Policy Update: The New AI Law That Exposed Japan’s Deep Tech Anxiety
Japan just passed a national AI law, but unlike the EU, surprisingly, it avoids penalties and invites cooperation. Read this deep dive into Japan's new AI law.
Japan has officially stepped into the AI policy arena with a new national law for artificial intelligence, but it is not what you might expect. Instead of standalone rules and penalties, the government is focusing on coordination, voluntary cooperation, and a cabinet-level strategy to boost innovation. For instance, while the EU is regulating AI with rigid risk classifications, Japan is choosing a softer, promotion-first path. The goal appears to be to catch up with the EU and other countries who are currently ahead, eventually lead globally to avoid falling behind. But with low private investment and vague safeguards, the real test is just beginning.
🇯🇵 Japan’s Parliament Adopts a New Legal Framework for AI Governance
On 28 May 2025, the Japanese House of Councillors formally adopted the Act on the Promotion of Research and Development and Application of Artificial Intelligence-Related Technologies.
Japan has entered a new phase in how it plans to manage the growth, control, and societal impact of artificial intelligence.
The law introduces a national-level framework directed by a new AI Strategy Headquarters. This body will be chaired by the Prime Minister and supported by all Cabinet members. Its job is to prepare a government-wide strategy to develop artificial intelligence technology while identifying risks that may arise from its misuse.
The plan is not simply to support innovation but to do so in a way that balances technological advancement with public interest. This includes addressing misinformation, biased algorithms, and the opaque nature of machine learning systems.
For a country that has often been perceived as lagging behind the United States, China, and the European Union in setting a clear AI agenda, this law offers a structure for Japan to catch up.
In fact, Japanese private sector investment in AI has remained significantly lower than in many other countries. The adoption of a coordinated plan, backed by legal authority, reflects an awareness of that shortfall and a clear response to it.
The law does not come with strict penalties or regulatory enforcement. Instead, it encourages business cooperation and allows the government to collect information from AI developers and operators. While some may see this as light-touch regulation, others will recognise it as a foundational step toward deeper oversight and accountability in the future.
Japan is not acting in isolation. The new law places a strong emphasis on international cooperation, including engagement in global AI standard-setting and participation in cross-border regulatory initiatives. It aims to make Japan not just a user of AI but an active participant in how it is governed across national lines.
There is a lot at stake.
Artificial intelligence affects how people work, learn, communicate, and make decisions. The law reflects a recognition that if these systems are to be trusted, they must be governed. It is about setting expectations for what kind of future Japan is prepared to support. And in doing so, it invites the public, researchers, developers, and institutions to be part of that conversation.
Japan’s Central Engine for Artificial Intelligence Governance
Japan has introduced a top-level coordination structure under its newly adopted artificial intelligence legislation. At the core of this law is the establishment of the “AI Strategy Headquarters,” a central body tasked with overseeing how artificial intelligence technologies are developed and applied across the country. This is not just a committee or advisory panel. It is a government-wide apparatus led directly by the Prime Minister and joined by all Cabinet ministers.
The seriousness of this arrangement reveals the political weight artificial intelligence now carries in Japan’s national agenda. By placing responsibility in the hands of the Prime Minister, the country is placing AI policy on equal footing with core national priorities such as economic security, defence, and energy.
The Cabinet-wide involvement means that this is not a task left to the Ministry of Economy, Trade and Industry or to any single bureaucratic silo. It brings AI governance into the central operating framework of the Japanese state.
The AI Strategic Headquarters is expected to develop and manage a comprehensive plan that covers research and development, practical use, data policy, risk mitigation, and international cooperation.
The breadth of that responsibility reflects how complex and unpredictable the AI environment has become. Technologies that were once experimental are now being integrated into finance, healthcare, media, education, and even policymaking. Japan is no longer content to monitor AI development from the sidelines.
The Headquarters will also be empowered to request information from AI businesses and institutions, investigate where necessary, and promote coordination between the public and private sectors.
However, the legislation avoids prescribing detailed rules. The legal structure is designed to provide oversight without shutting down innovation, but this also raises questions about the effectiveness of non-punitive governance. Whether or not this approach results in real accountability will depend heavily on how the Headquarters operates in practice.
There is a strategic dimension as well.
Japan is attempting to balance its domestic policy goals with growing international pressure to contribute to AI rulemaking. As countries and regional blocs advance their own AI laws and ethical frameworks, Japan must position itself as both a responsible AI innovator and a credible partner on the world stage.
By centralising control within the Prime Minister’s office, Japan is preparing to speak with one voice when it enters those global discussions.
The creation of the AI Strategy Headquarters is an institutional reform that reconfigures how the Japanese government treats artificial intelligence. It also raises a deeper question: how far will Japan go in aligning public interest with the profit-driven momentum of AI development? That remains to be seen, but the structure is now in place for the state to begin answering it.
The Urgency Behind the Strategy
Investment in Japan’s AI sector is far below where it needs to be. In 2025, private AI investment in Japan lags behind not only the United States and China but also the United Kingdom.
