The AI Opportunity.
AI is a once-in-a-generation opportunity.
AI is a once-in-a-generation opportunity to catalyse faster economic growth, boost social inclusion and address many of society’s most important challenges.1 In the last few years, we have seen rapid improvements in the capabilities of AI, spurred on by the development of the transformer model architecture by Google researchers in 2017. In our research, we found that AI could help power the next stage of Japan’s growth, boosting the economy by JPY 53 trillion (USD 350 billion), a 9% increase in GVA.
Japan’s long-standing reputation for innovation continues to shape how people view the nation’s role on the world stage; a majority of Japanese people want their country to be leading the charge on AI. 68% of Japanese people express pride in the country’s global leadership in the tech sector, with 61% saying they believe their country should aim to be an AI superpower.
AI's exponential economic impact.
*Gross Value Added (GVA) is Gross Domestic Product (GDP) minus taxes and subsidies.
AI can reset the Japanese economic model.
Challenge
Demographic decline and
economic stagnation.
A rapidly ageing population has left Japan with major workforce shortages in key industries. Limited human capital availability has also restricted economic growth. Japan sees low labour productivity and creeping inflation, pushing it towards a wage-price spiral where prices rise and there is heightened pressure to increase wages to help workers face rising costs of living, at a time when businesses are also facing surging costs. Moving away from an export-led economic growth model.
Japan’s reliance on price-competitive exports has suppressed domestic demand and wages for the last few decades. This model prioritised manufacturing and exports of tech hardware and held back its transition towards a high‑value, innovation‑driven services economy.
Small businesses are holding back major productivity gains.
While large businesses have been quicker to adopt digital tools and make significant contributions to national productivity, Japanese SMEs have experienced flat productivity growth in the last decade.2
AI Solution
AI can boost economic growth by making labour and capital more productive.
By automating repetitive tasks, AI allows workers to focus on higher value tasks, thereby boosting labour productivity. Through predictive maintenance of assets and optimising expenditure and monitoring, AI can augment capital usage. Such economic growth can mitigate inflationary pressures from labour costs and boost wages for workers, combatting the pressure from increased inflation.
AI can stimulate domestic demand and balance tradebooks.
Widespread AI use in domestic sectors can bolster demand, while investment in AI-facing sectors such as software and intangible tech assets can drastically reduce Japan’s productivity gap with countries like the United States.3 Access to AI translation tools also expands the reach of domestic Japanese content.
AI can reduce the economic gap between SMEs and large businesses.
By allowing Japanese SMEs to create more output with fewer labour and capital inputs, AI can help bridge the economic divide between Japanese SMEs and large conglomerates. This will likely help regions outside Tokyo the most, where the majority of struggling SMEs are located.
AI is gradually being adopted in Japan.
Japan is still in its early stages of AI adoption. Though usage increased by 162% between 2023 and 2024, overall adoption remains behind global averages.4 The country’s slower pace of adoption is characterised by caution, with a consensus-driven business culture and a preference for established systems over rapid diffusion of new technology.
As it stands, just 27% of people in Japan – rising to 35% of those under 35 – said that they were using a gen AI tool weekly in their work lives. This compares to 66% of those in the Asia-Pacific region and 75% of those under 35.
Increase in AI adoption, from 2023 to 2024.
Source: Sensor Tower data
How are people using AI in Japan?
Responses to question: Can you think of any ways you would use AI in your [personal/work] life? Answer in your own words.
Responses are edited for grammar and spelling, but otherwise unchanged.
All responses taken from a Public First survey of Japanese adults.
How Google is contributing to Japan.
For over a decade, Google has been investing in AI to advance its mission to organise the world’s information and make it universally accessible and useful. From key language understanding techniques, to the Transformer architecture underlying today’s generative AI revolution, Google researchers have been behind a significant number of defining AI breakthroughs.
Today, Google is expanding access to AI for billions in Asia Pacific through products like Maps, Search, Android, Gemini and NotebookLM, while helping businesses be more productive and connect with new customers.
This value adds up. In 2024, Google Search, Google Maps, Google Play, Google Drive, and YouTube helped provide JPY 18 trillion (USD 120 billion) of additional consumer benefits in Japan. This is equivalent to a monthly benefit of JPY 16,000 (USD 110) for the average online adult, which is the result of easier access to information, increased productivity and a variety of entertainment and enrichment benefits.
Google acts as a crucial economic catalyst: connecting businesses with customers worldwide, enhancing business productivity and giving Japanese creators and developers new platforms through which they can reach the world. In 2024, Google Search, Google Ads, Google AdSense, Google Play, and Google Cloud helped provide JPY 8.1 trillion (USD 53 billion) of economic activity for businesses.