In Japan, the robot isn’t coming for your job; it’s filling the one nobody wants

Physical AI is emerging as one of the next major industrial battlegrounds, driven by necessity in Japan. With workforces shrinking and pressures mounting to sustain productivity, companies increasingly deploy AI-powered robots across factories, warehouses, and critical infrastructure.

Japan’s Ministry of Economy, Trade and Industry reported that it aims to establish a domestic physical AI sector and capture a 30% share of the global market by 2040. The nation currently holds a dominant position in industrial robotics, with Japanese manufacturers accounting for approximately 70% of the global market in 2022, as per the ministry.

Based on discussions with investors and industry executives, TechCrunch investigates the driving factors behind this shift, how Japan’s approach differs from that of the U.S. and China, and where value is likely to emerge as technology matures.

Driven by Labor Shortages

Several factors contribute to the adoption of robotics in Japan, including cultural acceptance of robotics, demographic-induced labor shortages, and a robust industrial base in mechatronics and hardware supply chains, according to Woven Capital managing director Ro Gupta.

“Physical AI is being bought as a continuity tool: how do you keep factories, warehouses, and infrastructure running with fewer people?” Hogil Doh, Global Brain general partner, stated. “From what I’m seeing, labor shortages are the primary driver.”

Japan’s demographic crisis is accelerating. The population has decreased for 14 consecutive years as of 2024; those of working age account for just 59.6% of the total, a share expected to decline by nearly 15 million over the next 20 years. This situation is reshaping how companies operate—a 2024 Reuters/Nikkei survey found that labor shortages are the leading factor pushing Japanese firms to adopt AI.

“The driver has shifted from simple efficiency to industrial survival,” said Sho Yamanaka, a principal with Salesforce Ventures. “Japan faces a physical supply constraint where essential services cannot be sustained due to a lack of labor. With the shrinking working-age population, physical AI is a national urgency to maintain industrial standards and social services.”

Hardware Strength, System Risk

The key to Japan’s historical strength lies in its physical robotics components. However, it remains uncertain whether this advantage will transition into the AI era. The country displays ongoing proficiency in critical robotics components like actuators, sensors, and control systems, while the U.S. and China are pushing faster to develop full-stack systems.

“Japan’s high-precision components are vital for physical AI, creating a competitive edge in the global supply chain,” Yamanaka asserted. “The current priority is to accelerate system-level optimization by deeply integrating AI models with this hardware.”

While both China and Japan are strong in hardware capabilities, Japan is particularly adept in robot motion control. Nevertheless, the U.S. excels at service layers and market development, combining its software strengths with high-quality hardware sourced from Asia. However, this model may not fully apply to the emerging world of physical AI, noted Takino.

“In robotics, especially in Physical AI, understanding the physical characteristics of hardware is crucial,” Takino added. “This requires specialized control technologies that take significant time to develop and involve high costs of failure.”

WHILL, a startup based in Tokyo and San Francisco, designs autonomous personal mobility vehicles, drawing on Japan’s craftsmanship heritage while adopting a holistic approach to global expansion. The company has developed an integrated platform combining electric vehicles, onboard sensors, navigation systems, and cloud-based fleet management for autonomous transport, leveraging both Japanese and U.S. technology.

From Pilots to Real-World Deployment

The Japanese government is investing heavily in this AI initiative, allocating around $6.3 billion to strengthen core AI capabilities and foster robotics integration. The transition from experimentation to real-world deployment is already occurring, especially in the industrial automation sector. Japan installs tens of thousands of robots annually, particularly in the automotive industry.

“The signal is clear—customer-supported deployments over vendor-funded trials, ensuring reliable operations across shifts and measurable performance metrics like uptime, human intervention rates, and productivity impact,” Doh explained.

• Automated forklifts are becoming a common sight in logistics operations.
• Advanced inspection robots are extensively deployed in data centers and industrial settings.
• Companies like SoftBank are integrating physical AI with vision-language models to enhance robot autonomy.

In fields like defense, where autonomous systems are essential, competition increasingly hinges on operational intelligence driven by physical AI. By integrating operational data with AI capabilities, companies such as Terra Drone aim to ensure autonomous systems operate effectively in real-world environments.

The Rise of Hybrid Ecosystems

Japan’s physical AI landscape is evolving distinctly from conventional tech models. Rather than a winner-takes-all scenario, a hybrid ecosystem emerges where established companies ensure reliability and scale while startups innovate in software and system design.

Japan’s leading corporations—including Toyota and Honda—boast significant advantages in manufacturing scale and customer relations. Yet, startups are identifying crucial niches in challenging areas such as orchestration software and workflow automation.

“The collaboration between startups and established corporations fosters a mutually beneficial ecosystem,” Yamanaka explained. “Leveraging large companies’ vast resources alongside agile startups’ disruptive innovations enhances global industry competitiveness.”

This shift is particularly noticeable in Japan’s defense sector, where major corporations increasingly partner with startups to enhance operational capabilities.

Companies like Mujin are advancing development beyond hardware, crafting platforms that facilitate multi-vendor automation with a focus on seamless integration and efficiency across sectors.