Silicon Valley made AI powerful. Tokyo wants to make it work

By Catherine Thorbecke

THERE WAS A TIME when Tokyo felt light years ahead of the world. The flip phone I used in the 2000s was a marvel to every American I showed it to, packed with features far beyond anything on the US market.

But during the smartphone and internet era, Silicon Valley pulled ahead. Tokyo’s edge dulled as the country struggled through its lost decades and lagged in the shift from hardware to software. Now it’s trying something more ambitious than just catching up — it wants to become the most startup-friendly city in the world.

That push is led by Governor Yuriko Koike, who has run the world’s largest metropolitan area since 2016. A former defense minister and one of Japan’s most durable political figures, she’s now betting the city’s future on entrepreneurs.

The companies that have supported Japan up to now are the large established enterprises, she told me in an interview. Koike argues that younger Japanese are digital natives with a more global outlook. Her government wants to tackle startup bottlenecks alongside entrepreneurs rather than leave them to fend for themselves. Tokyo currently ranks 11^th globally, according to benchmarking ranker Startup Genome’s most-recent , up from No. 15 in 2023. And it’s home to .

Tokyo’s inherent advantages sound mundane until you live elsewhere. After a decade in New York, returning felt like rediscovering a luxury I’d forgotten was possible in a big city: trains that arrive, streets that are safe, infrastructure that works. Koike thinks this reliability is a big part of the city’s economic appeal.

It attracts more top tech talent than outsiders may assume. Llion Jones, the former researcher at Alphabet, Inc.’s Google who co-authored the seminal paper that underpins all modern generative AI, moved to the city in 2020 after falling in love with it, to the venture capital firm backing his Tokyo-born unicorn Sakana AI.

There’s no doubt Silicon Valley remains the world’s largest startup incubator. But the gap between its extraordinary wealth and visible urban dysfunction is getting harder to ignore. Tokyo offers a different model — a place where technology can improve life not just for founders, but for everyone else too.

The timing of the AI revolution may work in the city’s favor. If the last tech era mostly rewarded consumer internet platforms, the next may place greater value on what Japan already does well: robotics, industrial precision, and the emerging “physical AI” arena. It is home to some of the world’s leading robotics suppliers. Amazon.com, Inc., Microsoft Corp., and Google are spending tens of billions of dollars on data-center infrastructure in the country. The weak yen makes procurement and local hiring relatively cheap. And the country is also reasserting itself in advanced chips, from Taiwan Semiconductor Manufacturing Co.’s push into Kyushu to the government-backed effort to produce homegrown 2-nanometer semiconductors in Hokkaido.

Japan is full of contradictions on AI. People here are the least fearful in the world of the technology, perhaps because a shrinking population and labor shortages make automation feel less threatening than necessary. Yet adoption has been slow.

There are fewer places in the world where AI seems better suited to solving long-running productivity problems (as my colleague Gearoid Reidy has ) as well as helping its startups go global. Japan ranks 96^th of 123 countries on a measure, creating friction for foreign founders and domestic entrepreneurs trying to expand abroad. AI is unusually good at reducing that barrier. It can also help with coding in a country long stronger in hardware than software.

Plenty of governments say they support entrepreneurship. Tokyo has attached real targets to the slogan, setting the goal of nurturing 10 times more startups, public-private partnerships, and unicorns. This week, the city is backing its fourth annual Sushi Tech conference, now one of Asia’s biggest startup gatherings. More than 700 companies are exhibiting and executives from giants like Nvidia Corp. are headlining.

Skeptics are right to question whether Tokyo’s ambitious goal-setting is enough. Japan is still notorious for bureaucracy . Much of that lies in the hands of the National Government, but Koike says she wants Tokyo to become a model of speed. “Innovation is moving extremely fast,” she explained, and city leaders can usually keep up at a better pace than their national peers.

Capital is another weak spot. Japan still trails peers in funding AI companies. But geopolitics may help — as a close US ally, it is an easier destination for investors or uncertain about China.

Tokyo’s policymakers are right to focus on building an ecosystem, not just producing a few headline startups. But the harder task comes in helping founders scale. That means cultivating experienced management talent, perhaps by making it easier for mid-career workers to leave large companies for startups without treating the move as career-ending. Creating pipelines for both the young and experienced would broaden the city’s entrepreneurial base.

Some blame a cultural aversion to risk for holding back entrepreneurs. But foreign investors should recognize that Japan is not a monolith (Softbank Group Corp.’s Masayoshi Son, for example, has a borderline unhealthy attraction to big gambles).

Koike said she already uses AI extensively, pointing to how much it has improved for administrative work. The city is applying it to sewage systems, aging infrastructure, and disaster resilience. It’s a more compelling vision of AI; not as a spectacle but as a tool that can actually help people in daily life.

And that may be where Tokyo’s opportunity is greatest. If AI can supercharge the city’s startup ambitions, it can lead the world in creating an ecosystem built around solving real-world problems. Silicon Valley made AI lucrative. Tokyo could make it useful.

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