Japan has committed more than 10 trillion yen in public support for AI and semiconductor infrastructure as it seeks greater technological sovereignty and less exposure to foreign AI services. Its strategy centers on domestic development, including “physical AI” that combines artificial intelligence with robotics and machinery. The United States and China remain ahead in core AI development.
Domestic capacity and strategic autonomy
The Japanese Cabinet passed its Second Artificial Intelligence Basic Plan on July 14. It targets agentic AI and technological sovereignty. A related road map aims to mobilize 370 trillion yen ($2.3 trillion) in public and private funding by 2040 for AI and semiconductors.
Japan’s government launched a $6.34 billion initiative beginning in fiscal year 2026 to combine the country’s industrial robotics industry with next-generation AI. The plans include automating heavy industry, transport and infrastructure. One example in the account is autonomous AI systems managing Tokyo’s heating and cooling infrastructure.
Japan’s aging population and resulting labor shortage have led some companies to modernize and build AI capabilities, according to the article. The account gives no figures on the shortage’s scale or the number of jobs automation could affect.
Japan brought an AI Act into force in June 2025 and adopted a formal AI Basic Plan in December 2025. It also established a Prime Minister-led AI Strategic Headquarters. Hello World Japan called the rapid policy shift “recovery, not regulation.” It said the initial plan acknowledged “gaps between Japan and other growing countries in utilization rates and private investment,” which had “widened” through 2025.
Foreign exposure and domestic alternatives
Dr. Takahiro Tsuchiya of Kyoto University said Chinese companies dominate parts of Japan’s domestic AI market because their products cost less than Japanese companies’ offerings. He also said Japan hasn’t kept pace with the United States and China in core AI. Tsuchiya spoke to reporters at the Japanese Embassy in Washington, D.C., and attendees at his lecture at the Japanese Consulate in Boston.
Nikkei reported on September 9 that Sumitomo Corp. partnered with Sakana AI to offer the startup’s artificial-intelligence models to about 100,000 client companies. The arrangement aims to help the Tokyo-based company sell its solutions to small businesses. Nikkei said Sakana AI’s models are “said to be comparable to cutting-edge overseas models.”
The partnership addresses security concerns and Japanese companies’ reluctance to expose confidential data to generative AI systems. Nikkei said companies in Japan had fallen behind U.S. and Chinese rivals in using AI for structural and operational reforms. It reported “high expectations for Sakana AI as a provider of AI models that do not rely on overseas companies’ services.” The venture is described as a domestic Japanese project that doesn’t involve U.S. or Chinese companies.
Alliance and national calculations
Tsuchiya “strongly advocates for a robust U.S.-Japan alliance to counter regional threats,” identified in the article as China and North Korea. He said Japan should tighten technology export controls alongside the United States to counter China’s military-civil fusion, while grounding its defensive and economic calculations in its own circumstances.
“Japan can’t simply copy the United States,” Tsuchiya said, arguing that Tokyo must make its own assessments of threats and responses, including risks tied to AI development and deployment. Japan is geographically close to China and deeply connected to it through trade, the article said. The report describes a strategic-autonomy debate in Tokyo, but offers no details of popular protests or organized public opposition to the government’s AI plans.
The second source listed for the topic, a Reuters report on a Japan-Australia finance ministers’ dialogue, could not be fetched. No details from that report appear here.