Japan's manufacturing sector confronts AI-driven overhaul amid rising material costs

Japan’s manufacturing industry is grappling with structural shifts such as soaring raw‑material prices, labour shortages, wage pressures and heightened geopolitical tension. The Ministry of Economy, Trade and Industry’s “2026 Manufacturing White Paper” notes that while price spikes eased slightly in 2024‑25, they remain the chief source of managerial strain, and from 2025 onward new external factors—including U.S. tariff measures and rapid generative‑AI diffusion—are set to intensify.

At the same time, Japanese firms face a persistent “2025 cliff” in IT capability. Around 60 % still run legacy systems, and CIOs view technical debt as a critical issue. A DXC Technology survey of roughly 2,500 IT decision‑makers found that only half of Japanese respondents believe AI can significantly cut technical debt, compared with 80 % globally. The report warns that isolated AI tools—such as coding assistants or test‑automation bots—yield limited productivity gains unless integrated across the entire development lifecycle. DXC’s “AI‑plus‑spec‑driven” approach advocates embedding suitable AI functions from requirements through design, implementation, testing and operations, creating reusable “templates” and playbooks that transform development from a craft‑based activity into an organizational asset.