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Government-backed foundation models, safety rules, and robotics integration could reshape how Japanese AI startups scale
The Japan government has approved its first basic national plan on artificial intelligence, formally setting out how the country intends to strengthen AI development while managing risks linked to the technology. The plan was approved by the Cabinet on December 23, 2025, and openly acknowledges that Japan has fallen behind other major economies in AI investment, commercialization, and talent depth.
The policy is framed as part of a broader economic and crisis-management strategy under Prime Minister Sanae Takaichi, with the stated goal of reversing years of underinvestment. For startups, the plan marks the clearest signal yet that AI is moving from a fragmented initiative to a coordinated national priority.
What the plan actually prioritises
Rather than focusing only on research funding, the government has outlined four structural priorities that will guide AI policy:
Accelerating AI adoption across government and industry
Strengthening domestic AI development capabilities
Taking a leadership role in AI governance and rule-making
Reforming systems and institutions to support AI deployment
This structure suggests the plan is not just about building models, but about embedding AI into daily operations, especially in public administration and regulated sectors. For early-stage startups, this could gradually expand domestic demand for applied AI tools, particularly in govtech, enterprise software, and industrial automation.
Public AI investment and the emergence of a national “anchor” player
One of the most consequential elements of the plan is a five-year public support package worth about ¥1 trillion (US$6.34 billion), expected to begin in fiscal 2026. The funding is intended to support a new AI company formed through public-private cooperation, tasked with developing large-scale domestic foundation models.
According to sources, the company will be backed by around 10 firms, including SoftBank Group Corp, with roughly 100 engineers expected to come from SoftBank and AI startup Preferred Networks Inc..
For startups, this creates both opportunity and tension. A state-backed foundation model provider could lower infrastructure barriers for smaller firms. At the same time, it raises questions about market concentration and whether startups will be customers, collaborators, or competitors of a government-supported AI heavyweight.
Safety, governance, and the cost of trust
The plan places strong emphasis on “reliable AI”, reflecting public concern over safety, transparency, and misuse. Measures include expanding staffing at the Japan AI Safety Institute, which evaluates AI risks, and strengthening governance frameworks alongside innovation.
For startups, this signals a future where compliance will be unavoidable, particularly in sensitive sectors such as healthcare, finance, mobility, and public services. While this may raise early costs, it could also create an advantage for Japanese startups competing internationally, where trust and regulation are increasingly becoming selling points.
Education and talent: a long-term bet with short-term gaps
The plan also pushes AI education into elementary and junior high schools, aiming to build a domestic talent pipeline over the long term. This reflects recognition that Japan’s AI talent shortage cannot be solved through immigration or corporate hiring alone.
However, for startups operating today, talent remains a near-term constraint. While large firms involved in the national AI initiative may benefit first, smaller startups may continue to struggle unless complementary policies—such as startup-friendly visas, researcher mobility, and spin-out incentives—are introduced.
A notable feature of the plan is its focus on integrating AI with robotics, often described as “physical AI.” This plays directly to Japan’s industrial strengths in manufacturing, automation, and hardware.
For startups, this suggests the government sees the country’s competitive edge not in consumer AI apps, but in AI applied to real-world systems—factories, logistics, healthcare devices, and infrastructure. Startups working at the intersection of software, hardware, and AI may find stronger alignment with national priorities than those focused purely on digital services.
What this means for Japan’s startup ecosystem
Taken together, the plan represents a structural reset rather than a quick stimulus. Its impact on startups will likely unfold unevenly:
Positive signals for enterprise, industrial, robotics, and govtech startups
Greater availability of shared AI infrastructure over time
Higher expectations around safety, governance, and explainability
Continued pressure on early-stage firms to compete for talent and visibility
Much will depend on how open the new public-private AI initiatives are to startup participation, and whether funding mechanisms extend beyond large incumbents.
Momentum is real, but execution will decide outcomes
Japan’s first basic AI plan is a clear admission that the country can no longer afford to sit on the sidelines of global AI development. For startups, it offers direction, scale, and legitimacy, but not guaranteed access or immediate growth.
If policymakers can balance large-scale national projects with startup-friendly pathways, the plan could help re-energise Japan’s AI ecosystem. If not, there is a risk that innovation consolidates around a small group of major players. Either way, the plan marks a turning point—one that startups, investors, and founders will be watching closely as implementation begins in 2026.
Quick Takeaways
Japan has approved its first national AI plan, aiming to strengthen domestic AI development while managing safety and governance risks.
The government acknowledged that Japan has fallen behind other major economies in AI investment and commercialization and is seeking to reverse the trend.
A ¥1 trillion (US$6.34 billion), five-year support scheme is planned from fiscal 2026 to back home-grown AI, including foundation models.
The strategy prioritises AI adoption, domestic capability-building, governance leadership, and institutional reform.
Startups may benefit from shared AI infrastructure and public-sector demand, but will also face higher compliance expectations.
Robotics and so-called “physical AI” are positioned as areas where Japanese startups could gain a competitive edge.
The plan’s impact on startups will depend on how open public-private initiatives are to smaller firms, not just large incumbents.