Japan plans $65 billion physical AI push by 2040 to offset a shrinking workforce

On June 19, Japan’s government unveiled a plan to funnel 10.5 trillion yen ($65.1 billion) in combined public and private investment into physical artificial intelligence across 17 strategic sectors by fiscal 2040, according to Nikkei Asia.

This is the fifth major policy move made by the government of Prime Minister Sanae Takaichi within just four days.

On June 16, the Bank of Japan hiked its rate to 1%, a move Cryptopolitan reported could reshape Japan’s position in global crypto markets. On the same day, METI and the Ministry of the Environment started looking into an obligatory EV battery collection scheme. On June 18, the Japan Bankers Association flagged rising threats from AI-enabled cyberattacks.

Prior to that, earlier on June 19, the AI Strategic Headquarters had issued a draft proposal for ongoing assessment of AI-related laws. Together, the actions outline a coordinated effort involving monetary policy, industrial investment, environmental regulations, and cybersecurity.

Japan turns physical AI into a national growth plan

The physical AI investment will be split between the public and private sectors and distributed across 17 strategic sectors that the Takaichi government has designated as priorities, Nikkei Asia reported.

In November 2024, Japan announced a 10 trillion yen investment fund targeting AI and semiconductor industries, with roughly 3.9 trillion yen earmarked for domestic chip fabrication and AI chip production and over 1.2 trillion yen for robotics R&D and automation systems, according to an Acumen Research and Consulting analysis published by ABNewswire.

The Japanese Cabinet adopted the Basic National AI Plan in December 2025, officially recognizing physical AI and humanoid robotics as national strategies for the first time. This classification resulted in changing investments from voluntary research and development by corporations to nationally driven programs.

Shrinking workforce forces the robotics push

The link between Japan’s interest in physical AI and its demographics is undeniable. According to an estimate by Acumen Research, Japan will lose about 15 million of its working-age population within the next twenty years. Japan’s population has been on a decline since 2000, and at present, the proportion of working-age people in Japan is 59.6%.

The robotics sector is already responding. Japan maintains one of the highest robot densities globally, with 419 robots per 10,000 manufacturing workers and an installed base of 435,000 industrial units, according to the same analysis. The country exported 38% of the world’s industrial robots in 2024, shipping over 160,000 units worth approximately $12.5 billion to buyers in China, the United States, and Germany.

In Q1 of 2025, robot orders reached an all-time high of 324.5 billion yen, up 14.2% from the previous year. The automotive industry in Japan saw nearly 13,000 industrial robots installed in 2024, marking the highest annual total since 2020.

Robotics gives Tokyo a starting advantage

The financial investment of Japan makes the country part of the physical AI market which Acumen Research estimates to be worth $5 billion in 2025 and projected to grow to $82.8 billion in 2034 at an estimated growth rate of 32.8%. The size of Japan’s share of this market is expected to grow from $307.3 million in 2025 to $6.8 billion in 2035.

Jensen Huang, the CEO of NVIDIA, at CES 2026 said, “the ChatGPT moment for robotics is now,” stated in the Acumen report. According to IDC data, global shipments of humanoid robots are projected to exceed 50,000 units in 2026, a 178% from 2025.

If you're reading this, you’re already ahead. Stay there with our newsletter.