A Reuters survey reveals that while artificial intelligence adoption is growing in Japan, the majority of firms still apply AI narrowly or are undecided about its integration, potentially slowing the country's technology-driven productivity gains.
- 60% of firms use AI in limited parts of their operations
- 18% undecided on AI introduction, while 6% not considering it
- 82% prefer domestic over overseas investment in technology
What happened
A recent Reuters poll conducted with Nikkei Research surveyed 219 Japanese companies, uncovering that more than 80% either use AI only in limited segments of their operations or not at all. While about 16% have integrated AI across their entire businesses, many firms struggle with practical applications or remain uncertain about adopting AI technologies.
Respondents exemplified this cautious approach: a wholesaler reported limited AI use restricted to document creation, and a real estate official expressed uncertainty about how to implement AI effectively. This reflects the broader hesitancy seen in Japan's corporate landscape despite global momentum for AI integration.
Why it matters
Japan is trailing behind other major economies such as China, Germany, and the United States in terms of generative AI adoption, which raises concerns over its competitive edge in technology innovation and productivity enhancements. A government report highlighted that 86.4% of Japanese firms use generative AI for at least one task, compared to over 90% in these other countries.
The slow and partial adoption pattern could impede Japan's ambitions to revitalize its economy and improve productivity through AI. Coupled with demographic headwinds like a shrinking population, limited AI diffusion may hinder sustainable growth and innovation in critical sectors.
What to watch next
Investment intentions point towards a modest increase in AI budgets, with 55% of companies expecting some growth in spending over the next one to two years, though the majority of budget increases are projected to be single-digit. None of the respondents indicated plans to reduce AI expenditures, suggesting cautious but growing interest.
Additionally, 82% of firms favor boosting domestic investment rather than overseas, in line with Prime Minister Sanae Takaichi’s strategy emphasizing local development in AI, semiconductors, and quantum technology. How effectively companies translate this preference into sizable investments and broader AI adoption will be critical to watching Japan’s technological trajectory.