“Even Corporations Are Joining Forces” Japan Mounts an All-Out Push on Physical AI Amid Labor Strains, Testing the Limits of Its Global Full-Stack Competitiveness

SoftBank and other major Japanese companies establish an AI joint venture
Japanese government turns to physical AI as it seeks remedies for labor shortages
Competitive dynamics shift toward full-stack systems as large-scale U.S. and Chinese investment accelerates

Japan’s leading manufacturers and financial institutions have joined forces to develop a homegrown artificial intelligence platform. As the Japanese government steps up its push to foster “physical AI,” the initiative appears aimed at underpinning that effort by building a proprietary AI platform that domestic industries can readily deploy. Whether such efforts will translate into meaningful global competitiveness, however, remains uncertain. The center of gravity in robotics competition has expanded beyond the hardware strengths Japan once commanded to encompass software and data, while investment in the sector continues to accelerate in both the United States and China.

Japanese Industry’s AI Collaboration Blueprint

On April 12, Nikkei reported that SoftBank had established a joint venture tentatively named Nihon AI Foundation Model Development with NEC, Honda, Sony and others. The venture will initially focus on developing a one-trillion-parameter model, a capability currently associated with leading global AI systems, before moving to secure next-generation AI that can be deployed directly in manufacturing and robotics. SoftBank and NEC will lead foundation model development, while Honda and Sony will apply the resulting AI across a wide range of industries, including automobiles, robots, gaming and semiconductors. The development team is expected to comprise about 100 personnel, and an executive who has overseen Japanese AI development at SoftBank has been appointed chief executive.

The participating companies plan to make the jointly developed AI available across Japanese industry. Even non-equity participants will be allowed to tailor the model to their own operating environments, reflecting a broader ambition to cultivate an AI platform shared across Japan’s industrial base. Additional investors are also expected to join. Nippon Steel, Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corp. and Mizuho Bank, Japan’s three megabanks, are reportedly considering minority equity stakes, while numerous other companies are said to be in talks over possible participation.

Government support is also expected. A national research and development agency under Japan’s Ministry of Economy, Trade and Industry launched a public call late last month for its Domestic AI Development Support Program, which is designed to back Japanese AI developers, and Nihon AI Foundation Model Development plans to apply. Under the program, the Japanese government will provide selected companies with a total of about $6.3 billion over five years through 2030. Market participants believe the new joint venture stands a strong chance of being selected.

Government Resolve to Foster Physical AI

Industry observers also say the venture is likely to reinforce the government’s physical AI development agenda. Physical AI refers to AI systems that perceive and interpret physical environments through sensors such as cameras and lidar, then exert direct physical effects in the real world. Last month, the Ministry of Economy, Trade and Industry set out a goal of fostering the physical AI industry so that Japan can capture 30% of the global market by 2040, while the cabinet of Prime Minister Sanae Takaichi committed roughly $6.3 billion to strengthen AI capabilities and support the robotics industry. The Domestic AI Development Support Program, which Nihon AI Foundation Model Development is expected to join, is a subordinate vehicle created to deploy that funding.

Japan’s focus on physical AI reflects the urgency of securing labor capacity. The country’s working-age population, defined as those aged 15 to 64, now accounts for just 59.6% of the total population, and is projected to shrink by an additional 15 million over the next two decades. Commenting on the situation, Sho Yamanaka, principal at Salesforce Ventures, said, “The purpose of AI adoption is shifting from simple efficiency gains to industrial survival,” adding that “with the working-age population declining, the adoption of physical AI has become essential to sustaining social services and industrial standards.”

In practice, Japanese companies have recently accelerated the deployment of AI robots across factories, logistics warehouses and critical infrastructure sites. That has opened substantial opportunities for Japanese robotics manufacturers, which retain strong competitiveness in hardware segments such as actuators, sensors and control systems. Yet the rise of autonomous AI agents, and the growing interest in general-purpose robots capable of collecting, analyzing and learning from data on their own, has introduced a powerful new variable. Over recent years, the focus of robotics competition has shifted toward the development of full-stack systems integrating hardware, software and data, putting Japan’s traditional technological edge under growing strain. According to data from the International Federation of Robotics, Japanese companies controlled about 80% of the global robotics market in the 1980s, b

An Intensifying Global Contest for Dominance

Japanese robotics companies are also revising their business strategies in a bid to avoid losing ground in an increasingly unforgiving competitive landscape. They are moving away from their traditionally closed operating model and toward collaboration with outside companies and greater technological openness. Fanuc, one of Japan’s leading industrial robot and machine tool manufacturers, for example, announced a partnership with Nvidia in December last year on open-source control software for industrial robots, effectively abandoning its previous closed-system approach. The arrangement now allows AI engineers to develop and test software for Fanuc robots in simulated environments and to collect data in the process.

Yaskawa Electric has been selling AI-equipped industrial robots since 2023 and has conducted about 100 proof-of-concept projects with outside companies. The company is also reviewing a three-way partnership with Nvidia and Japanese IT company Fujitsu to support physical AI deployment. In December last year, it also announced a partnership with SoftBank Corp., the telecommunications arm under SoftBank Group. The two companies plan to jointly develop robotic systems that can perform tasks in office buildings, hospitals and commercial facilities.

Even so, it remains uncertain whether such efforts can yield meaningful results in global markets. The United States and China, both viewed as front-runners in physical AI, are already deploying capital on a massive scale. China established a $120 billion state fund last year to foster strategic technologies including robotics, and invested another $5 billion in fields such as humanoids during the first two months of this year alone. In the United States, large pools of capital are moving under the leadership of venture capital firms and big tech companies. Total investment directed at major U.S. humanoid companies from last year through this year has already approached at least $3 billion. More specifically, Figure AI raised more than $1 billion in new funding in September last year; Apptronik secured $415 million in 2025 and then raised an additional $520 million this year; and Agility Robotics received $400 million in funding last year.