Why Japan is lagging behind in generative A.I. — and how it can create its own large language models
Japan is known for its futuristic technology. But the nation is lagging behind in the generative AI race and is trying to create its own large language models.
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Countries are racing to develop their own generative artificial intelligence algorithms, but high tech Japan is already behind.
Generative AI has been the trendiest topic in tech since OpenAI made waves with its chatbot ChatGPT. Breakthroughs in generative AI possess the potential to fuel a 7% increase in global GDP, or almost $7 trillion, over the next decade, according to Goldman Sachs research.
Key to generative AI development are large language models which underpin the likes of ChatGPT and Baidu’s Ernie Bot, capable of processing vast data sets to generate text and other content. But Japan is currently trailing behind the U.S., China and the EU in developing these algorithms, said Noriyuki Kojima, co-founder of Japanese LLM startup Kotoba Technology.
Chinese organizations, including tech giants Alibaba and Tencent, have launched at least 79 LLMs domestically over the past three years, Reuters reported in May citing research from a consortium of state-run institutes. U.S. corporate powerhouses such as OpenAI, Microsoft, Google and Meta play a significant role in propelling the country’s LLM advancements, said Kojima.
Japan lagging behind in generative AI
Japan, however, lags behind the U.S., China and Europe in the scale and speed of its LLM development.
“Japan’s trailing position in the field of generative AI largely stems from its comparative shortcomings in deep learning and more extensive software development,” said Kojima.
Deep learning requires a “robust community of software engineers” to develop necessary infrastructure and applications, Kojima added. Japan, however, will face a deficit of 789,000 software engineers by 2030, according to the Ministry of Economy Trade and Industry. The nation is now ranked 28th out of 63 countries in terms of technological knowledge, according to the IMD World Digital Competitiveness Ranking.
Japan also faces hardware challenges as LLMs need to be trained using AI supercomputers like IBM’s Vela and Microsoft’s Azure-hosted system. But no private company in Japan possesses its own “world-class machine” with those capabilities, Nikkei Asia reported.
Government-controlled supercomputers like Fugaku therefore “hold the key” to Japan’s pursuit of LLMs, Kojima explained.
“Access to such large-scale supercomputers forms the backbone of LLM development, as it has traditionally been the most significant bottleneck in the process,” he said.
How Japan’s supercomputers can help
Tokyo Institute of Technology and Tohoku University plan to use Fugaku to develop LLMs based primarily on Japanese data in collaboration with the supercomputer’s developers Fujitsu and Riken, Fujitsu announced in May.
The organizations plan to publish their research results in 2024 to help other Japanese researchers and engineers develop LLMs, Fujitsu added.
The Japanese government will also invest 6.8 billion yen ($48.2 million), about half the total cost, to build a new supercomputer in Hokkaido that will begin service as early as next year, Nikkei Asia reported. The supercomputer will specialize in LLM training to promote Japan’s development of generative AI, said Nikkei Asia.
In April, Japanese Prime Minister Fumio Kishida said the country supports the industrial use of generative AI technology. Kishida’s remarks followed his meeting with OpenAI CEO Sam Altman, who said the company is looking to open an office in Japan.
Japanese companies pursuing generative AI
Big Tech players have also joined the fray to boost Japan’s standing in generative AI. In June, SoftBank’s mobile arm said it plans to develop its own generative AI platform, reported local media. This was underscored by SoftBank CEO Masayoshi Son’s announcement that the investment firm plans to shift from “defense mode” to “offense mode” and intensify its focus on AI.
“We would like to be [in] the leading position for the AI revolution,” Son said during a shareholders’ annual general meeting.
SoftBank Group sold its 85% stake in SB Energy to Toyota Tsusho in April and recently agreed to sell its 90% stake in U.S. investment manager Fortress Investment Group, Nikkei Asia reported. Trimming these other investments helps SoftBank free up cash, allowing it to focus largely on AI through its Vision Fund venture capital investment unit.
SoftBank-owned chip design company Arm is also set to pursue a U.S. IPO listing later in the year. “It will be by far the biggest IPO that’s hit the world,” said Amir Anvarzadeh, Japan equity market strategist at Asymmetric Advisors.
