Japan Data Centre Market Opportunities

• Japan's data centre market, the second-largest among developed nations after the United States, represents one of the real estate sectors currently gaining the greatest attention from developers, operators and investors. Leveraging its geographical advantages and robust infrastructure, Japan has established itself as a premier global data centre location, becoming a critical industry driving both Digital Transformation (DX) and Green Transformation (GX).
• With 90% of data centres concentrated in Greater Tokyo and Greater Osaka, the government is promoting regional distribution through initiatives including "Regional Revitalization" and "Digital Infrastructure Development Plan 2030," while advancing decarbonisation efforts. As Artificial Intelligence (AI) demand continues to grow, driving higher power requirements, innovative technology development is progressing toward distributed data centres through Watt-Bit Collaboration.
• Supply plans continue expanding in existing clusters across Greater Tokyo and Greater Osaka, while development advances in new areas. Development sites with secured power supply are commanding premiums, with data centre being the prime driver of unit price increases.
• The Financial Services Agency's promotion of data centre REIT is expected to generate a virtuous cycle of increase in sector investment and improvement in transparency. The Ministry of Economy, Trade and Industry's new energy efficiency standards will further accelerate decarbonisation through technology implementation.
• Cloud computing and AI have rapidly proliferated to become integral to daily life. The data centres supporting these technologies constitute essential infrastructure for society's sustainable growth.

Japan is the second-largest data centre market among developed countries after the United States. Japan's data centre market size (revenue) reached USD 23.4 billion in 2024. Growth projections for 2025-2030 indicate an annual average growth rate of 6.7%, reaching USD 33.4 billion by 2030.

This growth stems from demand factors, including increased domestic internet traffic and expanded AI utilisation, alongside fundamental advantages such as Japan’s geographical positioning as a North America-Asia Pacific connectivity hub, political stability, low power outage rates, high-fibre optic infrastructure development, and abundant skilled human resources.

^{Note: Developed countries refers to the 22 constituent countries of the MSCI World Index for which Statista provides data (Hong Kong is excluded as data is unavailable).
Source(s): Statista,September 2025;The World Bank Group; OCCTO; MIC; OECD; JLL Research, 2025}

With 90% of data centres concentrated in Greater Tokyo and Greater Osaka, the government is promoting regional distribution through initiatives including "Regional Revitalization" and "Digital Infrastructure Development Plan 2030," while advancing decarbonisation efforts. As Artificial Intelligence (AI) demand continues to grow, driving higher power requirements, innovative technology development is progressing toward distributed data centres through Watt-Bit Collaboration.

^{Note 1: Greater Tokyo refers to Saitama, Chiba, Tokyo and Kanagawa
Note 2: Greater Osaka refers to Kyoto, Osaka, Hyogo and Nara
Note 3: Kyushu refers to Fukuoka, Saga, Nagasaki, Kumamoto, Oita, Miyazaki and Kagoshima
Note 4: Figures have been rounded
Source(s): MLIT; GSI; MIC; CAO; METI; JLL Research, 2025}

With concerns rising about power shortage in the face of rapid increase in generative AI usage, technologies are being implemented to promote regional data centres through Watt-Bit coordination.

Japan‘s AI system market is projected to reach JPY 4.2 trillion by 2029, with a 25.6% annual average growth, driving data centre and semiconductor factory power demand to 7.15 million kW by 2034.  Data centres anticipate 32.4% CAGR from 2025 to 2034, with 65.1% CAGR from 2025 to 2029.

Data centre power consumption predominantly involves GPU-equipped servers and cooling systems. Conventional technology power efficiency limitations necessitate new technology transitions. Meanwhile, since AI training data centres feature relaxed low-latency requirements compared to conventional or inference centres, they can be located farther from major metropolitan areas.

The government has set initiatives, including "Regional Revitalization" and "Digital Infrastructure Development Plan 2030", to promote regional diversification and decarbonisation of data centres. 

Three pivotal policies include:

• Data centre development through Watt-Bit Collaboration: Promote regional diversification through collaboration of power and telecommunications;

   

• Data centre workload shift: Achieving low-latency inter-data centre connections using All-Photonic Network technology by 2030 and advanced computing resource power load control by 2035; and

   

• Creation of five or more data centre hubs to enhance GX-driven industrial growth.

