Japan’s data centre market was the third largest worldwide in 2024 by revenue, sitting behind only the US and China. The same year, Tokyo was the most popular market among surveyed data centre investors within the APAC region.
To explore settings in other jurisdictions across APAC visit our APAC Regulatory Guide.
Sources: Worldometer, Statista, Globe Newswire, Cushman & Wakefield
Much of the market’s growth is due to Japan’s political stability, strong local talent and wide acceptance of AI. This is complemented by a clear regulatory framework with limited restrictions on critical infrastructure and foreign investment.
While subsidies are generally limited, they exist for the development of data centres outside of Tokyo and Osaka, and for government infrastructure, as highlighted by the JPY600 million (~US$4 million) subsidy to data centre operator SAKURA Internet.
Power supply presents a challenge, particularly in Tokyo. Combined with rising construction and land costs and a tight labour market, this can significantly delay development.
A further complication is the propensity for natural disasters in Japan such as earthquakes and tsunamis, which can cause significant power outages. Despite these difficulties, outside of the data centre dense areas of Tokyo and Osaka, Japan is an attractive destination for development.
Spotlight on key drivers
Regulatory clarity and confidence
Japan’s commitment to regulatory transparency and its stable economic and legal environment make it an attractive destination for data centre developers and operators.
Japan offers clear standards for data protection and cyber security, along with a supportive approach to innovation.
The government has been openly hesitant of hindering innovation and creating excessive burden in connection with AI. It has recently enacted a law specifically focused on government-led promotion measures for AI, the Act on Promotion of Research, Development and Utilisation of Artificial Intelligence-Related Technology.
This is bolstered by industry-led efforts. Notably, the Japan Data Centre Council’s voluntary Data Centre Facility Standard is focused on ensuring and improving the quality and reliability of the design, construction and operation of data centres.
Open to foreign investment
Japan's commitment to foreign investment openness is a significant drawcard for international capital in the data centre sector.
Japan imposes no restriction on foreign ownership of land, allowing offshore investors to acquire property. In cases where foreign-ownership notification to the relevant minister is required, approval is rarely withheld.
Nonetheless, foreign players should understand that Japan is a very localised market. Knowledge of, and respect for, cultural norms and business practices is critical for success.
Championing data flow without borders
The Japanese Government has adopted a policy position of promoting the free flow of data via the concept of Data Free Flow with Trust (DFFT).
It does not provide data localisation regulations or require government access to data. This may increase the attractiveness of politically independent Japanese data centres to overseas players. However, there is a limited likelihood that users will see Tokyo as a potential regional hub given the high costs of power.
'Investment in data centres is rapidly increasing due to rising AI demand, with major tech firms and foreign companies making significant commitments. This is supported by government AI policies and flexible copyright laws.
However, the rise in data centres has raised electricity use concerns, prompting the government to consider energy-saving regulations and promote decentralisation, as 80% are concentrated in limited areas of Tokyo and Osaka, making them vulnerable to disasters.'
KWM Partner Yoshiki Tsurumaki
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