Here's what to expect from Japan’s data centre market 

The market size could exceed USD14.5b by 2024.

Analysts expect the data centre market in Japan to grow rapidly as internet usage and the rise of 5G continue to increase. Firms have also been recently forced to improve their IT infrastructure during the pandemic. 

Savills says the market has traditionally been very insular, led by domestic systems integrators and IT companies such as Fujitsu, Hitachi, Mitsubishi Electric and NEC, although there is no dominant domestic player. 

Here’s more from Savills: 

Greater Tokyo is not surprisingly Japan’s top data centre market, accounting for 50% of the data centre capacity in the country as of 2020, followed by Greater Osaka and Greater Nagoya at 18% and 10%. Inzai City in Chiba prefecture has emerged as a hub for large-scale data centres servicing the region. 

The data centre sector has seen a myriad of investments over the past two years as demand soars, mainly for the hyperscale data centres which cloud-based technologies require. The absence of a dominant domestic player presents Japan as an ideal market for international hyperscale cloud platform providers from both the U.S. and China to break into.

On top of this, Japan’s strategic location as a connection and distribution hub for submarine cables from the west coast of the U.S. which extend to the Asia Pacific region also plays in its favour. The recent wave of investment has also come on the back of increased support from the government. Building data centres requires government planning and assistance for national security measures and electrical grid improvements, given the impact which they have on the technological and security infrastructure of a country. 

Still, identifying available land which also has access to the appropriate energy and fibre optic infrastructure remains a key challenge. This has been a roadblock for major cloud providers in particular, as they generally prefer to develop and operate their own out-of-the-box facilities. Instead, they have had to rely heavily on third-party colocation centres to deploy and strengthen the capacity of their cloud regions. Even major colocation operators such as Equinix have largely leased their Japan facilities from domestic corporates. Joint ventures with entities which have existing platforms in Japan appear to be the new modus operandi for operators looking to secure hard assets and property investors aiming to get a slice of the pie. 

Looking ahead, demand for data centre capacity in Japan at large and Tokyo in particular, should continue to outstrip supply. Overall country capacity is expected to rise significantly, and IDC Japan expects that the size of the Japanese data centre market will exceed JPY2 trillion in 2024 from JPY1.5 trillion in 2020. In terms of submarket performance, the Greater Tokyo area will increase by 37% in data centre service market value between 2018 and 2023, with the Greater Osaka area seeing a 62% jump. The government is also looking to decentralise data centre distribution from the key metropolitan regions, as it is planning to building a dozen data centres in rural areas over the next five years through the ‘Digital Garden City Nation Scheme’.