DIGITAL TRANSFORMATION IN JAPAN

The pandemic has expedited demand for digital infrastructure in Japan, which has served as a catalyst for economic growth and investment, with foreign direct investment into communications having seen significant increments over the past few years to more than JPY300 billion in 2022. Since the government started its focus on semiconductor policies in 2021, investments of more than JPY2 trillion have been announced.

Indeed, the need for digital security has heightened, especially amidst international disputes like those observed between the United States and China. Greater interest in the semiconductor industry has risen in turn, and TSMC will be constructing a JPY1 trillion fabrication plant to be completed in 2024 in Kumamoto. Furthermore, chipmaker Rapidus, led by the former CEOs of Tokyo Electron and Western Digital Japan, is planning to begin full-scale 2-nanometer production in 2027. Overall, this paradigm shift has signified increasing demand for data centres to serve as a base for digital infrastructure.

GROWTH OF DATA CENTRES IN JAPAN

The rise of digital transformation has also served as a tailwind to the rapid expansion seen in the data centre sector, with significant growth forecasted in upcoming years. A survey conducted by the Ministry of Economy, Trade and Industry, showed an increasing number of companies that have made digital transformation initiatives from 2021 and 2022 (Graph 1). Moreover, according to Fuji Chimera Research Institute, the market value of data centres is expected to have expanded from around JPY2.1 trillion in 2018 to JPY3.7 trillion in 2023, and is forecast to grow to JPY4.4 trillion in 2027. In physical terms, the number of server racks is expected to double from around 138,000 in 2023 to 272,000 in 2027, underscoring the extent of the market expansion in Japan.