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Can Japan Counter China’s Dominance in AI?

Since 2025, Tokyo has acted boldly and decisively to ward off foreign AI-related threats by developing AI for Japan, in Japan.

Japan, a nation historically known for innovations and new technologies, has not held that advantage in artificial intelligence (AI). The United States and China dominate AI’s development. According to one Japanese expert, Dr. Takahiro Tsuchiya of Kyoto University, Chinese companies in Japan even dominate Japan’s domestic market. A major factor is cost. Prices for Chinese-developed AI products are well below those charged by Japan’s home-grown AI enterprises.

This is a sea change in the global technology pecking order, but not one that the Japanese are willing to passively accept. While Japan has ceded market territory to Chinese firms in AI, Japan is nonetheless quickly establishing a leading position in “physical AI” – integrating AI into robotics and machinery – and sovereign AI deployment.

Critically, the Japanese government has woken up to the problem. Since 2025, Tokyo has acted boldly and decisively to ward off foreign AI-related threats by developing AI for Japan, in Japan.

The fact remains that Japan has not kept up with global leaders – the United States and China – in core AI, Tsuchiya confirmed. AI is globally considered to be both a revolutionary technology as well as a potential threat mechanism for those who dominate its use and development.

Speaking to reporters at the Japanese Embassy in Washington, D.C., and to his lecture attendees at the Japanese Consulate in Boston, Tsuchiya “strongly advocates for a robust U.S.-Japan alliance to counter regional threats” (read: China and North Korea). However, the readout highlighted “a growing school of thought in Tokyo regarding strategic autonomy.”

Tsuchiya emphasized that “while Japan must tighten technology export controls alongside the U.S. to counter China’s military-civil fusion, Tokyo’s defensive and economic calculations must remain grounded in its own reality.”  Part of that reality, suggested Tsuchiya, is that Japan is not only geographically close to China, but is also deeply tied in trade with China, as well.  

The Diplomat asked Tsuchiya to describe Japan’s priorities in handling the delicate balancing act of maintaining its strong and strategic relationship with the United States while maintaining at least a stable relationship with China.

Tsuchiya said that “Japan cannot copy the U.S.  Japan makes its own assessments” of the threats it may face, and how to handle them. Those assessments include risks related to AI development and rollout.

The Japanese government launched a $6.34 billion initiative beginning in fiscal year 2026 with the goal of wedding Japan’s unmatched industrial robotics industry with next-generation AI.  Heavy industry, transport, and infrastructure are all planned to be AI-automated. As an example, autonomous AI pipelines are due to manage the heating and cooling infrastructure of Tokyo.

Japan’s population is aging. One of the most........

© The Diplomat