BBC Big Question: Why is the world's third-largest economy falling far behind in the 'AI arms race'?

Facing severe labor shortages, population aging, and persistent productivity problems, Japanese businesses should be fertile ground for artificial intelligence (AI) adoption. Yet, compared to the United States and the United Kingdom, Japanese companies remain slow and cautious in embracing AI. Japan’s response to AI has begun to resemble the deliberate pace of traditional Noh theater. On stage, all masked characters solemnly repeat the call to action—yet the actors remain frozen in place. This works well for dramatic effect, but does nothing to address the country’s urgent challenges.

Data shows Japan is already lagging in workplace AI usage. According to a report released by the Organisation for Economic Co-operation and Development (OECD) at the end of last year, only 8.4% of Japanese employees use AI in their work. In contrast, other statistics show that the figure stands at 50% in the United States and 32% in the UK. Singapore is reportedly the second-highest in AI application after the United Arab Emirates and leads Asia, with 56% of its workforce said to use AI “multiple times per week.”

So why is Japan so reluctant to act?

Austin Xu, co-founder of the American startup Kuse AI, believes it is because Japanese companies are more conservative and risk-averse. His company recently opened an office in Japan to sell its AI systems to Japanese firms.

He told the BBC: "In some organizations, their processes and consensus-driven culture genuinely slow things down. In these environments, tolerance for AI errors is almost zero, especially in any area involving direct customer interaction.

"Some would rather leave a position vacant than let a machine handle it."

Mr. Xu explained that the situation in the US is markedly different, with some companies already granting AI agents greater autonomy to boost productivity.

"In the US, AI colleagues initially join as assistants and gradually integrate into workflows. American bosses typically adopt a 'try first, correct later' approach."

Mr. Xu added that Japanese companies need more evidence before they can fully trust and utilize AI.

Professor Parrisa Haghirian from Kyoto University of Advanced Sciences, who studies international management, also told the BBC that many Japanese companies are overly risk-averse and hesitant to consider AI.

"The challenges of adopting AI are the same as those faced when introducing any kind of change within Japanese companies. That’s why AI usage remains quite limited and relatively cautious, particularly in the workplace," she said.

She contrasted this with the more entrepreneurial culture in the US, noting that Japanese firms are highly sensitive to mistakes, uncertainty, and reputational risks.

"Because generative AI is still not entirely reliable, it is primarily used in Japan for low-risk tasks such as writing, summarizing, or information gathering—but rarely for core operations, decision-making, or improving overall processes," she said.

AI adoption in Japan’s healthcare sector is particularly slow, with some hospitals not even having fully digitized patient records.

An unnamed Japanese hospital employee said, "Paper documents are piling up—it’s like the Stone Age."

The Japanese government recognizes the widespread issue of low AI adoption and is actively working to encourage more businesses to embrace the technology. Last year, Japan’s Diet passed the 'AI Promotion Act,' aiming to encourage corporate investment in AI through relaxed regulations.

Tokyo has pledged that Japan will become "the most favorable country in the world for AI development and application." The government believes widespread AI adoption can help raise Japan’s productivity, which currently ranks lowest among developed G7 nations.

Japan’s Ministry of Finance claims corporate AI adoption has risen sharply. Currently, 75% of companies use the technology, up from just 11% five years ago.

However, critics argue that within these companies, only a tiny fraction of employees actually use AI—and even then, only in very limited ways.

Professor Yasushi Ogaskawa, an expert on Japanese social institutions and technology at Meiji University, says there is a lack of tech-savvy talent in the labor market.

"While Japanese people enjoy using smartphones and other electronics, their digital literacy is very low," he said.

An earlier report this year highlighted this point, warning that Japan will face a shortfall of nearly 800,000 IT professionals by 2030.

Many companies also struggle with outdated computer systems, with around 60% reportedly still using systems over 20 years old.

Professor Ogaskawa added that Japanese companies face greater pressure to avoid exacerbating unemployment than to develop AI that could potentially displace workers.

"The government keeps talking about AI, skills retraining, and digital skills, but in reality, it’s difficult to adapt human resources to digital skills because the top priority is maintaining full employment," he analyzed.

But hiring practices are shifting, with some companies now prioritizing 'AI literacy' when recruiting new graduates.

In the private sector, major conglomerates like trading giant Kanematsu are hiring sharp graduates like Uta Yamaguchi.

She joined the company in April. She said, "I frequently use AI in my work. Many of my colleagues do too—for example, drafting emails for our bosses, summarizing complex documents, recording meetings, and summarizing meeting content."

However, she noted that AI systems capable of autonomously handling multi-step tasks remain virtually unheard of in Japan compared to the US.

Still, her forward-thinking employer has now embraced them.

Professor Ogaskawa said, "Change in Japan is limited."

"Japanese society expects smooth reforms, so thorough transformation is at least difficult," he added.

In Japan, 'disruption' might be a pejorative term—but without disruption, the productivity gains Japan needs may remain out of reach.

This article was originally written in English. We used artificial intelligence to assist with translation, which was reviewed by a BBC journalist prior to publication. Learn more about how we use AI.