Addressing rapid power demand increases, Innovative Optical and Wireless Network (IOWN) photonics-electronics convergence technology attracts attention as cutting-edge Watt-Bit Coordination technology. The IOWN concept, proposed by NTT in 2019, encompasses network and information processing infrastructures.

IOWN photonics-electronics convergence technology achieves a 100-fold power efficiency improvement over conventional methods by fusing electrical and optical signal circuits. Simultaneously achieving low power consumption, high capacity, and low latency enables AI-era data centre efficiency.  Efforts to enable more diverse siting of data centres using IOWN include applying APN for inter‑data‑centre connectivity, as well as applying PEC/DCI for board/server‑level photonic interconnects to improve compute‑side efficiency.

The IOWN Global Forum includes the founding members (NTT, Intel, Sony), as well as domestic and international companies, including Rakuten Mobile, KDDI, etc.

Although regional distribution is being encouraged by the government, current supply plans still focus mainly in Greater Tokyo and Greater Osaka. 

In Greater Tokyo, development continues to be led by existing clusters such as Tama or Inzai, supported by solid ground and power supply infrastructure. However, Inzai faces power supply constraints toward 2030 despite substation construction plans.  Newer locations such as Saitama offers abundant land but may require time for power supply capacity and grid development.

Greater Osaka‘s Bay Area benefits from AI data centre demand as a new region. Large-scale AI data centres have been built to utilise the existing power supply on a former factory site. The Keihanna Region—where the southern Kyoto, eastern Osaka, and northern Nara areas meet—will continue to see a steady increase in data‑center capacity and remains one of Western Japan’s leading hubs for new developments.

^{Note: All MW included in under construction, planning approved and land bank. These pipeline is an estimate only and may be subject to change.
Source(s): JLL Research, 2025}

Development site transactions (including acquisitions of existing properties for redevelopment) are starting to reflect value-add from data centres, as well as the value of infrastructures such as power supply. A site in Greater Tokyo recently marked a 770% premium over official land prices, reflecting strong appetite among investors and developers for power-secured sites.

One transaction in Greater Osaka which took place within the last five years marked a 110% premium for the acquisition of a former factory site.  This was primarily because the site already had the required power capacity in place.  While the lead time for securing power supply in Osaka is generally shorter than in Tokyo (3-5 years versus Tokyo's 8-10 years), investors and developers are still seeking ways to further shorten the development timeline.

Meanwhile, with land acquisitions from local governments, the prices are generally comparable to official land prices, thereby contributing to cost containment.

^{Source(s): MLIT, official publications, JLL Research, 2025}

The Financial Services Agency clarified in 2025 that certain data centre equipment can be classified as “real estate” for J-REIT framework. To be eligible as a J-REIT, more than 50% of capital needs to be invested in real estate. Uncertainty over whether or not the facilities—representing a large portion of data centre assets—qualified as “specified assets” had long been a major impediment to forming data‑centre REITs in Japan. Inclusion of data centres in REITs would lead to expanded investment opportunities and greater transparency in the sector.

The Ministry of Economy, Trade and Industry introduces stricter data centre energy efficiency standards. From existing voluntary 2030 operator average PUE ≤ 1.4 targets, new regulations require PUE ≤ 1.3 compliance for new data centres (above a certain scale) from fiscal 2029 (after two years of operation). As GPU servers and cooling equipment dominate power consumption, cooling transitions from conventional water/air to liquid improve efficiency. Enhanced energy-saving requirements should promote technology development and implementation, and accelerate decarbonisation. 

Data centres function as crucial platforms enabling all stakeholders—developers, operators, tenants and investors—to simultaneously realise Digital Transformation (DX) and Green Transformation (GX), demonstrating pathways to competitive strengthening and sustainable growth. Strategic value realisation requires collaboration with trusted external specialists. Throughout real estate lifecycle phases, including market analysis, development, management and operations, sustainability promotion, leasing, and investment, external specialised knowledge enhances business quality and speed while supporting optimal decision-making.