As the Japanese government pushes a large-scale industrial policy to foster 17 strategic industries including semiconductors, AI, nuclear fusion, and drones, some say private investment must follow to deliver real results.
On the 13th (local time), Nikkei Business analyzed that even if the government injects massive budgets, it will be hard to break the low-growth structure unless corporations actively engage in domestic facility investment and research and development (R&D).
Prime Minister Sanae Takaichi is implementing a large-scale industrial promotion policy targeting 61 products and technologies across 17 fields. Physical AI, nuclear fusion, next-generation ships, drones, hydrogen, and green steel are included. With this policy, the Japanese government aims to respond to the U.S.-China-centered contest for industrial hegemony and restore manufacturing competitiveness.
In Japan, consumption and investment stagnated for a long time after the real estate and stock bubbles burst in the early 1990s. This period is also called the "lost 30 years." Then the 2008 Lehman Brothers crisis compounded the situation, and corporations became more conservative, focusing on securing cash and overseas investment rather than domestic investment. On top of that, declining population and aging further slowed economic growth.
◇ "Japanese corporations reluctant to invest in production capacity and research and development"
There are concerns in and outside Japan's business community that government support alone will not be enough to escape a low-growth society.
According to Japan's Ministry of Economy, Trade and Industry, while maintenance and repair investments among local corporations' facility spending are increasing, the share of investments to expand production capacity has declined. Data show that the share of facility maintenance and repair investments among Japanese corporation investments is about 31% in 2025, up 16 percentage points from 2000. In contrast, the share of investments to expand production capacity is about 25%, down 7 percentage points.
Investment in research and development has also stagnated. According to Nikkei Business, the ratio of research and development expenses to sales among the top 1,000 Japanese manufacturing corporations has not changed much compared with 2004. By contrast, the United States, China, and major European countries increased their research and development investment ratios over the same period.
Shareholder returns, however, appear to have increased. According to the lab of Waseda University professor Tomo Suzuki, shareholder returns by Japanese corporations (excluding finance and insurance) in 2024 rose 2.3 times compared with 2014. Over the same period, employee wages and benefits increased 14%, and facility investment rose only 29%.
Nippon Steel Chairman and CEO Eiji Hashimoto also said at a recent government meeting that "we must balance human and facility investment so that management decisions are not distorted toward short-term profit."
Nikkei Business assessed, "The key is whether (corporations) can shift away from a skewed profit distribution structure and pivot to bold investment. In the end, corporate execution is what's being tested."
◇ Need cross-industry linkages and policy continuity… Criticism also says to ease regulations instead of investing
Experts also advised that strategies for linkages across industries are important. For example, the permanent magnet industry connects to the motor industry, and motors are mounted in Physical AI-based robots or small unmanned aerial vehicles. The hydrogen industry likewise will struggle to be competitive unless the hydrogen supply chain and the green steel industry are built together.
There are also calls to secure policy continuity so corporations can undertake long-term investments. That is because fields like Physical AI and nuclear fusion take time to commercialize.
Asuka Miyabashira, president of the Japan Pharmaceutical Manufacturers Association, said in an interview with Nikkei Business, "Other countries are strategically fostering industries from a medium- to long-term perspective," and noted, "Japan should enact national strategy-related laws so that policy direction does not waver even if administrations change and provide support."
Some, however, argue that deregulation and selection and concentration are more important than indiscriminate support. Hideo Kumano, chief economist at Dai-ichi Life Research Institute, said, "Investing in fields of innovation that have already matured is not very meaningful," and noted, "Selection and concentration are necessary, and it is more effective to push deregulation more aggressively, not just investment."