Over 80% Japanese Firms Limit AI, Hinder Productivity

A significant majority of Japanese organisations operate with artificial intelligence in a limited capacity or not at all, according to a recent Reuters survey. This trend potentially impedes official initiatives aimed at improving productivity within the national economy. Over 80% of companies fall into this category.

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The survey findings indicated that approximately 60% of responding firms use AI only in specific departments or via other restricted applications. A further 18% of businesses reported that they had yet to determine whether to integrate artificial intelligence into their workplaces. Additionally, 6% of organisations were not even considering the adoption of AI technologies at present.

The remaining 16% of companies surveyed had implemented AI across their entire operations as an essential organisational tool. One manager at a wholesaler noted that while their company had begun using it broadly, its application was confined to duties such as document production. And a property firm official separately stated, "We don't know how to put it in use."

A government report released earlier this year highlighted Japan's position behind other industrialised nations in the integration of AI. The report showed that 86.4% of local firms used generative AI for at least one function. This figure compares with China's 98.1%, Germany's 91.6%, and the United States' 90.9% adoption rates.

When questioned about their AI budgets for the next one to two years, 4% of respondents anticipated an annual expenditure increase of 50% or more. Another 21% projected an increase likely falling between 10% and 50%. A third of firms, 30%, forecast single digit expansion in their AI spending.

Furthermore, 14% of businesses indicated that their AI budgets would probably remain largely static. But a substantial 31% of respondents had not yet made a decision regarding future AI spending. No company among those surveyed stated that they intended to reduce their expenditure on artificial intelligence over the coming period.

Nikkei Research conducted the poll on behalf of Reuters. The survey took place between July and August. Researchers contacted 510 companies, from which 219 provided responses on the condition of anonymity.

Regarding the allocation of financial resources, 82% of organisations expressed a preference for domestic investment over overseas ventures. This inclination broadly aligns with the national growth strategy advocated by Prime Minister Sanae Takaichi. Her policy framework prioritises internal economic development.

In a move to revitalise the Japanese economy, Prime Minister Takaichi has pledged to discontinue what she termed "excessive austerity". She also committed to increasing domestic investment. So this enhanced focus is directed towards critical sectors, including artificial intelligence, semiconductors, and quantum technology, among others.

An official from a machinery manufacturer commented on this strategy. The official stated, "We already have our major production facilities concentrated in Japan and export products from there." They added, "Given the continued weakness of the yen, we see little merit in investing overseas."

A depreciated yen generally contributes to higher earnings for Japanese exporters. However, it also renders overseas investment more costly when calculated in yen. Some managers among the 18% who placed greater emphasis on foreign investment cited stronger growth prospects abroad.

These firms noted that Japan faces a declining population, which could constrain long term domestic growth. For the business year concluding in March 2027, approximately 41% of respondents projected an increase in domestic investment compared to the previous year.

However, 9% of firms anticipated a year on year decline in domestic investment for the same period. And the remaining 50% of companies reported plans to maintain their current levels of investment within the country.

• Over 80% of Japanese companies use AI minimally or not at all.

• Only 16% of firms have deployed AI company wide across operations.

• Japan trails other industrial nations in generative AI adoption rates.

• Most Japanese organisations, 82%, favour domestic investment over overseas ventures.

• Prime Minister Takaichi has pledged to boost domestic investment in key technologies.

Source: Reuters