In Japan, the robot isn’t coming for your job; it’s filling the one nobody wants

Physical AI is emerging as one of the next great industrial battlegrounds, with Japan’s push driven more by necessity than anything else. As workforces shrink and pressure mounts to maintain productivity, companies are increasingly deploying AI-powered robots in factories, warehouses and critical infrastructure.

The Japanese Ministry of Economy, Trade and Industry said in March 2026 that it aims to build a domestic physical AI sector and capture a 30% share of the global market by 2040. The country already has a strong position in industrial robotics, with Japanese manufacturers accounting for around 70% of the global market by 2022, according to the ministry.

Based on conversations with investors and industry executives, TechCrunch explored what’s driving this shift, how Japan’s approach differs from the US and China, and where value is likely to emerge as the technology matures.

Driven by shortages in the labor market

Several factors are driving adoption in Japan, including cultural acceptance of robotics, labor shortages due to demographic pressures and deep industrial strength in mechatronics and hardware supply chains, Woven Capital director Ro Gupta told TechCrunch.

“Physical AI is purchased as a continuity tool: how do you ensure that factories, warehouses, infrastructure and service activities continue to run with fewer people?” Hogil Doh, general partner of Global Brain, also said this. “As far as I see, the labor shortage is the main cause.”

Japanese demographic the cracking speeds up. The population declined a 14th year in a row in 2024; those of working age accounting for only 59.6% of the total, a share is expected to shrink by almost 15 million over the next twenty years, Doh points out. It is already changing the way companies operate: a 2024 Reuters/Nikkei survey The labor shortage is the main driver pushing Japanese companies to adopt AI.

“The driver has shifted from simple efficiency to industrial survival,” said Sho Yamanaka, director at Salesforce Ventures, in an interview with TechCrunch. “Japan faces physical supply constraints where essential services cannot be maintained due to a lack of labor. Given the shrinking working-age population, physical AI is a matter of national urgency to maintain industrial standards and social services.”

Japan is stepping up efforts to promote automation in manufacturing and logistics, said Mujin CEO and co-founder Issei Takino. The government has promoted automation to address structural challenges such as labor shortages. Mujin, a Japanese company, has built software that allows industrial robots to perform picking and logistics tasks autonomously. Mujin’s approach focuses on software – specifically robotics control platforms – that allow existing hardware to perform more autonomously and efficiently, Takino said.

Hardware strength, system risk

Where Japan has historically excelled is the physical building blocks of robotics. Whether that advantage translates into the AI ​​era is a more open question. The country remains strong in core robotics components such as actuators, sensors and control systems, while the US and China are accelerating towards developing full-stack systems that integrate hardware, software and data.

“Japan’s expertise in high-precision components – the crucial physical interface between AI and the real world – is a strategic moat,” Yamanaka said. “Controlling this touchpoint provides a significant competitive advantage across the global supply chain. The current priority is to accelerate system-level optimization by deeply integrating AI models with this hardware.”

Hardware capabilities are strongest in China and Japan, with Japan being particularly strong in robot motion control, while the US leads the way in service layer and market development, Takino said. Historically, many American companies have leveraged their software strengths to build integrated businesses – similar to Apple – by pairing strong software platforms with high-quality hardware from Asia. However, this model may not fully translate into the emerging world of physical AI, Takino said.

“In robotics, and especially in physical AI, it is critical to have a deep understanding of the physical characteristics of hardware,” said Takino. “This requires not only software capabilities, but also highly specialized control technologies, which take a long time to develop and have high failure costs.”

WHILL, a Tokyo- and San Francisco-based startup that makes autonomous personal mobility vehicles, is leveraging Japan’s “monozukuri,” or craftsmanship, as it takes a broader, full-stack approach to global expansion, CEO Satoshi Sugie told TechCrunch. The company has developed an integrated platform that combines electric vehicles, on-board sensors, navigation systems and cloud-based fleet management for autonomous transport over short distances. The company is tapping both Japan and the U.S. for development, using Japan to refine hardware and meet the needs of the aging population, and the U.S. to accelerate software development and test large-scale commercial models, Sugie noted.

From pilots to implementation in the real world

The government is putting money behind the push. Under Prime Minister Sanae Takaichi, Japan committed to it $6.3 billion to strengthen core AI capabilitiespromote the integration of robotics and support industrial implementation.

The shift from experimentation to real implementation is already underway. Industrial automation remains the most advanced segment, together with Japan install tens of thousands of robots every yearespecially in the automotive sector. Newer applications are also starting to gain traction, Doh said.

“The signal is simple: customer-paid implementations instead of vendor-funded testing, reliable operation throughout full shifts and measurable performance metrics such as uptime, human intervention and impact on productivity,” Doh said.

In logistics, companies are deploying automated forklifts and warehouse systems, while in facility management, inspection robots are being used in data centers and industrial locations.

Companies like Soft Sofa are already putting physical AI into practice, combining vision language models with real-time control systems to enable robots to interpret environments and perform complex tasks autonomously.

In the defense sector, where autonomous systems are becoming fundamental, competitiveness will depend not only on platforms but also on operational intelligence powered by physical AI, Toru Tokushige, CEO of Terra Drone, told TechCrunch. Tokushige added that by combining operational data with AI, Terra Drone is working to enable autonomous systems to function reliably in real-world environments and support the advancement of Japan’s defense infrastructure.

Investments are shifting beyond hardware, with companies allocating more capital to orchestration software, digital twins, simulation tools and integration platforms, investors and industry sources said.

The rise of hybrid ecosystems

Japan’s physical AI ecosystem is also evolving in ways that differ from traditional models of technological disruption. Instead of a winner-takes-all dynamic, industry participants expect a hybrid model, where incumbents provide scale and reliability while startups drive innovation in software and systems design.

Large incumbents, including Toyota Motor Corporation, Mitsubishi Electric and Honda Motor, retain significant advantages in production scale, customer relationships and deployment capabilities. But startups play a crucial role in emerging areas such as orchestration software, perception systems and workflow automation.

“The relationship between startups and established companies is a mutually complementary ecosystem,” Yamanaka said. “Robotics requires heavy hardware development, deep operational knowledge and significant capital expenditures. By combining the vast assets and domain expertise of large companies with the disruptive innovation of startups, the industry can strengthen its collective global competitiveness.”

Japan’s defense ecosystem is also shifting from the dominance of big companies to greater collaboration with startups, according to Terra Drone’s CEO. Large companies remain focused on platforms, scale and integration, while startups drive the development of smaller systems, software and operations, where speed and adaptability become key competitive factors.

Companies like Mujin are developing platforms that go beyond hardware, enabling multi-vendor automation and faster deployment across industries. Others, including Terra Drone, are applying similar approaches to autonomous systems, combining AI and operational data to support real-world applications at scale.

“The most defensible value will lie with whoever owns the implementation, integration and continuous improvement,” Doh said.