Japan

3. Legacy Systems Hit the Digital Cliff

A substantial number of legacy systems and core customer-facing platforms, many of which were developed two to three decades ago, are now reaching obsolescence. Outdated IT infrastructure could cost the Japan economy up to JP¥12 trillion annually in lost productivity. This “2025 Digital Cliff” has triggered large-scale modernisation efforts across government, financial services, technology, and retail sectors.

Currently, 34% of workloads in Japanese organisations are hosted on public cloud platforms, with this figure expected to rise steadily in the coming years. Nonetheless, a persistent lack of technical expertise continues to hinder modernisation efforts – particularly in addressing the significant technical debt and systemic bottlenecks within legacy monolithic architectures and on-premises environments. The ability to decommission outdated systems and revamp IT infrastructure will be critical in distinguishing digital leaders from laggards.

4. AI Adoption – Intent Strong, Execution Fragmented

AI is a key strategic priority, though implementation maturity varies considerably. While 97% of organisations expect AI to deliver substantial value across critical strategic domains, many are still navigating early adoption and overcoming executional hurdles. Some have successfully harnessed large language models (LLMs) and adopted generative and agentic AI tools, yet others continue to face challenges due to limited internal expertise, insufficient project planning, and difficulty attracting specialised talent.

Organisations are beginning to deploy generative AI to streamline operations and automate routine tasks, prompting heightened focus on data security, ethical concerns, and implementation governance. In response, many are establishing internal guidelines to support responsible AI usage. As enterprises transition from pilot programmes to full-scale deployment across targeted functions and labour-intensive activities, employees are proactively upskilling and seeking exposure to high-impact applications. As priorities evolve, understanding how AI can serve as a strategic enabler to drive efficiency, reduce costs, and enhance productivity will be essential to staying ahead.

5. Increased Demand for Localised User Experiences

Customer-led innovation and digital transformation are accelerating demand for UX designers and digital marketers who can localise global strategies with precision. Japanese consumers expect seamless, culturally resonant digital experiences, and organisations are responding by prioritising human-centred design and hyper-personalised customer journeys. This evolution goes far beyond translation – it requires a deep understanding of behavioural nuances, design aesthetics, and user expectations unique to the Japanese market.

To meet these expectations, organisations are increasingly harnessing AI, machine learning, and predictive analytics to deliver tailored, data-driven experiences that speak the language of the audience. These technologies enable dynamic personalisation across the customer journey, fostering deeper engagement and boosting long-term loyalty. As a result, there is growing demand for high-calibre talent who can bridge the gap between technical execution and cultural insight, ensuring digital platforms connect meaningfully with local users while maintaining global consistency.

6. Talent Shortage and Hiring Trade-Offs

Japanese organisations continue to face a severe shortage of IT professionals, particularly in AI, machine learning, cloud, DevOps engineering, cybersecurity, and ERP analysis. In fact, the shortage of skilled professionals remains the most significant barrier to adopting next-generation technologies. Critical skillsets facing acute talent shortages include, but are not limited to, the following.

This shortage has contributed to salary inflation and an increasing trend relocating foreign talent to Japan, particularly from the Philippines, Vietnam, China, and India. In fact, the number of foreign working professionals in Japan has quadrupled from just under half a million in 2008 to 2.3 million in 2024. In response to the challenges of attracting and retaining skilled professionals, organisations are reassessing their hiring criteria – often navigating trade-offs between technical proficiency and bilingual fluency amid limited talent availability and cut-throat competition. To bridge these gaps, organisations are placing greater emphasis on hands-on training and targeted upskilling – aimed at retaining high-performing talent and unlocking the full potential of their existing workforce.

7. Hybrid Work – A Tricky Balancing Act

While hybrid work models have become standard across many global markets, Japan presents a more nuanced landscape. Many employees, particularly foreign professionals and those with young children or ageing parents, express a strong preference for hybrid work arrangements that offer flexibility and support work-life balance.

Japanese organisations, by contrast, often favour onsite work – shaped by cultural norms, traditional management practices, and infrastructure constraints. In some instances, hybrid arrangements are adopted out of necessity, such as limited office space, while others maintain onsite requirements to justify real estate investments. However, these policies are likely to evolve under the influence of government initiatives and legislative reforms aimed at promoting flexible work arrangements. Notable developments include amendments to the Childcare and Family Care Leave Act and the Development of the Next-Generation Children Act – aimed at addressing Japan’s ageing population and advancing gender equality.

Beyond flexibility, candidates are increasingly seeking meaningful engagement, career development opportunities, and autonomy in how they work. The prevailing preference is for hybrid models that allow 2-3 days on-site, complemented by flexible hours to accommodate family responsibilities and personal wellbeing. Balancing these expectations with entrenched organisational norms remains a key challenge for employers navigating evolving workplace dynamics.