Since OpenAI made waves with its ChatGPT chatbot, generative AI has become the hottest topic in tech. According to Goldman Sachs, new AI breakthroughs could boost global GDP growth by 7%, or nearly $7 trillion, over the next decade.
Key to the development of generative AI are large language models (LLMs), which can process huge datasets to generate text and images. Noriyuki Kojima, co-founder of startup LLM Kotoba Technology, said Japan is currently behind the US, China and Europe in developing these algorithms.
According to CNBC, companies in China, including Alibaba and Tencent, have launched at least 79 LLMs in the past three years. Major US tech companies such as Microsoft, Google and Meta have also played a major role in promoting LLM development.
However, Japan is lagging behind the US, China and Europe in terms of the scale and speed of LLM development. Kojima said the reason for Japan's lag in generative AI technology is largely due to shortcomings in deep learning and software development.
Deep learning requires a highly skilled community of software engineers to develop the necessary infrastructure and applications. According to Japan’s Ministry of Economy , Trade and Industry, the country will face a shortage of 789,000 software engineers by 2030. Based on IMD’s Digital Competitiveness Ranking, Japan is currently ranked 28th out of 63 countries in the digital literacy category.
Japan also faces hardware challenges, as LLMs need to be trained on AI supercomputers like IBM’s Vela or Microsoft’s Azure storage system, according to Nikkei Asia. But no private company in Japan has a world-class supercomputer with similar capabilities.
Kojima believes that government- controlled supercomputers like Fugaku will “hold the key” to Japan’s pursuit of LLM. He said access to these supercomputers will become the backbone of LLM development.
Tokyo Institute of Technology and Tohoku University are planning to collaborate with supercomputer developers Fujitsu and Riken to use Fugaku to develop LLM based on Japanese data. They expect to publish the research results in 2024 to help other Japanese researchers and engineers develop LLM.
The Japanese government will also invest $48.2 million to build a new supercomputer in Hokkaido, scheduled to begin operations in early 2024, which will specialize in LLM training to promote the development of generative AI in Japan. In April, Japanese Prime Minister Fumio Kishida expressed support for the industrial use of generative AI technology.
Japanese companies chase after artificial intelligence
Tech giants have also joined the race to boost Japan’s AI prowess. In June, SoftBank Group’s mobile division said it plans to develop its own generative AI platform. SoftBank CEO Masayoshi Son stressed that the investment firm plans to shift from “defense mode” to “offense mode” and increase its focus on AI. SoftBank wants to be a leader in the AI revolution, he said.
SoftBank Group has sold an 85% stake in SB Energy and agreed to sell a 90% stake in Fortress Investment Group, cutting other investments that will free up cash for SoftBank to pour money into AI through its venture capital arm Vision Fund.
Spending $140 billion investing in AI, Softbank is still being left behind in this race
SoftBank-owned chip designer Arm is also preparing to list its IPO in the US later this year, which would be the world's largest IPO, said Amir Anvarzadeh, a Japan equity strategist at Asymmetric Advisors.
Arm was initially looking to raise only $8 billion to $10 billion. But with demand for semiconductors skyrocketing, Anvarzadeh believes Arm could raise $50 billion to $60 billion, which would be equivalent to 85% of SoftBank’s market capitalization.
While SoftBank’s stock price may rise, that doesn’t guarantee that its AI investment efforts will be successful. Anvarzadeh said SoftBank is not the savior in Japan’s AI race.
Japanese telecommunications company NTT has also announced plans to develop its own LLM to create a “lightweight and efficient” service for corporations. In May, digital advertising company CyberAgent released an LLM that allows companies to create AI chatbots, one of the few models that specializes in Japanese language and culture.
While Japan is still lagging behind in the AI race, it is making headway thanks to contributions from businesses. Developing LLMs requires a highly skilled workforce and large amounts of capital investment. Kojima says that once a strong infrastructure is in place, the remaining technical challenges can be significantly reduced by leveraging open-source software and data from pioneers.
However, companies entering the field should anticipate long-term competition. SoftBank and NTT’s involvement in AI development will not change the current situation in the short term, Mr. Kojima warned.
AI Regulation in Japan
A survey by Teikoku Databank found that more than 60% of companies in Japan have a positive attitude toward using generative AI, while 9.1% are currently applying AI in their operations.
Hitachi has established a Generative AI Center to promote the safe and effective use of technology by employees. With the participation of data scientists, researchers and AI experts, the center will develop guidelines to minimize the risks that Generative AI can bring.
Japan's Chief Cabinet Secretary Hirokazu Matsuno said the government will consider adopting AI technology like ChatGPT if cybersecurity and privacy issues are resolved.
Hiroki Habuka, a research professor at Kyoto University Law School, said the Japanese government should develop and facilitate soft rules for the use of generative AI, while also reviewing and introducing strict regulations to protect against potential dangers from AI.
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