To accelerate its progress, it is seeking collaborations with overseas companies, including those from the UK, which offer AI innovations in a range of critical business sectors such as manufacturing, mobility, and cybersecurity.

These are the findings of a new report, prepared by international business development consultancy Intralink as part of the UK-APAC Tech Growth Programme which it is delivering on behalf of the UK Government.

It is available for free download here. 

The report explains that Japan is known for its strengths in manufacturing and hardware, but its workforce is insufficiently equipped with the software skills necessary for AI development. The adoption of AI has been further impeded by the slow pace of digital transformation, a limited startup ecosystem, a lack of regulation and a business culture which values stability over the rapid deployment of disruptive technologies.

As a result, the AI market in Japan is still small in comparison with the US or China but is starting to grow rapidly and is expected to reach £5.9 billion by 2027.

Faced with a loss of global competitiveness and challenged by a range of social issues, including an ageing population, and shrinking workforce, Japan is rushing to regain momentum, prioritising the adoption of generative AI and other AI technologies for a range of critical sectors. These include:

1. Manufacturing: applications such as preventive maintenance, fault detection, demand forecasting and supply automation are of particular interest to Japanese manufacturers. Automotive manufacturers are also seeking AI partners in the fields of software-defined vehicles (those with capabilities that can be upgraded over time by software instead of having to change physical parts), advanced driver assistance systems (ADAS), autonomous driving and electric vehicles. Automation and robotics for warehouses and factories are also in demand
2. Mobility: sought-after AI applications include those for Mobility-as-a-Service (MaaS) – digital platforms that enable users to pay for and access real-time information on a range of public and private transport options. Systems relating to autonomous vehicles, fleet management, automated fare collection, safety monitoring, and data-driven decision-making are also required
3. Cybersecurity: as AI used with cloud computing can increase exposure to cybersecurity risks, Japanese companies are increasing their investment in tools to counter cyberattacks and to manage, operate and secure AI systems.

Other sectors for which Japanese companies are on the look-out for AI solutions include logistics, retail, healthcare, financial services, marketing, agriculture, and sustainability.

Renata Naurzalieva, Tokyo-based Director of Operations at Intralink Japan and author of the report, said: “Japan is racing to catch up with its AI competitors to boost economic growth and reclaim its position as a global technology leader.

“As Japan lacks the home-grown skills to develop the solutions it needs, it’s heavily reliant on collaborations with overseas companies, opening exciting opportunities for UK AI pioneers.

“Japanese corporations look for best-in-class technologies, and entering the market requires patience, a long-term view and a good understanding of Japanese business culture. But, once relationships have been built, they’re often long-lasting and driven by shared values rather than price, so Japanese companies can be highly desirable business partners.”

She added: “The UK-APAC Tech Growth Programme is here to help UK tech scaleups take their first steps in Asia Pacific by providing the knowledge, contacts and language skills needed. We urge those with the innovative technologies Japan is looking for to take advantage of the support on offer to explore the many opportunities available in a country seeking long-term collaboration.”

The UK-APAC Tech Growth Programme – backed jointly by the UK Government’s Department for Business & Trade and Department for Science, Innovation & Technology - is aimed at scaleups with significant international growth potential.

The Programme helps UK tech companies expand in South Korea, Taiwan, Singapore, Vietnam, Malaysia, the Philippines, Thailand, Indonesia, Australia and New Zealand, as well as Japan.

Intralink’s teams on the ground in Asia Pacific identify participants’ business opportunities, provide market entry advice, and help them sell their products, forge partnerships and raise investment.