The IPO will provide a hefty sum to boost funds at SoftBank, which reported a record 4.3 trillion yen loss at Vision Fund for its fiscal year ending March 31.
Arm originally sought to raise between $8 billion and $10 billion. But with demand for semiconductor chips “through the roof,” Anvarzadeh suggested Arm could raise as much as $50 billion to $60 billion — or “85% of SoftBank’s market cap.”
He said SoftBank’s share price will likely rise, although this does not guarantee the success of its AI efforts.
“Fundamentally, I don’t think SoftBank is going to change Japan’s landscape … they are no savior of Japan’s AI,” he said.
Japanese telecommunications company NTT also announced plans to develop its own LLM this fiscal year, aiming to create a “lightweight and efficient” service for corporations. NTT said it will funnel 8 trillion yen over the next five years into growth areas like data centers and AI, a 50% increase from its previous level of investment.
Local media reported that digital ad company CyberAgent released an LLM in May that enables companies to create AI chatbot tools. The company said it is one of few “models specialized in the Japanese language and culture.”
While it has yet to catch up in the generative AI space, Japan is making its first stride with these private sector efforts. Once a “robust infrastructure” is established, the remaining technical challenges are likely to be “significantly mitigated” by using open-sourced software and data from previous pioneers, Kojima said. Bloom, Falcon and RedPajama are all open-sourced LLMs trained on vast amounts of data that can be downloaded and studied.
However, companies venturing into this field should anticipate competition spanning a “relatively longer timeframe,” Kojima said. Developing LLMs requires substantial capital investment and a workforce highly skilled in natural language processing and high-performance computing, he explained.
“SoftBank and NTT, joining this competition, will not change the AI landscape in the short-term.”
AI regulation in Japan
Japanese tech companies’ increased participation in generative AI development coincides with a positive stance on AI adoption in other sectors. Over 60% of companies in Japan have a positive attitude toward using generative AI in their operations, while 9.1% are already doing so, a survey by Teikoku Databank found.
Hitachi has established a generative AI center to promote employee’s safe and effective use of the technology, it said in May. With the expertise of data scientists, AI researchers and relevant specialists, the center will formulate guidelines to mitigate the risks of generative AI, the conglomerate said.
Japan will even consider government adoption of AI technology like ChatGPT, provided that cybersecurity and privacy concerns are resolved, said Chief Cabinet Secretary Hirokazu Matsuno.
As Japan becomes more open to the use of generative AI, the government should formulate and facilitate soft guidelines regarding its use, while assessing the need for hard regulation based on specific risks, said Hiroki Habuka, research professor at Kyoto University’s Graduate School of Law.
“Without clearer guidance on what actions companies should take when using generative AI, practices may become fragmented,” the professor said.
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Mark Zuckerberg’s announcement this week that Meta would pivot its moderation policies to allow more “free expression” was widely viewed as the company’s latest effort to appease President-elect Donald Trump.
More than any of its Silicon Valley peers, Meta has taken numerous public steps to make amends with Trump since his election victory in November.
That follows a highly contentious four years between the two during Trump’s first term in office, which ended with Facebook — similar to other social media companies — banning Trump from its platform.
As recently as March, Trump was using his preferred nickname of “Zuckerschmuck” when talking about Meta’s CEO and declaring that Facebook was an “enemy of the people.”
With Meta now positioning itself to be a key player in artificial intelligence, Zuckerberg recognizes the need for White House support as his company builds data centers and pursues policies that will allow it to fulfill its lofty ambitions, according to people familiar with the company’s plans who asked not to be named because they weren’t authorized to speak on the matter.
“Even though Facebook is as powerful as it is, it still had to bend the knee to Trump,” said Brian Boland, a former Facebook vice president, who left the company in 2020.
Meta declined to comment for this article.
In Tuesday’s announcement, Zuckerberg said Meta will end third-party fact-checking, remove restrictions on topics such as immigration and gender identity and bring political content back to users’ feeds. Zuckerberg pitched the sweeping policy changes as key to stabilizing Meta’s content-moderation apparatus, which he said had “reached a point where it’s just too many mistakes and too much censorship.”
