How Japan is trying to avert ‘digital defeat’

The ability of U.S. and Chinese companies to integrate sensors, unify standards, and share data is driving their progress in physical artificial intelligence, an area in which Japan’s structural weaknesses threaten to provoke what its own government calls a “digital defeat.” Manufacturing robots that co-exist in everyday spaces with human beings is an attractive solution for a country that has been mired for decades in a growing demographic crisis and restrictive immigration policies.

Japan also has a special predisposition towards living with devices. Its popular culture abounds with characters like Doraemon the cosmic cat, a robot from the future who does everything possible to help its owner in the anime series that bears its name. In 1999, Sony launched the Aibo dog, the longest-running robot pet on the market, which is still sold today in different versions. In 2000, car manufacturer Honda was one of the first to build an autonomous walking humanoid who went by the name of Asimo.

The country is one of the world leaders in the manufacturing of industrial robots, and up until 2023, it represented 38% of global production of these machines, according to the International Federation of Robotics. In 2024, there were 435,299 industrial robots operating in Japanese factories producing electrical equipment, automobiles, and metal products. Known for their smooth, safe, and exact movements, Japanese industrial robots use high-precision speed reducers and high-performance servomotors that control their axes.

In theory, physical AI is the perfect way for Japanese industrial robotics to take the big leap from structured, predictable environments to real life. But training autonomous systems to act in a wide variety of situations implies a series of challenges in coordination and funding, in addition to cultural and regulatory barriers. The Japanese government itself recognizes that one of the primary obstacles to the implementation of physical AI in Japan is the country’s corporate culture, which is oriented towards data protection.

A recent Digital Economy Report from the Ministry of Economy, Trade and Industry (METI) points to Japanese companies’ structural reluctance to share data. The study says the country needs to resolve issues related to standardization, governance, operability, and corporate practices in order to generate the large volumes of real-world data that physical AI requires. It points out that many Japanese manufacturers lack modernized and digitized workflows, which blocks the collection and standardization of data necessary for physical AI.

Lack of competitiveness

The METI report explains that this lack of competitiveness is reflected in the fact that Japan pays more for digital services from abroad than it earns. It stresses that this “hidden digital deficit” could reach nearly $300 billion by 2035 if the current trend of losing ground to the United States in software and platforms is not reversed.

The report warns of an imminent “digital defeat” and calls on companies, investors, and policymakers to share a common diagnosis and act together to solve it. Firstlight Capital, an investment firm that promotes the creation of companies addressing Japan’s population decline, echoes the METI study in a statement on its website that calls on Japan to “learn from past defeats.”

In the case of physical AI, it warns that a similar pattern could be repeating: Japan invents the underlying technology and, instead of transforming its advantage into global products, cedes its hegemony. In the future, states Firstlight, Japan may see robots caring for its elderly using local technology, but with imported software, explaining that U.S. and Chinese companies have an advantage in the development and application of physical AI thanks to private and state-owned ecosystems that facilitate the generation, standardization and large-scale circulation of data.

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