The Japan government has unveiled its first basic national plan on artificial intelligence, formally outlining strategies to bolster AI development while addressing associated risks. Approved by the Cabinet on December 23, 2025, the plan acknowledges Japan’s lag behind major economies in AI investment, commercialization, and talent resources, marking a pivotal shift in the nation’s approach to technology.
Framed as part of a broader economic and crisis-management strategy under Prime Minister Sanae Takaichi, the policy seeks to reverse years of underinvestment. For startups, this plan signals a transition from fragmented initiatives to a coordinated national priority.
Rather than focusing solely on research funding, the government emphasizes four structural priorities to guide AI policy: accelerating AI adoption across government and industry, strengthening domestic AI development capabilities, establishing leadership in AI governance and rule-making, and reforming institutional frameworks to support AI deployment. This framework suggests that the plan aims not just to build AI models but to integrate AI into daily operations, particularly in public administration and regulated sectors. This integration could gradually increase domestic demand for applied AI tools, particularly in areas such as govtech, enterprise software, and industrial automation.
A significant element of the plan is a five-year public support package worth about ¥1 trillion (US$6.34 billion), set to commence in fiscal 2026. This funding is designated to back a new AI company created through public-private collaboration, tasked with developing large-scale domestic foundation models. According to sources, the company will be supported by around ten firms, including SoftBank Group Corp, with approximately 100 engineers expected from SoftBank and AI startup Preferred Networks Inc..
This initiative presents both opportunities and challenges for startups. A state-backed foundation model provider could ease infrastructure hurdles for smaller firms, yet it raises concerns regarding market concentration and whether startups will act as customers, collaborators, or competitors to this government-backed entity.
Emphasizing “reliable AI,” the plan reflects public concerns regarding safety, transparency, and potential misuse. Measures include expanding staffing at the Japan AI Safety Institute, which assesses AI risks, along with enhancing governance frameworks alongside innovation. Startups should prepare for a future where compliance becomes essential, particularly in sensitive sectors like healthcare, finance, mobility, and public services. While compliance may initially escalate costs, it could also provide a competitive edge for Japanese startups in international markets, where trust and regulatory adherence are increasingly critical.
Additionally, the plan promotes AI education in elementary and junior high schools, aiming to cultivate a domestic talent pipeline over the long term. This reflects an understanding that Japan’s AI talent shortage cannot be solely addressed through immigration or corporate hiring. However, startups currently face a pressing talent gap. Large firms involved in the national AI initiative may reap early benefits, leaving smaller startups to struggle unless supportive policies—such as startup-friendly visas, mobility for researchers, and incentives for spin-outs—are enacted.
A noteworthy aspect of the plan is its focus on integrating AI with robotics, often referred to as “physical AI.” This aligns with Japan’s industrial strengths in manufacturing, automation, and hardware, suggesting that the government perceives the nation’s competitive advantage not in consumer AI applications but in deploying AI within real-world systems, including factories, logistics, healthcare devices, and infrastructure. Startups at the intersection of software, hardware, and AI may find greater alignment with national priorities than those concentrating solely on digital services.
Taken together, the plan signals a structural reset rather than an immediate stimulus, with impacts on startups expected to be uneven. There are likely to be positive signals for sectors such as enterprise, industrial, robotics, and govtech. Over time, shared AI infrastructure may become more accessible, accompanied by heightened expectations surrounding safety, governance, and explainability. Nevertheless, early-stage firms may continue to face challenges in competing for talent and visibility.
Much will hinge on the openness of the new public-private AI initiatives to startup participation and whether funding mechanisms extend beyond large incumbents. Japan’s first basic AI plan indicates that the nation can no longer afford to remain on the sidelines of global AI development. For startups, it offers direction, scale, and legitimacy, although it does not guarantee immediate growth or access.
If policymakers can adeptly balance large-scale national projects with startup-friendly pathways, the plan could revitalize Japan’s AI ecosystem. Conversely, there is a risk that innovation may consolidate around a limited number of major players. Regardless, the plan represents a significant turning point that startups, investors, and founders will monitor closely as implementation unfolds in 2026.
For further insights, visit Japan’s government website, SoftBank, and Preferred Networks.
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