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The data center market in Japan is expected to expand at a compound annual growth rate (CAGR) of 8.36% between 2026 and 2035
In sum – what to know
Market growth – Japan’s data center market is forecast to grow from $11.96 billion in 2026 to $24.64 billion by 2035 at an 8.36% CAGR.
Key drivers – Cloud adoption, AI workloads, digital transformation and 5G-driven edge computing are fueling demand for new infrastructure.
Infrastructure shift – Colocation dominates today, while hyperscale and self-built facilities are expected to expand as cloud providers scale regional capacity.
Japan’s data center market is projected to expand significantly over the next decade, growing from $11.96 billion in 2026 to about $24.64 billion by 2035, according to a new report by Precedence Research.
The forecast implies a compound annual growth rate (CAGR) of 8.36% between 2026 and 2035, reflecting sustained demand for cloud infrastructure, artificial intelligence workloads, and digital services across the country.
The report estimates the market reached $11.04 billion in 2025, highlighting steady expansion driven by Japan’s ongoing digital transformation across government, enterprise and industrial sectors. Demand for cloud computing, big data analytics and AI-based services is increasing the need for large-scale computing infrastructure and localized data processing, according to Precedence Research.
Global cloud providers are also contributing to the market’s growth as they expand regional infrastructure to meet data sovereignty requirements and serve customers in Japan’s enterprise and public sectors.
One of the primary drivers behind the market’s growth is the acceleration of digitalization across multiple industries. Companies in manufacturing, finance, healthcare, and retail are investing heavily in cloud platforms and data-driven services, increasing demand for reliable data center capacity, the report stated.
Government initiatives promoting cloud adoption have also supported the development of domestic infrastructure, encouraging both international and Japanese operators to expand their local data center footprint, it added.
The rise of new technologies — including artificial intelligence and the Internet of Things — is further boosting demand for high-performance computing and low-latency processing capabilities, according to the research firm.
The rollout of advanced mobile networks is another key factor shaping the data center landscape. As 5G deployments expand, businesses are adopting new digital applications that require real-time processing and rapid data transmission.
Industries such as manufacturing, logistics and healthcare are increasingly relying on connected devices and IoT systems, which generate large volumes of data that must be processed quickly. This trend is driving demand for edge infrastructure and medium-sized facilities located closer to end users.
Regulatory requirements are another key factor influencing data center development in Japan. Data privacy rules under the Act on the Protection of Personal Information (APPI) require organizations to handle personal data carefully and ensure adequate safeguards for storage and processing.
In addition, data residency requirements often require sensitive information to be stored within Japan, prompting enterprises to rely on domestic data center facilities.
In terms of data center types, colocation facilities currently account for the largest share of the market. Many enterprises prefer colocation services because they provide access to advanced infrastructure without the high capital costs associated with building and operating private data centers, according to the report.
However, hyperscale and self-built facilities are expected to grow rapidly in the coming years as cloud providers expand capacity to support AI workloads, big data processing and large-scale digital platforms, Precedence Research said.
Major industry players in Japan’s data center sector include companies such as NTT Global Data Centers, KDDI Corporation, Fujitsu, NEC Corporation and SoftBank, among others.
