What: Japan announces a JPY 2 trillion (USD 12.8 billion) stimulus package to revitalise its semiconductor and AI industries, aiming to rebuild domestic tech capabilities and support economic digitalisation.

Why it is important: This strategic investment addresses Japan's critical need for tech autonomy while supporting the retail sector's digital transformation, as Asian retailers have already demonstrated significant returns from AI implementation, with companies like Intime achieving 15% sales growth through AI adoption.

Japan's government is set to deploy a substantial JPY 2 trillion stimulus package to reinvigorate its position in the semiconductor and artificial intelligence markets. This initiative builds upon previous investments, with the government having allocated more than 4 trillion yen over the last three years under former Prime Minister Kishida Fumio. The package introduces medium-term support measures, including new bridging bonds and enhanced interest rates on treasury notes, while the Bank of Japan will utilize government bonds to support AI and semiconductor investments.The stimulus specifically targets domestic capacity building, offering continuous financial backing for new production facilities even if private sector support wavers. This approach aligns with Japan's Economic Security Promotion Act of 2022, which emphasizes stable semiconductor supply chains as a national priority. The package will support Rapidus, a coalition of eight major Japanese companies, in achieving ambitious goals including 2nm AI-enabled chip production by 2027 and the training of over 20,000 engineers in advanced semiconductor design.Despite potential challenges, including public skepticism toward digitalization and cultural resistance to technological change, the package represents a strategic move to reclaim Japan's historical leadership in sophisticated AI and chip development.

IADS Notes: Japan's ambitious JPY 2 trillion AI stimulus package aligns with successful AI implementations already transforming Asian retail. In July 2024, Lotte Department Store demonstrated the potential of such investments by reducing manual task time by 90% through AI chatbots , while Intime Department Store reported a 15% increase in counter sales after implementing AI systems . The stimulus package's focus on semiconductor development and AI infrastructure could accelerate similar transformations across Japan's retail sector, particularly relevant given the successful deployment of AI-powered customer service solutions by Shinsegae Department Store in October 2024 . This investment strategy mirrors the broader industry trend of moving away from traditional systems toward AI-driven solutions, as evidenced by global retailers' shift from Excel-based operations to intelligent automation . With Japanese department stores already adapting to demographic challenges through technological innovation , this stimulus package could provide the necessary foundation for widespread AI adoption in retail, addressing both workforce challenges and customer experience enhancement

Japan’s 2 Trillion Yen AI Stimulus