan in December 2025, established a Prime Minister-led AI Strategic Headquarters and committed more than 10 trillion yen in public support for AI and semiconductor infrastructure.
On July 14, the Japanese Cabinet passed its Second Artificial Intelligence Basic Plan, targeting agentic AI and technological sovereignty. A road map aims to mobilize 370 trillion yen ($2.3 trillion) in public and private funding by 2040 for AI and semiconductors. Those figures show the scale of public backing and projected investment, but the article didn’t explain who would receive the funds or what returns private investors might expect.
On September 9, Nikkei reported that trading house Sumitomo Corp. had partnered with Sakana AI to bring the startup’s models to its roughly 100,000 client companies, helping the Tokyo-based company sell solutions to small businesses. Nikkei said Sakana AI’s models are “said to be comparable to cutting-edge overseas models.” The article describes the venture as a domestic project that doesn’t involve U.S. or Chinese companies.
Nikkei said the partnership addresses security concerns and Japanese companies’ reluctance to expose confidential data to generative AI systems. It also reported that Japanese companies had fallen behind U.S. and Chinese rivals in using AI for structural and operational reforms, citing “high expectations for Sakana AI as a provider of AI models that do not rely on overseas companies’ services.”
Economic security and strategic autonomy
Tsuchiya said Japan “strongly advocates for a robust U.S.-Japan alliance to counter regional threats,” which the article identifies as China and North Korea. He also argued that Japan must assess its own risks. “While Japan must tighten technology export controls alongside the U.S. to counter China’s military-civil fusion, Tokyo’s defensive and economic calculations must remain grounded in its own reality,” he said.
Japan’s geographic closeness to China and deep trade connections with it shape those calculations, the article said. Tsuchiya said Japan can’t simply copy the United States; it must make its own assessments of threats and responses, including risks tied to AI development and deployment.
Hello World Japan said the initial plan acknowledged “gaps between Japan and other growing countries in utilization rates and private investment,” which had “widened” through 2025. It called the strategy “recovery, not regulation.” The article also described a growing school of thought in Tokyo on strategic autonomy. A Reuters report on a Japan-Australia finance ministers’ dialogue could not be fetched, and the article included no details from it.