300 Billion Yen for Generative AI Development, 1 Trillion Yen Over Five Years
Japan's Ministry of Economy, Trade and Industry (METI) is making a major push into generative AI with its 2026 fiscal year budget proposal. The ministry plans to allocate approximately 300 billion yen in related expenses, marking the first step in a five-year, 1 trillion yen program to support domestic AI development.
As global AI development competition intensifies, Japan finds itself lagging behind the United States and China. METI's strategy aims to reverse this situation through public-private partnerships to accelerate the development of domestically-produced AI foundation models.
SoftBank and Over Ten Companies to Establish New AI Venture
At the core of Japan's domestic AI development initiative is a new company to be established through investments from over ten Japanese firms, including SoftBank and Preferred Networks. The company is expected to launch in spring 2026, with plans to involve approximately 100 engineers.
The new venture targets approximately 1 trillion parameters, an indicator of AI performance. This represents Japan's ambition to develop large-scale AI models at the "1 trillion parameter" level, which is becoming the global standard. Development will involve mass procurement of high-performance semiconductors from NVIDIA to build large-scale computing infrastructure.
SoftBank plans to invest 2 trillion yen over six years starting in fiscal 2026 for data centers used in AI learning and development. Data centers in Tomakomai, Hokkaido and Sakai, Osaka are being considered as candidate sites.
Leveraging Manufacturing Strengths Through Physical AI
A particularly noteworthy aspect of this support initiative is the development of "Physical AI" - technology that combines AI with robotics to autonomously control machinery in manufacturing settings.
Japan's manufacturing sector, where the country holds competitive advantages, has accumulated valuable industrial data over many years. However, if this data flows to overseas AI companies, Japan risks losing its competitive edge. Driven by this concern, METI aims to utilize domestic industrial data to develop Japanese AI that can be deployed across various industries according to their specific needs.
Support will be provided in stages rather than as a lump sum. The government will conduct annual reviews of development progress and provide additional investment when technical standards are deemed to have been met. The "GX Economic Transition Bonds" are being considered as a funding source, given the energy-efficient nature of the AI being developed.
10 Trillion Yen Support Framework for AI and Semiconductors Over Seven Years
This generative AI support is part of a larger initiative. Based on the "AI and Semiconductor Industrial Base Strengthening Framework" formulated in the November 2024 economic package, the government plans to provide over 10 trillion yen in public support over seven years through fiscal 2030.
This aims to stimulate over 50 trillion yen in public-private investment over ten years and generate approximately 160 trillion yen in economic ripple effects. As the semiconductor and AI sectors are critical to economic security and beyond the capacity of private companies alone to adequately invest in, the government is demonstrating a long-term fiscal commitment.
Continued Advancement of Next-Generation Nuclear Reactor Development
In the energy sector, budget allocation continues for next-generation innovative reactor development. Support using GX Economic Transition Bonds continues for demonstration reactor development of both fast reactors and high-temperature gas-cooled reactors.
Mitsubishi Heavy Industries has been selected as the core company for fast reactor development and is conducting conceptual design work for sodium-cooled tank-type fast reactors from fiscal 2024 through 2028. Mitsubishi Heavy Industries is also responsible for high-temperature gas-cooled reactors, which are being developed as next-generation reactors with superior inherent safety features and diverse heat utilization capabilities.
These next-generation reactors are positioned as essential technologies for achieving both carbon neutrality and energy security.
Government-Wide AI Utilization Initiative
Prime Minister Sanae Takaichi announced on December 19 at the AI Strategy Headquarters that the government would invest over 1 trillion yen in AI development and utilization. The government-dedicated AI "Gennai" will be made available to over 100,000 government employees from May 2026, with plans to ultimately enable over 300,000 employees to fully integrate generative AI into their work.
Additionally, the government plans to expand the AI Safety Institute (AISI), which evaluates AI safety, from its current staff of approximately 30 to 200 people, matching the scale of the UK's organization.
Balancing Industrial Competitiveness and Economic Security
METI's 2026 fiscal year budget proposal represents a major commitment to two critical areas: generative AI and next-generation nuclear reactors. In AI, Japan aims to leverage industrial data accumulated through manufacturing to catch up with the US and China. In energy, the country is advancing technology development to balance decarbonization with stable energy supply.
Whether these investments bear fruit will significantly impact Japan's future industrial competitiveness and economic security.
In Japan, large-scale investments in AI development through public-private partnerships are gaining momentum. How is your country approaching AI development and next-generation energy technologies? We'd love to hear your perspectives on the role of government and collaboration with private companies.
