Japan Commits 10.5 trillion Yen to Boost Physical AI Industry

Prime Minister Sanae Takaichi announced that Japan will invest 10.5 trillion yen through fiscal year 2040 to develop "physical AI," a technology that combines advanced AI models with robotics to operate autonomously in real‑world environments. The plan aims to capture a 30 % share of a projected 20 trillion‑yen global market and build on Japan’s traditional strengths in manufacturing and industrial robotics.

The government’s commitment follows the creation of the AI Robot Association in 2025 and research calls by the New Energy and Industrial Technology Development Organization (NEDO). At the same time, the Nikkei index broke the 70,000‑point barrier, reflecting market optimism toward the sector. Analysts point to seven heavyweight firms—Kiokushia, SoftBank Group, Tokyo Electron, Murata Manufacturing, Advantest, Hitachi, and Shin-Etsu Chemical—as the core “M7” companies driving the underlying semiconductor and infrastructure ecosystem that will support physical AI.

U.S. startup Physical Intelligence demonstrated robots that can retrieve and fold laundry using multimodal AI, illustrating the practical possibilities that Japan hopes to scale nationally.