Stakeholders bemoan data center development hurdles as Japan plays catch up

Japan is eager to build more data centers. But finding enough electricity to power them while maintaining efficiency and global competitiveness is a delicate balancing act.Data center capacity will dictate how quickly AI rolls out and which industries benefit first. At Japan’s largest technology expo, SusHi Tech Tokyo 2026, industry leaders drew attention to increased bidding competition for electricity between households and AI data centers.Will AI drive up electricity bills?Rocky Lee of Zettabyte, an AI infrastructure company based in Taiwan, said that tackling latency is a major factor behind electricity volume.“If you ask an AI a question and get a response 40 seconds later, that’s not an ideal customer or enterprise experience. Power has to be transferred to GPUs, which is where we see the shortage.”He warned that households in Japan will likely bear the brunt of rising electricity costs.“AI is competing with you. If somebody is willing to pay a little bit more than you, then you have a problem,” said Rocky Lee of Zettabyte, an AI infrastructure company based in Taiwan.Wholesale electricity prices have already soared in U.S. cities with a high concentration of data centers, such as Virginia, Texas, and Silicon Valley.What is regional Japan’s role?The need for low-latency AI services is prompting companies to build data centers around big cities such as Tokyo and Osaka. However, the Japanese government is trying to buck this trend.Japan is home to an estimated 256 operational data centers. The U.S., on the other hand, operates a whopping 5,400 facilities, followed by approx. 520 in Germany, 500 in the UK and roughly 450 in China.On April 24, it announced an expansion of its GX strategy with the aim of creating industrial clusters around renewable energy sources in regional Japan. The designated regions have not been made public, but likely include Hokkaido, Tohoku, and Kyushu.GMI Cloud is one AI cloud startup that is poised to build Japan’s largest data center in the southern city of Kagoshima. The massive $12 billion gigawatt-scale (GW) project is expected to be completed by 2030.Japan is a safe haven for dataGMI Cloud Founder and CEO, Alex Yeh, explained that ample availability of nuclear power is just one reason for the location.“Japan is a huge hub for fiber optic internet access from the U.S. to Asia, such as South Korea, Taiwan, Singapore and the rest of Southeast Asia. That’s why Google, Amazon, Microsoft Azure are located in Japan.”Its data protection policy is an added advantage. Alex Yeh said Japan is the best choice when it comes to building highly sought-after sovereign data centers.“Data is sensitive. There’s government data, military data, and enterprise data. You don’t want data situated in geopolitically sensitive areas such as the U.S. and Korea. That’s why Japan matters.”Corporate giants bet on AI infrastructureJapan’s legacy industrial giants are pivoting toward data centers and power infrastructure in an effort to reinvent their business model and generate new avenues of growth.Japanese telecommunication giant NTT is expanding R&D into AI-native infrastructure. It currently holds the largest market share of data centers in Japan. It has more than 160 sites across all 47 prefectures.On April 27, it announced the AI x OWN initiative. It’s NTT’s effort to redesign the internet around real-time AI use.In a statement, NTT President Akira Shimada said “NTT’s AI infrastructure must shift from conventional ICT infrastructure to infrastructure for a new market premised on AI utilization.”NTT also plans to triple its domestic power capacity from approximately 300 MW today to around 1 gigawatt by fiscal 2033.Can data center deregulation boost AI competition?At SusHi Tech Tokyo 2026, Alex Yeh of GMI Cloud said top-down deregulation could make Japan globally competitive in AI data centers. He criticized legacy businesses for stifling innovation as well as the government’s preference for traditional, concrete-built data centers.“In the U.S. and Taiwan, data centers are built modularly. These are 40-foot container units that can be shipped and deployed quickly. They’re essentially pre-built data centers, with all wiring integrated, that can be dropped on-site. So why can’t we do that in Japan?”Yeh hopes Japan will turn to modular data centers, slashing construction timelines to six to eight months instead of the 18 to 24 months needed for conventional concrete facilities.If you're reading this, you’re already ahead. Stay there with our newsletter.