Key Insights

Japan’s generative AI penetration stands at only 26.7%, but growth is accelerating — making it a blue-ocean market with strong growth potential.

According to data from Japan’s Ministry of Internal Affairs and Communications, as of 2025, the personal generative AI usage rate is only 26.7%, far lower than in China, the United States, and Germany. While the overall AI user base remains limited, Japanese users demonstrate strong spending capacity and market potential, placing the country in a unique position within the global AI landscape, with significant room for growth and commercial opportunities. 

Young users dominate generative AI adoption in Japan and South Korea, showing high acceptance of new technologies, a strong willingness to pay, and a strong desire for novelty.

Generative AI users in Japan and South Korea are mainly young people. In South Korea, users aged 20 to 40 not only account for 70% of ChatGPT’s monthly active users (totalling 20.31 million), but this group has also driven AI tool penetration to nearly 40% of smartphone users, becoming a key force behind market expansion. In Japan, the usage rate among users aged 20–29 reached 44.7%, showing that young people act as the “early adopters and reference group” for generative AI, with high acceptance of new technologies, strong willingness to pay, and a desire to try new products and experiences.

Japanese and South Korean AI users show strong willingness to pay —South Korea’s fortune‑telling/occult‑themed AI assistant generated KRW 4.7 billion in half a year, while Japan’s AI recording app Plaud saw hardware sales grow twenty-onefold.

AI users in Japan and South Korea show a prominent willingness to pay and mature consumption habits. In South Korea, a fortune‑telling/occult‑themed AI assistant generated ₩4.7 billion in revenue over half a year, confirming users’ willingness to pay for emotional companionship services. Japanese users favour subscription-based models: the AI recording app Plaud’s annual subscription, priced at around JPY 40,000 contributes to 30% of its in-app purchase revenue, and its hardware sales increased twenty-onefold in one year, reflecting users’ recognition of long-term services and integrated software-hardware solutions, forming a mature consumption pattern.

Both countries lead globally in AI patent registrations, but face clear shortcomings in technology transfer and talent development. Building a sufficient talent base will be key to breaking through local market barriers.

According to Stanford University’s “2024 AI Index” report, both South Korea and Japan ranked in the global top five for AI patent registrations per 100,000 people in 2022. Although they hold a leading global position in patent quantity, there are significant shortcomings in technology transfer and talent cultivation. In South Korea, for instance, only one flagship AI model has gained international recognition, revealing a large gap between patent output and real-world application. Furthermore, in 2023, South Korea’s net AI talent outflow index turned negative for the first time since 2020, indicating a significant decrease in attractiveness for AI talent compared with countries like the US and Germany. This situation suggests that for overseas companies planning to enter these two markets, building strong local talent bases could be the key to overcoming local market barriers and establishing a competitive advantage. 

Japan & South Korea: generative AI markets with high-tech investment ambitions and strong consumer spending power

Japan’s FY2025 AI-related budget is approaching JP¥200 billion, hitting a record high, while South Korea continues to increase investment in the AI sector, striving to rank among the world’s top three AI powers. Additionally, users in both countries show a high willingness to pay for AI products that balance daily functional needs with emotional needs, with young people being the main user group. This strong user payment potential resonates with proactive technological development, creating unique opportunities in markets with both a rapidly growing user base and highly valuable existing users, offering high-quality targets for overseas AI deployment. What are the core advantages of the Japanese and South Korean markets? How should generative AI manufacturers approach these markets? What challenges and opportunities might they face when expanding overseas?

Japan and South Korea as AI expansion destinations: distinct market advantages

Mature digital infrastructure and technical support systems

Digital infrastructure construction in Japan and South Korea is comprehensive, and technical support systems are becoming increasingly mature, showing strong capabilities in core areas such as network communication and data computing power. Relying on clear policy guidance and collaborative mechanisms, they have laid a solid foundation for the high-quality development of digital industries such as artificial intelligence.

