Japan’s Slow AI Adoption Amid Labour Strain Signals Urgent Need for Workforce Reform

Japan’s adoption of AI remains slow despite severe labour shortages, with companies facing skill gaps and workers expressing both caution and concern about future job impacts. Yet the technology holds strong potential to boost productivity and inclusion, if supported by better training, clearer guidelines and stronger worker consultation.

Japan stands on the brink of a major shift in the world of work. A new OECD report, built on extensive surveys by the Organisation for Economic Co-operation and Development (OECD) and the Japanese Institute for Labour Policy and Training (JILPT), provides one of the most detailed portraits yet of how artificial intelligence is reshaping labour dynamics. Together, these research institutes analyse tens of thousands of worker responses to understand how AI is being used, what obstacles hinder adoption, and how technology is influencing wages, skills and worker perceptions.

A Nation Slow to Adopt AI Despite Heavy Need

Japan’s labour market is tightening due to declining birth rates and rapid ageing, leaving firms under pressure to boost productivity. AI, described in the report as a transformative general-purpose technology, could help unlock efficiency, yet workplace adoption remains unusually low. Workers in sectors like finance and manufacturing interact with AI far less than their counterparts in Europe or the United States, and many Japanese employees report no contact with AI at all.

Companies struggle with several overlapping barriers: a shortage of employees who understand AI, difficulty preparing suitable data, uncertainty about benefits, and concerns over cost. Among employees, worries about accuracy, safety, and system reliability are widespread. Yet nearly one-third of workers who do not use generative AI say they have no specific reason, suggesting that stronger guidance and clearer corporate policies could rapidly expand usage.

Early Signs of Inequality in AI’s Benefits

Even at today’s limited adoption levels, AI’s labour-market effects are visible. Workers with disabilities or caregiving responsibilities are more likely to use AI tools, pointing to the technology’s potential to support greater workplace inclusion. At the same time, wage benefits are not evenly distributed. Men, younger employees, regular workers, and higher-income earners are more likely to report pay increases after using AI. These patterns indicate that those who already enjoy structural advantages often gain the most from early technological change.

Japan’s longstanding employment system, where workers are hired into companies rather than roles and reassigned internally, has likely softened the impact of AI-related displacement. Only a small share of workers report job loss linked to AI. Yet fears about the future run deep: more than 70% of Japanese AI users in key sectors worry that AI could threaten jobs within the next decade, a higher rate than in many other OECD economies.

Skill Demands Rising as Consultation Lags Behind

AI is triggering notable shifts in the skills landscape. Digital literacy, machine learning awareness, and advanced cognitive abilities are increasingly required, mirroring global trends in AI-driven labour markets. Demand for AI-specific skills has surged internationally, and Japan is no exception.

However, Japan lags significantly in one crucial area for responsible AI deployment: worker consultation. In major economies such as Germany and Ireland, employers commonly discuss new technologies with staff. In Japan, consultation rates are among the lowest across all surveyed countries. This gap is especially severe in large firms and in industries facing labour shortages, precisely where AI adoption is rising fastest. Both male and female workers report low consultation levels, though women face marginally larger gaps.

A New Legislative Push, but Challenges Remain

Japan’s policy landscape is evolving rapidly. The country enacted its first AI-specific legislation in May 2025, establishing principles for safe and trustworthy AI, clarifying stakeholder responsibilities, and creating a Strategic AI Headquarters. The AI Safety Institute, modelled on similar bodies in the US and UK, has also been launched to test vulnerabilities and promote robust evaluation standards.

Yet Japan’s regulatory approach leans heavily on existing laws, such as the Act on the Protection of Personal Information. Debates continue over whether consent requirements for sensitive personal data should be eased for statistical or AI-training purposes, raising tension between innovation and privacy. Meanwhile, the Ministry of Health, Labour and Welfare is exploring how AI and metaverse technologies might modernise HR processes, particularly for small and medium-sized enterprises.

Ultimately, the report concludes that Japan has much to gain if AI is implemented thoughtfully. Stronger digital-skills training, reskilling programs for vulnerable workers, clearer internal AI guidelines, and more robust worker consultation will be crucial. With these measures, AI could help Japan counter demographic decline and build a more inclusive, resilient labour market. Without them, the technology risks widening inequalities and eroding trust at a critical juncture for the nation’s workforce.