The policy change was the latest strategic shift Meta has taken to buddy up with Trump and Republicans since Election Day.
A day earlier, Meta announced that UFC CEO Dana White, a longtime Trump friend, is joining the company’s board.
And last week, Meta announced that it was replacing Nick Clegg, its president of global affairs, with Joel Kaplan, who had been the company’s policy vice president. Clegg previously had a career in British politics with the Liberal Democrats party, including as a deputy prime minister, while Kaplan was a White House deputy chief of staff under former President George W. Bush.
Kaplan, who joined Meta in 2011 when it was still known as Facebook, has longstanding ties to the Republican Party and once worked as a law clerk for the late conservative Supreme Court Justice Antonin Scalia. In December, Kaplan posted photos on Facebook of himself with Vice President-elect JD Vance and Trump during their visit to the New York Stock Exchange.
Joel Kaplan, Facebook’s vice president of global policy, on April 17, 2018.
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Many Meta employees criticized the policy change internally, with some saying the company is absolving itself of its responsibility to create a safe platform. Current and former employees also expressed concern that marginalized communities could face more online abuse due to the new policy, which is set to take effect over the coming weeks.
Despite the backlash from employees, people familiar with the company’s thinking said Meta is more willing to make these kinds of moves after laying off 21,000 employees, or nearly a quarter of its workforce, in 2022 and 2023.
Those cuts affected much of Meta’s civic integrity and trust and safety teams. The civic integrity group was the closest thing the company had to a white-collar union, with members willing to push back against certain policy decisions, former employees said. Since the job cuts, Zuckerberg faces less friction when making broad policy changes, the people said.
Zuckerberg’s overtures to Trump began in the months leading up to the election.
Following the first assassination attempt on Trump in July, Zuckerberg called the photo of Trump raising his fist with blood running down his face “one of the most badass things I’ve ever seen in my life.”
A month later, Zuckerberg penned a letter to the House Judiciary Committee alleging that the Biden administration had pressured Meta’s teams to censor certain Covid-19 content.
“I believe the government pressure was wrong, and I regret that we were not more outspoken about it,” he wrote.
After Trump’s presidential victory, Zuckerberg joined several other technology executives who visited the president-elect’s Mar-a-Lago resort in Florida. Meta also donated $1 million to Trump’s inaugural fund.
On Friday, Meta revealed to its workforce in a memo obtained by CNBC that it intends to shutter several internal programs related to diversity and inclusion in its hiring process, representing another Trump-friendly move.
The previous day, some details of the company’s new relaxed content-moderation guidelines were published by the news site The Intercept, showing the kind of offensive rhetoric that Meta’s new policy would now allow, including statements such as “Migrants are no better than vomit” and “I bet Jorge’s the one who stole my backpack after track practice today. Immigrants are all thieves.”
Recalibrating for Trump
Zuckerberg, who has been dragged to Washington eight times to testify before congressional committees during the last two administrations, wants to be perceived as someone who can work with Trump and the Republican Party, people familiar with the matter said.
Though Meta’s content-policy updates caught many of its employees and fact-checking partners by surprise, a small group of executives were formulating the plans in the aftermath of the U.S. election results. By New Year’s Day, leadership began planning the public announcements of its policy change, the people said.
Meta typically undergoes major “recalibrations” after prominent U.S. elections, said Katie Harbath, a former Facebook policy director and CEO of tech consulting firm Anchor Change. When the country undergoes a change in power, Meta adjusts its policies to best suit its business and reputational needs based on the political landscape, Harbath said.
“In 2028, they’ll recalibrate again,” she said.
After the 2016 election and Trump’s first victory, for example, Zuckerberg toured the U.S. to meet people in states he hadn’t previously visited. He published a 6,000-word manifesto emphasizing the need for Facebook to build more community.
The social media company faced harsh criticism about fake news and Russian election interference on its platforms after the 2016 election.
Following the 2020 election, during the heart of the pandemic, Meta took a harder stand on Covid-19 content, with a policy executive saying in 2021 that the “amount of COVID-19 vaccine misinformation that violates our policies is too much by our standards.” Those efforts may have appeased the Biden administration, but it drew the ire of Republicans.
Meta is once again reacting to the moment, Harbath said.
