Information and communication technology (ICT) market in Japan

Investment in Japan’s information and communications technology (ICT) sector has continued to grow despite the impacts of COVID-19.

ICT investment reached CAD $130 billion in 2020, up 0.6% from 2019. Companies have recognized the need for digitization and business transformation, leading to accelerated ICT investment and the development of an environment for telework implementation.

Japanese businesses are shifting to cloud-based applications and collaborating with external partners for cost effective add-on software development. The digital media sector also remains strong as Japanese game platforms (Nintendo Switch, Sony PlayStation, mobile) continue to drive a thriving content creation sector.

Key opportunities for Canadian ICT companies in Japan

• Japanese multinational enterprises (MNEs) have focused on Open Innovation Programs with 3rd-party partners, including foreign companies, to adapt to the fast-changing ICT sector and to integrate emerging and disruptive technologies.
• These companies seek emerging and disruptive technologies such as artificial intelligence (AI) software, cybersecurity, enterprise data management, big data pattern analysis, machine learning, digital banking applications, human-machine interfaces, software defined communication networks, large scale internet of things (IoT) integration, metaverse and mixed-reality (3D, augmented reality (AR)/virtual reality(VR)), and quantum computing.
• The Government of Japan has new priorities to revive the country's semiconductor industry
  • funding program for companies, including both domestic and overseas companies, to establish semiconductor manufacturing facilities in Japan
  • possibility of more opportunities for Canadian semiconductor firms and institutes to partner with Japanese semiconductor companies to co-develop next-generation, high performance semiconductors.
• The following technology areas have the potential for Canadian companies to develop business in Japan:
  • chips and devices for telecommunications
  • displays and imaging technologies for video games and industrial applications
  • sensors and microelectromechanical systems for medical/biotech and automotive applications

Notable challenges for Canadian ICT companies in Japan

• Longer lead times to generate initial business leads in Japan due to low brand recognition. 
• High standard for post-sale customer support is required. This can be solved by having local partners and agents.
• Longer business cycle to sign projects or contracts in Japan. The more stakeholders involved, the longer it takes.
• The language barrier is very high; Canadian companies should prepare promotional material in both Japanese and English.

Japan business landscape

AI is expected to significantly contribute to the digitization of Japan's "Society 5.0". Nursing care and medical care, for example, are the popular business fields of AI applications, which are related to social issues, and are expected to improve business efficiency. In other words, they are a competitive market.

Quantum computing is another area where major companies in the industrial world are competing. Japan is working on the creation of new industries using quantum technology, practical application of quantum technology, and its implementation in society.

Japan is the second largest video game market in the world and continues to offer opportunities for Canadian companies to be part of the Japanese companies' value chain. The sale of AR/VR related products is estimated to have grown 76% from 2018 to 2023 in the Japanese video game market.

Aiming to boost the semiconductor industry in 2021, the Government of Japan (GoJ) announced a CAD $6.2 billion funding program to foster development of faster and more advanced memory chips for applications for autonomous cars, electric vehicles, IoT, robotics, AI, smart homes and more.  

Summary

Japan is an attractive market for ICT tech companies. Considering Canadian strengths and Japanese interests, the ICT market in Japan is ideal for:

• IoT
• Digital media
• AI (=big data pattern analysis +machine learning algorithm & platforms),
• Fintech
• Cybersecurity
• NanoTech,
• Quantum computing, and semiconductors

For more information on ICT in the Japanese market, please contact Kenji Hirabara (Kenji.Hirabara@international.gc.ca) Trade Commissioner at the Embassy of Canada to Japan.