Digital infrastructure and technical support in Japan and South Korea

Source: Speedtest,Ministry of Science and ICT,public internet resources

The differentiated advantages of these infrastructures help drive the implementation of local AI applications. For example, South Korea’s 111.94 Mbps mobile network speed can support “high-frequency, high-bandwidth” AI tool usage (such as real-time AI voice translation, 4K-level AI video generation). Overseas manufacturers can prioritise the launch of real-time interactive products sensitive to network speed. Japan’s breakthrough in 19-core fibre, although not yet applied to consumer AI applications, lays the transmission foundation for future “multimodal AI large models”. Enterprises that enter this field early will gain first-mover advantage through technological iterations.

Active government support and favourable policy environment for AI development

Japan has passed top-level plans to clarify its AI development direction. Its announced “DX and Innovation Acceleration Plan 2030” lists strengthening the digital foundation and enhancing core technology competitiveness as core focus points, providing a clear strategic guidance framework for AI industry development. Furthermore, the Japanese Diet has deliberated and passed the initial budget bill for FY2025. AI-related funds, which were often included in supplementary budgets in the past, have this time been incorporated into the initial budget, totalling JP¥196.9 billion — a new record — accounting for 0.17% of the total budget. This adjustment clearly reflects the Japanese government’s urgency to accelerate AI industry development and indicates that AI policies will be more stable (avoiding the uncertainty of supplementary budgets), though accompanied by stricter fund usage oversight.

South Korea, through the “2025 New Growth Engine 4.0 Plan”, is expanding investment scale in digital, AI, and 6G fields. On September 8, 2025, it officially established the National AI Strategy Committee. This committee is chaired by President Lee Jae‑myung and composed of 34 civilian members and 13 minister-level officials from key departments. The committee aims to serve as an AI policy command tower to help South Korea become one of the world’s top three AI powers. At its first meeting, the committee proposed the “Korean AI Action Plan”, which sets out three policy pillars: fostering an AI innovation ecosystem, driving nationwide AI transformation, and contributing to global AI infrastructure, along with 12 strategic focus areas. This strategic emphasis at the national level provides strong policy support for the development of AI technology in South Korea. Overseas companies that align their products with South Korea’s goal of global AI leadership (for example, supporting the export of Korean AI technology) may gain additional government support.

Additionally, the two countries have agreed to establish a new Japan-South Korea Digital Policy Forum aimed at strengthening bilateral cooperation in cutting-edge digital fields such as AI and quantum communication. This also suggests that overseas manufacturers could explore product designs for the cross-border Japan-South Korea market (e.g., AI tools supporting both Japanese and Korean), leveraging bilateral cooperation to reduce cross-border operating costs.

User base doubles, expanding market potential

The AI user base in the Japanese and South Korean markets is relatively small, but the payment capability and market potential demonstrated by users are very strong, giving these markets a unique position in the global AI landscape. According to statistics from the “Information and Communications White Paper” released by Japan’s Ministry of Internal Affairs and Communications in July 2025, the personal generative AI usage rate in Japan was only 26.7% — roughly one-third of China’s (81.2%), and far lower than the United States (68.8%) and Germany (59.2%). However, from a growth rate perspective, Japan’s AI user base is expanding rapidly, indicating substantial latent growth potential and commercial opportunities.

Comparison of personal generative AI usage rate in Japan vs. China, US, Germany, 2023-2024

Source: “Information and Communications White Paper,” Japan Ministry of Internal Affairs and Communications, July 2025

Evolving and diversified growth landscape of the Japan-South Korea generative AI tools market

Global and local players coexist, shaping a highly competitive market

The generative AI market in Japan and South Korea presents a diversified competitive landscape, with international giants and localised products jointly dominating the market. Among major global players, general-purpose efficiency assistants like ChatGPT, AI ChatBot, and Claude show strong and steady performance. Their subscription revenue is largely supported by everyday utility features like Q&A, writing assistance, and translation, which help keep their user base stable. At the same time, several products developed by Asia-based teams have started gaining meaningful momentum in Japan. In the first half of 2025, a noticeable share of the top in-app revenue-generating generative AI apps in Japan and South Korea came from developers in the wider region, accounting for close to half of the top 10. At the same time, localised products also perform well. The AI social application LoveyDovey from South Korean manufacturer TainAI also made the list. This competitive landscape, where internationalisation and localisation coexist, provides market opportunities for overseas companies with diverse backgrounds.

Interface and function display of LoveyDovey product

Source: GooglePlay, LoveyDovey