In Japan, a robot won’t come to do your work; It fills what no one wants

Physical AI is emerging as one of the next great industrial battlegrounds, with Japan driven more by necessity than anything else. As workforces shrink and pressures mount to maintain productivity, companies are increasingly deploying AI-powered robots across factories, warehouses and critical infrastructure.

Japan’s Ministry of Economy, Trade and Industry said in March 2026 that it aims to build a domestic physical AI sector and capture a 30% share of the global market by 2040. The country already has a strong position in industrial robotics, with Japanese manufacturers will account for about 70% of the global market in 2022, according to the ministry.

Based on conversations with investors and industry executives, TechCrunch explored what’s driving this shift, how Japan’s approach differs from the US and China, and where value is most likely to emerge as the technology matures.

Driven by labor shortages

Ru Gupta, managing director of Woven Capital, told TechCrunch that several factors are driving the adoption of robots in Japan, including cultural acceptance of robots, labor shortages due to demographic pressures, and deep industrial strength in mechatronics and hardware supply chains.

“Physical AI is being bought as a continuity tool: How do you keep factories, warehouses, infrastructure and service operations running with fewer people?” said Hugill Doh, General Partner of Global Brain. “From what I see, labor shortages are the main driver.”

Japan’s demographic crisis is accelerating. The population declines for the 14th consecutive year in 2024; Du noted that those of working age make up only 59.6% of the total, a share that is expected to shrink by about 15 million people over the next 20 years. It’s already reshaping how companies operate: a 2024 Reuters/Nikkei poll found that labor shortages are the main force driving Japanese companies to embrace AI.

“The engine has shifted from simple efficiency to industrial survival,” Sho Yamanaka, director of Salesforce Ventures, said in an interview with TechCrunch. “Japan faces physical supply constraints as basic services cannot be sustained due to labor shortages. Given the shrinking working-age population, physical AI is an urgent issue at the national level to maintain industrial standards and social services.”

Japan is stepping up efforts to boost automation in manufacturing and logistics, according to Mujin CEO and co-founder Issei Takino. The government is promoting automation to address structural challenges such as labor shortages. Japanese company Mujin has built software that allows industrial robots to handle picking and logistics tasks autonomously. Mujin’s approach focuses on software — particularly robot control platforms — that allows existing hardware to perform more autonomously and efficiently, Takino said.

Hardware power and system risks

Where Japan has historically excelled is in the building blocks of robotics. Whether this advantage will translate into the era of artificial intelligence is a more open question. The country continues to demonstrate strength in core robotics components such as actuators, sensors and control systems, according to Japanese venture capitalists, while the United States and China are moving more quickly to develop complete systems that integrate hardware, software and data.

“Japan’s expertise in high-precision components — the critical physical interface between AI and the real world — represents a strategic moat,” Yamanaka said. “Controlling this touchpoint provides a significant competitive advantage in the global supply chain. The current priority is to accelerate system-level optimization by deeply integrating AI models with these devices.”

Takino said hardware capabilities are strongest in China and Japan, with Japan being particularly strong in controlling the movement of robots, while the United States leads in the service layer and market development. Historically, many American companies have leveraged their software strengths to build integrated businesses – à la Apple – by pairing powerful software platforms with high-quality hardware sourced in Asia. However, Takino said this model may not fully translate to the emerging world of physical AI.

“In robotics, especially in physical AI, it is important to have a deep understanding of the physical properties of devices,” Takino said. “This requires not only software capabilities, but also highly specialized control technologies, which take a long time to develop and involve high failure costs.”

WHILL, a startup based in Tokyo and San Francisco that makes self-driving personal mobility vehicles, is drawing on “monozukuri,” or Japanese craft heritage, as it takes a broader, more holistic approach to global expansion, CEO Satoshi Sugi told TechCrunch. The company has developed an integrated platform that combines electric vehicles, on-board sensors, cloud-based navigation and fleet management systems for short-haul and autonomous transportation. Suji noted that the company is leveraging both Japan and the United States for development, using Japan to improve hardware and meet the needs of an aging population, and the United States to accelerate software development and test large-scale commercial models.

From pilots to real-world deployment

The government is putting money behind this campaign. Under Prime Minister Sanae Takaishi, Japan has allocated about $6.3 billion to strengthen core AI capabilities, enhance robotics integration, and support industrial deployment.

The shift from experimentation to real deployment is already underway. Industrial automation remains the most advanced sector, with Japan installing tens of thousands of robots every year, especially in the automotive sector. Newer applications are starting to gain more interest, Doh said.

“The signal is simple – customer-driven deployments rather than vendor-funded trials, reliable operation across full shifts, and measurable performance metrics like uptime, human intervention rates, and productivity impact,” Doh said.

In logistics, companies deploy automated forklifts and warehouse systems, while in facilities management, inspection robots are used in data centers and industrial sites.

Companies like SoftBank are already applying physical AI in practice, combining vision language models with real-time control systems to enable robots to interpret environments and perform complex tasks autonomously.

In defense, where autonomous systems are becoming key, competitiveness will depend not only on platforms but on operational intelligence powered by physical AI, Toru Tokushige, CEO of Terra Drone, told TechCrunch. By combining operational data with artificial intelligence, Terra Drone enables autonomous systems to operate reliably in real-world environments and support the advancement of Japan’s defense infrastructure, Tokushige added.

Investment is shifting beyond hardware, with companies allocating more capital to orchestration software, digital twins, simulation tools and integration platforms, according to investors and industry sources.

The emergence of hybrid ecosystems

Japan’s physical AI ecosystem is also evolving in ways that differ from traditional technological disruption models. Instead of a winner-take-all dynamic, industry participants expect a hybrid model, where incumbents provide scale and reliability, while startups drive innovation in software and systems design.

Major companies, including Toyota Motor Corporation, Mitsubishi Electric, and Honda Motor, maintain significant advantages in manufacturing scale, customer relationships, and publishing capabilities. But startups are playing critical roles in emerging areas such as orchestration software, perception systems, and workflow automation.

“The relationship between startups and established companies is an ecosystem that complements one another,” Yamanaka said. “Robots require heavy hardware development, deep operational knowledge, and significant capital outlays. By combining the vast assets and field expertise of major companies with the disruptive innovation of startups, the industry can enhance its collective global competitiveness.”

Japan’s defense ecosystem is also shifting away from the dominance of large companies toward greater collaboration with startups, Terra Drone’s CEO said. Large companies still focus on platforms, scale, and integration, while startups are driving development in smaller systems, software, and processes, where speed and adaptability have become key competitive factors.

Companies like Mujin are developing platforms that outperform hardware, enabling multi-vendor automation and faster deployment across industries. Others, including Terra Drone, are applying similar approaches to autonomous systems, combining artificial intelligence and operational data to support large-scale real-world applications.

“The most defensible value will lie with whoever owns the deployment, integration and continuous improvement,” Doh said.