Generative AI in Japan: Market Size, Current Trends and Challenges

By Nate Kawasaki

When ChatGPT was launched last year in November, the groundbreaking innovation shook the world – Japan was no exception. Since then, in Japan, I’ve seen many generative AI related books being published, webinars being hosted, and government creating guidelines.

Since the release of ChatGPT, the development of generative AI technology is unstoppable. Just to name a few:

·?Microsoft (Bing): added generative AI for its search function (January 2023)

·?Open AI (ChatGPT GPT-4): it can output conversations from text and image inputs (March 2023)

·?Google (Bard): chatbot AI which can simulate human like conversations (May 2023)

The landscape of generative AI technology is expanding from text and capable of outputting images, videos, audios, and even coding. Currently, businesses are fumbling around to find out what can be done with generative AI and to what extent it can be used effectively. Either way, the productivity and efficiency that generative AI will bring will not be negligible.

Market size & insights

According to Statista, the global market for generative AI is projected to reach $126.5 billion by 2031. The Japanese market is expected to grow at a CAGR of 25.33% from 2023 to 2030, reaching a value of $8.68 billion by 2030.

McKinsey’s research (*1) points out that “generative AI has the potential to generate $2.6 trillion to $4.4 trillion in value across industries” on productivity globally.

According to the research conducted by Japan’s financial research firm, Teikoku Databank, while 52% of companies answered that they are “considering using it in their future work”, only 9.1% of companies answered that they are “currently using it in their work”. In addition, 93.1% of the current usage is for text and code generations, which may change as each industry deepens the knowledge of the technology.

Current trends

There are a number of current trends in the Japanese generative AI market. Here are some examples:

·?SoftBank Corp., the Japanese telecommunications and technology giant, is planning to build its own generative AI platform. The company will invest 200 billion JPY (approximately $140 million USD) in the project, which will be supported by a 5.3 JPY (approximately $37 million USD) grant from the Japanese government. The platform will be powered by Nvidia's GPUs, which are some of the most powerful graphics processing units available. This will allow the platform to process large amounts of data and generate realistic and creative content.

·?Mitsubishi UFJ Financial Group (MUFG), one of Japan's three largest megabanks, is planning to deploy generative AI technology across 110 business operations. The company aims to use the technology to automate administrative tasks, generate customer notifications, and improve risk management. MUFG will begin rolling out the technology in the summer of 2023. By the end of the year, the company plans to provide access to generative AI to all of its employees.

·?Itochu Corporation, one of Japan's largest trading companies, and BrainPad, a Japanese business analytics platform provider, have announced a partnership to establish the "Generative AI Research Lab." The lab will focus on developing and deploying generative AI technology across Itochu's businesses, with a particular focus on the retail and financial sectors.

Challenges

The future prospects for the Japanese generative AI market are very positive. The market is expected to grow significantly in the coming years, driven by the increasing adoption of generative AI in a variety of industries.

Some of the challenges that the market faces include:

• Reliability of the information. As many companies are still learning the best ways to utilize generative AI technology, many of them are concerned about the reliability of the information it generates.
• Continuous training and awareness. Many companies in Japan are concerned about the risk of personal and confidential information being leaked. As the technology would have impacts on many workplaces, it is necessary for the companies to provide training and raise awareness for its use. ?
• Creativity is not quite there yet. For generating creative assets such as videos and images, design professionals are examining the possibilities of generative AI. While many professionals feel threatened, top designers believe the presence of design professionals are still necessary and not replaceable with the technology just yet.
• The lack of skilled talent. There is a shortage of skilled talent in the field of generative AI, which could hinder the growth of the market.
• The regulatory challenges. There are a number of regulatory challenges that need to be addressed before generative AI can be widely adopted in some industries.

Despite these challenges, the future of generative AI in Japan is bright. The market is expected to grow significantly in the coming years, and generative AI is likely to have a major impact on a variety of industries.

Source:

*1 McKinsey Digital (2023). The economic potential of generative AI: The next productivity frontier. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-economic-potential-of-generative-ai-the-next-productivity-frontier#introduction