Generative AI is emerging as a critical lever for Japan’s digital transformation, economic revitalization, and financial sector modernization, according to Kangsoo Kim, Special Research Fellow at the Financial Services Agency and Board Director of the Special Situations Group at the Matsuo Institute. Speaking at the Nomfins Investment Forum in Tokyo on December 5, Kim highlighted how a convergence of policy support, labor market dynamics, and underutilized digital potential is positioning Japan as a prime environment for AI adoption.
“In 2023, Japan’s regulatory response to generative AI was among the fastest in the world,” Kim noted.
AI Boom 2.0: Generative AI Sparks a New Era
With significant advances in deep learning, data availability, and processing power, AI is undergoing a new boom, fueled in large part by generative models. Tools like OpenAI’s ChatGPT — which reached 100 million users within two months of launch — demonstrate the power of generative AI in text, code, and semantic understanding. Kim noted that the current generation of large language models (LLMs), such as GPT-4o, represents a major leap forward in both accuracy and usability.
Other global tech giants are rapidly following suit:
- Google is integrating its Gemini LLM into core services.
- Meta is open-sourcing its Llama3 model for continued in-house training.
- Amazon Web Services (AWS) has committed ¥2.2 trillion to building Japanese data centers by 2027.
- OpenAI established its first Asia-Pacific office in Japan in 2024.
Government and Market Dynamics: Japan’s Competitive Edge
Kim emphasized several reasons Japan offers fertile ground for generative AI adoption:
- Strong government support, including the launch of an AI Strategy Council focused on safe, productive AI use.
- Relatively low labor costs, which make automation economically appealing.
- Large corporates with global exposure, where AI can create scale efficiencies.
- Significant room for digital transformation, particularly among legacy institutions.
“Promoting AI use and strengthening its development capabilities are as important as regulating it,” said Kim.
Use Cases: AI in Financial Services
Generative AI holds particularly strong potential in Japan’s financial sector, according to Kim. Its capabilities could unlock transformational gains in efficiency, cost control, and cyber resilience. Key applications include:
- Automated analysis across companies, sectors, geographies, and asset classes
- Enhanced transaction monitoring and fraud detection in real time
- Multilingual phishing detection, improving defenses against sophisticated cyber threats
“As financial transactions become more digitized, AI-powered countermeasures will become indispensable,” Kim stated.
He also warned that the same tools are being deployed offensively by cybercriminals, setting up an AI-driven arms race in financial crime. “It’s likely that countermeasures and crimes will increasingly resemble a cat-and-mouse game,” he said.
Call to Action: Leadership Experience is Key
Kim stressed that executive-level familiarity with LLMs is now critical. Leaders must gain hands-on experience with generative AI tools to meaningfully integrate them into workflows and accelerate enterprise-wide digital adoption.
Conclusion: AI as a National Growth Strategy
With a receptive policy environment, major tech investments, and a financial sector ripe for innovation, Japan is well-positioned to leverage generative AI as both a defensive and growth strategy. The country’s next digital transformation — particularly in finance — will hinge on how effectively institutions integrate these tools to improve performance, reduce risk, and future-proof operations.
