Why Japanese firms are being so slow to use AI

Japanese companies are using artificial intelligence (AI) at a slow pace compared to other countries like the US and UK. The Organisation for Economic Co-operation and Development (OECD) found that only 8.4% of Japanese workers use AI in their jobs, while 50% of US workers and 32% of UK workers do. Only Singapore, the second highest adopter after the UAE, has a 56% AI adoption rate among workers. Several factors contribute to Japan's cautious approach to AI.

Austin Xu, co-founder of Kuse AI, attributes the slow adoption to Japanese businesses being conservative and risk-averse. Some companies would rather leave a role unfilled than allow AI to handle it, especially in client-facing situations where tolerance for AI mistakes is close to zero. In contrast, US businesses are more willing to allow AI agents to assist and gradually become part of the workflow, with bosses often allowing experimentation and correction.

Parrisa Haghirian, a professor of international management at Kyoto University of Advanced Science, agrees that Japanese companies are too risk-averse to fully embrace AI. Japanese firms are highly sensitive to error, uncertainty, and reputational risk, making it difficult for them to trust AI enough to use it in core operations or decision-making, particularly in low-risk tasks like writing and summarising.

The Japanese government recognizes the slow AI adoption and is trying to encourage businesses to invest in the technology. The AI Promotion Act was passed by the country's parliament last year to use light-touch regulation to promote AI investment. Tokyo aims to become "the world's most-friendly country for developing and utilizing AI" to improve productivity, currently the worst among G7 nations. However, critics argue that only a small percentage of staff use AI in these businesses, and the limited usage is minimal.

Another issue is Japan's digital literacy, with only 60% of companies having computer systems more than 20 years old, according to an expert on Japan's social system and technology at Meiji University. Moreover, there is a shortage of IT professionals, with projections estimating a shortage of nearly 800,000 by 2030. However, some forward-thinking companies, like Kanematsu, a large general trading company, are hiring graduates with AI skills, such as Uta Yamaguchi.

Despite this shift, Japan's productivity gains still require more significant disruption to overcome the country's slow AI adoption.