“There wasn’t a business risk here in Silicon Valley to be more right-leaning,” Harbath said.
While Trump has offered few specific policy proposals for his second administration, Meta has plenty at stake.
The White House could create more relaxed AI regulations compared with those in the European Union, where Meta says harsh restrictions have resulted in the company not releasing some of its more advanced AI technologies. Meta, like other tech giants, also needs more massive data centers and cutting-edge computer chips to help train and run their advanced AI models.
“There’s a business benefit to having Republicans win, because they are traditionally less regulatory,” Harbath said.
Meta’s CEO Mark Zuckerberg reacts as he testifies during the Senate Judiciary Committee hearing on online child sexual exploitation at the U.S. Capitol in Washington, U.S., January 31, 2024.
Evelyn Hockstein | Reuters
Meta isn’t alone in trying to cozy up to Trump. But the extreme measures the company is taking reflects a particular level of animus expressed by Trump over the years.
Trump has accused Meta of censorship and has expressed resentment over the company’s two-year suspension of his Facebook and Instagram accounts following the Jan. 6 attack on the Capitol.
In July 2024, Trump posted on Truth Social that he intended to “pursue Election Fraudsters at levels never seen before, and they will be sent to prison for long periods of time,” adding “ZUCKERBUCKS, be careful!” Trump reiterated that statement in his book, “Save America,” writing that Zuckerberg plotted against him during the 2020 election and that the Meta CEO would “spend the rest of his life in prison” if it happened again.
Meta spends $14 million annually on providing personal security for Zuckerberg and his family, according to the company’s 2024 proxy statement. As part of that security, the company analyzes any threats or perceived threats against its CEO, according to a person familiar with the matter. Those threats are cataloged, analyzed and dissected by Meta’s multitude of security teams.
After Trump’s comments, Meta’s security teams analyzed how Trump could weaponize the Justice Department and the country’s intelligence agencies against Zuckerberg and what it would cost the company to defend its CEO against a sitting president, said the person, who asked not to be named because of confidentiality.
Meta’s efforts to appease the incoming president bring their own risks.
After Zuckerberg announced the new speech policy Tuesday, Boland, the former executive, was among a number of users who took to Meta’s Threads service to tell their followers that they were quitting Facebook.
“Last post before deleting,” Boland wrote in his post.
Before the post could be seen by any of his Threads followers, Meta’s content moderation system had taken it down, citing cybersecurity reasons.
Boland told CNBC in an interview that he couldn’t help but chuckle at the situation.
“It’s deeply ironic,” Boland said.
— CNBC’s Salvador Rodriguez contributed to this report.
WATCH: Meta is returning to free speech tradition, says Facebook’s former chief privacy officer Chris Kelly
Jaap Arriens | Nurphoto | Getty Images
Apple is losing market share in China due to declining iPhone shipments, supply chain analyst Ming-Chi Kuo wrote in a report on Friday. The stock slid 2.4%.
“Apple has adopted a cautious stance when discussing 2025 iPhone production plans with key suppliers,” Kuo, an analyst at TF Securities, wrote in the post. He added that despite the expected launch of the new iPhone SE 4, shipments are expected to decline 6% year over year for the first half of 2025.
Kuo expects Apple’s market share to continue to slide, as two of the coming iPhones are so thin that they likely will only support eSIM, which the Chinese market currently does not promote.
“These two models could face shipping momentum challenges unless their design is modified,” he wrote.
Kuo wrote that in December, overall smartphone shipments in China were flat from a year earlier, but iPhone shipments dropped 10% to 12%.
There is also “no evidence” that Apple Intelligence, the company’s on-device artificial intelligence offering, is driving hardware upgrades or services revenue, according to Kuo. He wrote that the feature “has not boosted iPhone replacement demand,” according to a supply chain survey he conducted, and added that in his view, the feature’s appeal “has significantly declined compared to cloud-based AI services, which have advanced rapidly in subsequent months.”
Apple’s estimated iPhone shipments total about 220 million units for 2024 and between about 220 million and 225 million for this year, Kuo wrote. That is “below the market consensus of 240 million or more,” he wrote.
Apple did not immediately respond to CNBC’s request for comment.
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