For a country with a deep history in robotics, advanced manufacturing, and precision engineering, this is no small gap. It reflects a structural issue that has forced policymakers to intervene.
Japan’s economy relies heavily on innovation to drive growth, especially in the face of a shrinking population and labour shortages. Artificial intelligence is expected to redefine labour, efficiency, and competitiveness across all major industries. A lack of investment means Japanese firms could lose out on productivity gains and technological leadership, while foreign competitors advance.
Unlike the venture capital environments in Silicon Valley or Shenzhen, Japan’s private sector has often taken a more conservative stance on AI. Risk aversion, aging corporate culture, and slow internal digital transformation have contributed to a cautious investment approach.
Meanwhile, AI research and startups in other countries have moved quickly from experimentation to commercialisation. Japan’s AI strategy is an effort to close this distance, but it begins with a fundamental challenge: convincing domestic investors that AI is not only necessary but urgent.
The law adopted by the House of Councillors aims to establish confidence. By putting the government at the centre of AI strategy, the goal is to create a policy environment that reduces uncertainty for businesses.
A centralised plan, clear priorities, and a framework for collaboration may not provide immediate financial returns, but they can shift market expectations. This is especially relevant for Japan, where public-private partnerships have often driven large-scale industrial innovation in the past.
However, there is a risk that the law alone will not fix the deeper problems. Without real incentives, strong regulatory clarity, and support for smaller AI ventures, large corporations may continue to hesitate. Japan’s startup ecosystem remains relatively small. Venture capital is still cautious. University research is often siloed from industry.
If the AI Strategy Headquarters wants to change this, it will need to create mechanisms that directly encourage capital allocation. That could include subsidies, regulatory sandboxes, or procurement programmes targeting AI solutions. Otherwise, Japan may end up with a national plan that lacks the financial weight to bring its ambitions to life. The investment gap is more than a statistic. It is a warning.
Japan’s 2025 AI Law: A Policy Approach Rooted in Promotion and National Strategy
Japan’s AI legislation, passed in 2025, stands in contrast to the EU’s AI Act of 2024. While the EU’s model is grounded in rules and enforcement, Japan’s approach is designed around flexibility, innovation, and voluntary engagement. Below is a breakdown of key features in the Japanese context:
Core Approach: Promotion-Oriented and Light-Touch
Japan has deliberately avoided a heavy regulatory model.
The primary goal is to support innovation by reducing legal obstacles.
This approach reflects Japan’s desire to stimulate AI R&D after falling behind global competitors in private sector investment.
The government acts as a facilitator rather than a regulator, promoting coordination and providing guidance.
Scope: Broad and Cross-Sectoral
The law covers the full AI lifecycle, from early research to practical use in public and private sectors.
It applies broadly across industries including manufacturing, healthcare, education, and logistics.
Unlike the EU’s more targeted approach to commercial AI systems, Japan’s framework encourages comprehensive development and experimentation.
Enforcement: Based on Coordination, Not Penalties
There are no legal penalties for non-compliance.
The law emphasizes government-business dialogue, information sharing, and collaboration.
Japan’s intention is to build trust and collective responsibility instead of imposing mandates.
This may foster innovation, but it also raises concerns about weak deterrence for misuse or abuse of AI.
Risk Classification: Undefined
Japan has not introduced a tiered classification system for AI risk (unlike the EU’s categories: Unacceptable, High, Limited, Minimal).
This absence reflects the government’s reluctance to pre-emptively constrain AI development.
However, it also means that potentially harmful applications may go unregulated unless they trigger public or political concern.
Governing Body: Cabinet-Level Oversight
The AI Strategy Headquarters, chaired by the Prime Minister, oversees implementation and planning.
This centralised structure ensures AI governance is tied closely to national policy and economic strategy.
Unlike the EU’s independent European AI Board, Japan’s political leadership has direct authority over AI priorities.
Developer Obligations: Voluntary Cooperation
Developers are asked to collaborate with the government rather than meet binding requirements.
There is no obligation to comply with safety audits or formal risk mitigation processes.
This reflects Japan’s historical preference for administrative guidance (gyosei shido) instead of hard law.
While it may encourage participation, it leaves uncertainty about accountability mechanisms.
Risk Protections: Limited and Generalised
The law includes broad references to avoiding misuse and promoting safe development.
It does not contain specific provisions on transparency, explainability, or data rights.
This minimalist approach may not satisfy public demands for AI fairness and oversight in the long term.
International Coordination: Active and Strategic
Japan places strong emphasis on international engagement and leadership in global AI standards.
It seeks to contribute to global forums and influence rule-making.
Unlike the EU, which prioritises internal sovereignty and alignment with its own laws, Japan appears eager to collaborate with international partners.
Governments that promote AI without enforcing standards create a unique political tension. Japan is betting on national pride and industry cooperation to push AI forward. But at the same time, there at a reason other regions, like the EU, are tougher on rules. Politicians in Japan are making a choice: let companies run with it and clean up later if needed. That makes it faster, but potentially more fragile.