Physical AI is emerging as one of the next major industrial battlegrounds, with Japan\u2019s push driven more by necessity than anything else. With workforces shrinking and pressure mounting to sustain productivity, companies are increasingly deploying AI-powered robots across factories, warehouses, and critical infrastructure. <\/p>\n
Japan\u2019s Ministry of Economy, Trade and Industry said<\/a> in March 2026 that it aims to build a domestic physical AI sector and capture a 30% share of the global market by 2040. The country already holds a strong position in industrial robotics, with Japanese manufacturers accounting for about 70% of the global market in 2022, according to the ministry<\/a>.<\/p>\n Based on conversations with investors and industry executives, TechCrunch explored what\u2019s driving that shift, how Japan\u2019s approach differs from the U.S. and China, and where value is likely to emerge as the technology matures. <\/p>\n Driven by labor shortages \u00a0<\/p>\n Several factors are driving adoption in Japan, including cultural acceptance of robotics, labor shortages driven by demographic pressures, and deep industrial strength in mechatronics and hardware supply chains, Woven Capital managing director Ro Gupta told TechCrunch.<\/p>\n \u201cPhysical AI is being bought as a continuity tool: how do you keep factories, warehouses, infrastructure, and service operations running with fewer people?\u201d Hogil Doh, Global Brain general partner, also said. \u201cFrom what I\u2019m seeing, labor shortages are the primary driver.\u201d<\/p>\n Japan\u2019s demographic<\/a> crunch is accelerating. The population declined for a 14th straight year in 2024<\/a>; those of working age make up just to 59.6%<\/a> of the total, a share projected to shrink by nearly 15 million over the next 20 years, Doh pointed out. It\u2019s already reshaping how companies operate: a 2024 Reuters\/Nikkei survey<\/a> found labor shortages are the main force pushing Japanese firms to adopt AI.<\/p>\n \u201cThe driver has shifted from simple efficiency to industrial survival,\u201d Sho Yamanaka, a principal with Salesforce Ventures, said in an interview with TechCrunch. \u201cJapan faces a physical supply constraint where essential services cannot be sustained due to a lack of labor. Given the shrinking working-age population, physical AI is a matter of national urgency to maintain industrial standards and social services.\u201d<\/p>\n Techcrunch event<\/p>\n \n\t\t\t\t\t\t\t\t\tSan Francisco, CA Japan is stepping up efforts to advance automation across manufacturing and logistics, according to Mujin CEO and co-founder Issei Takino. The government has been promoting automation to address structural challenges such as labor shortages. Mujin, a Japanese company, has built software that lets industrial robots handle picking and logistics tasks autonomously. Mujin\u2019s approach centers on software \u2014 specifically robotics control platforms \u2014 that allows existing hardware to perform more autonomously and efficiently, Takino said.<\/p>\n Hardware strength, system risk<\/p>\n Where Japan has historically excelled is in the physical building blocks of robotics. Whether that advantage translates into the AI era is a more open question. The country continues to demonstrate strength in core robotics components such as actuators, sensors and control systems, according to Japan-based venture capitalists, while the U.S. and China are moving more quickly to develop full-stack systems<\/a> that integrate hardware, software and data.<\/p>\n \u201cJapan\u2019s expertise in high-precision components \u2013 the critical physical interface between AI and the real world \u2013 is a strategic moat,\u201d Yamanaka said. \u201cControlling this touchpoint provides a significant competitive advantage in the global supply chain. The current priority is to accelerate system-level optimization by integrating AI models deeply with this hardware.\u201d<\/p>\n Hardware capabilities are strongest in China and Japan, with Japan particularly strong in robot motion control, while the U.S. leads in the service layer and market development, Takino said. Historically, many U.S. companies have leveraged their software strengths to build integrated businesses \u2013 similar to Apple \u2013 pairing strong software platforms with high-quality hardware sourced from Asia. However, this model may not fully translate to the emerging world of physical AI, Takino said.<\/p>\n \u201cIn robotics, and especially in Physical AI, it is critical to have a deep understanding of the physical characteristics of hardware,\u201d Takino said. \u201cThis requires not only software capabilities, but also highly specialized control technologies, which take significant time to develop and involve high costs of failure.\u201d<\/p>\n WHILL, a Tokyo- and San Francisco-based startup that makes autonomous personal mobility vehicles, is drawing on Japan\u2019s \u201cmonozukuri,\u201d or craftsmanship heritage, as it takes a broader, full-stack approach to global expansion, CEO Satoshi Sugie told TechCrunch. The company has developed an integrated platform combining electric vehicles, onboard sensors, navigation systems and cloud-based fleet management for short-distance and autonomous transport. The company is leveraging both Japan and the U.S. for development, using Japan to refine hardware and address aging population needs, and the U.S. to accelerate software development and test large-scale commercial models, Sugie noted.<\/p>\n From pilots to real-world deployment<\/p>\n The government is putting money behind the push. Under Prime Minister Sanae Takaichi, Japan has committed about $6.3 billion to strengthen core AI capabilities<\/a>, advance robotics integration and support industrial deployment.<\/p>\n The shift from experimentation to real deployment is already underway. Industrial automation remains the most advanced segment, with Japan installing tens of thousands of robots each year<\/a>, particularly in the automotive sector. Newer applications are also beginning to gain traction, Doh said.<\/p>\n \u201cThe signal is simple \u2013 customer-paid deployments rather than vendor-funded trials, reliable operation across full shifts, and measurable performance metrics such as uptime, human intervention rates and productivity impact,\u201d Doh said.<\/p>\n In logistics, companies are deploying automated forklifts and warehouse systems, while in facilities management, inspection robots are being used in data centers and industrial sites. <\/p>\n
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\n\t\t\t\t\t\t\t\t\t\t\t\t\tOctober 13-15, 2026\n\t\t\t\t\t\t\t<\/p>\n