Reactions in Japan
While the 300 billion yen investment by METI in generative AI is late, at least they're finally serious. The problem is the scale - 1 trillion yen over 5 years. The US and China are investing on a completely different scale, so I honestly doubt we can catch up with this
The new company centered around SoftBank is a positive move. However, I'm concerned it might become too dominated by large corporations and shut out startups. They need to provide broad access to computing resources
I have high hopes for Physical AI. Our factory is facing serious labor shortages, and autonomous robots would be a huge help. The challenge though is how to integrate them into existing production lines
Continuing next-generation reactor development is the right decision. Nuclear power is unavoidable for balancing carbon neutrality and stable electricity supply. Both fast reactors and high-temperature gas reactors should be supported until commercialization
More massive tax spending again? We've failed so many times with 'national projects' in the past - what's the basis for thinking it'll work this time? Wouldn't it be better to just leave it to the private sector?
Targeting 1 trillion parameters is good, but model performance isn't the only issue. The key is how to secure quality and quantity of Japanese language data. It's meaningless if we remain dependent on English data
Data centers in Tomakomai and Sakai are good news from a regional revitalization perspective. We can expect job creation and tax revenue increases. I hope they'll expand to other regions too
Utilizing industrial data is fine, but what about personal information protection? We need robust mechanisms to ensure transparency of data used for AI training and protect users' privacy rights
Budget allocation is important, but AI talent development is even more urgent. Without increasing investment in universities and research institutions, we won't have the talent to utilize computing resources no matter how many we have
Why does all the budget go to large corporations? I want them to enhance support for SMEs to adopt AI too - like developing user-friendly tools or subsidizing implementation costs
Advancing both fast reactors and high-temperature gas reactors is technically correct. But I'm worried about dispersing our talent pool. Wouldn't concentrating investment on one type yield better results?
We should allocate more budget to renewable energy rather than next-generation reactors. Continuing to depend on nuclear power is dangerous and goes against global trends
Isn't the estimated 160 trillion yen economic ripple effect too optimistic? They should have reviewed the cost-effectiveness of past national projects before deciding on such large-scale investments
Physical AI is a field where Japan could potentially lead the world. Combining manufacturing floor knowledge with robotics technology could give us advantages that the US and China don't have
I understand both AI and nuclear power are necessary, but I hope electricity bills don't go up any more. The impact on household budgets is my biggest concern
Developing domestic AI is absolutely necessary from an economic security perspective. If we depend on foreign AI, there's a risk we won't be able to use it when we need it most
I want to work in this field, but salaries are way too low compared to overseas. They need to face the reality that talented people are flowing abroad. Not just budget - we need better compensation for talent
Annual review of development progress with staged support is wise. They should establish strict evaluation criteria to avoid endlessly pouring funds into failing projects
If they're using GX Economic Transition Bonds, we need to monitor whether the AI development actually contributes to decarbonization. Can't let it become greenwashing in name only
Japan is finally getting serious about AI development. It'll be tough to catch up, but I want to support this. I believe in Japan's technological capabilities
It's good news that Japan is investing 1 trillion yen in AI, but a single AI company in Silicon Valley invests more than that annually. They need to recognize the difference in scale
Germany is also advancing AI development using manufacturing data, but Japan's Physical AI approach is interesting. There might be areas where we could cooperate with EU countries
Korea is also making large investments in semiconductors and AI, but we should explore possibilities for cooperation with Japan. If East Asia unites, we can compete with the US and China
India has abundant talented AI engineers. If Japan utilizes Indian talent, couldn't they accelerate development speed?
Japan's industrial data is indeed valuable, but the technology and speed to convert it into AI is the issue. If it takes too long, they'll miss the opportunity
France is also investing in both nuclear power and AI, but we're not taking an integrated approach like Japan. Nuclear power is essential for energy-intensive AI development
China has already implemented AI in many industries. Japan seems to be taking too much time in the planning phase. Execution speed will be key
If the UK's AI Safety Institute and Japan's AISI cooperate, there's potential to take the lead in creating international AI safety standards
Latin America could be a good market for Japanese AI technology. There's particularly high interest in AI applications in agriculture
Eastern European countries also have thriving manufacturing, but AI investment is insufficient. If Japan produces success stories, we can learn from them
The Middle East is too dependent on oil. Japan's combination of next-generation nuclear reactors and AI could be a model for energy diversification
Spain is focusing on renewable energy, but I understand Japan's return to nuclear power. Climate change countermeasures need all options
Australia is also suffering from labor shortages. If Japan's Physical AI succeeds, we'd like to consider adopting it
Nordic countries are small, but AI startups are active. It contrasts with Japan's large corporation-led model, and I'm watching to see which succeeds
Israel is a major AI startup nation, but for large-scale foundation model development, I envy Japan's national support
Canada is also advancing small modular reactor development. I wish we could share research results on Japan's fast reactors and high-temperature gas reactors
Saudi Arabia is also investing in AI and renewables, but Japan's balanced approach is instructive. You can't change everything at once
Brazil is focusing on AI talent development. If Japan utilizes our talent, there would be mutual benefits
From a neutral position, Switzerland can bridge Japan's AI development and Western projects. We'd like to provide a venue for international cooperation
Singapore is a small country, but it's developing as an AI hub. We might be able to serve as a testbed for Japan's large-scale projects