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Robots to the Rescue: How AI Could Offset Japan’s Population Crisis

As we stand on the brink of a remarkable era defined by significant advancements in artificial intelligence (AI), dialogue surrounding its potential implications on job markets worldwide has intensified. The seemingly sudden emergence of AI-driven technologies has induced a mixture of excitement and apprehension, evident from the factory floor to the corporate boardroom. A recent article in The Economist highlights this sentiment, revealing a startling surge in global Google searches for “is my job safe?” — an indication of growing concerns over the prospect of job displacement by large language models (LLMs).

OpenAI published research forecasting that “around 80% of the U.S. workforce could experience a 10% alteration in their work tasks due to the integration of LLMs, while approximately 19% of workers may witness at least 50% of their tasks affected.” Ironically, the study also highlights the potential for higher-income jobs to be more susceptible to LLM capabilities. For those that believed that automation replacing jobs was something only frontline employees needed to worry about, this could be a jarring new development.

My outlook leans toward techno-optimism; I believe that, in the long run, new jobs will emerge, and the work landscape will adapt to this evolving paradigm. However, I also recognize that, in the short term, this seismic shift could trigger widespread unemployment and exacerbate economic disparities. As history has repeatedly demonstrated, such conditions often culminate in political unrest, posing potential challenges for the years ahead.

Yet, while the specter of AI-induced job displacement may induce fear and uncertainty in many parts of the world, Japan’s circumstances could be unique. A country grappling with a precipitous population decline might find in AI and automation not an adversary, but a savior.

Japan’s population contraction is far from a speculative forecast; it is a pressing reality with potentially profound economic consequences. The country’s labor force, those aged 15–64, is predicted to decline even more drastically than the overall population, falling by an estimated 24 million by 2050. The government, to their credit, has been proactive about making it easier to immigrate. Obtaining a work visa or permanent residency is now much easier than many may realize. However, whether it be due to the language and cultural barriers that can make it difficult for foreigners to feel welcomed, or less competitive compensation, immigration is unlikely to offset impending population decline.

The increasing challenges with labor shortages are serving as a forcing function for Japan to automate. In this context, AI and automation may serve as a potent antidote to these demographic pressures. And Japan’s extensive history with robotics and automation offers a solid foundation for this transition. Japanese firms such as FANUC, Kawasaki Heavy Industries, Sony, and Yaskawa Electric Corporation have traditionally been at the vanguard of robotic technology. In 2020, Japanese companies installed 390 robots per 10,000 employees in the manufacturing sector, the third highest after Korea and Singapore. In the same year, the production capacity of Japanese suppliers reached 174,000 units, delivering 45% of the global robot supply.

The integration of AI and robotics into the services sector — which contributes 75% of Japan’s GDP — could be revolutionary. The term “digital transformation” or “DX” is now ubiquitous in Japan, coinciding with an accelerating trend towards cloud adoption. AI is poised to accelerate this transition even further, driving rapid progress in automation and robot utilization. Given the escalating labor shortage, firms of all sizes are harnessing cutting-edge technologies to maintain competitiveness. The widespread adoption of self-checkout systems in retail outlets and touch-screen ordering devices in restaurants epitomizes this trend.

The challenges of Japan’s population decline coincide with a period of profound productivity advancements due to AI and automation. This confluence of factors raises an intriguing paradox: the population decline could be coincidentally timed to match a period when the country might require fewer people. In other words, the natural attrition of Japan Inc. could align fortuitously with the rise of automation, turning a potential crisis into an opportunity for evolution and growth.

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Founding Partner & CEO @ Coral Capital

James Riney

Founding Partner & CEO @ Coral Capital

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