The construction industry in Japan, an essential pillar of the nation’s GDP, has been undergoing significant transformation fueled by infrastructure projects, demographic trends, and advancements in digital technology.
The industry contributed 5.5% to the GDP in 2021 and reflecting its essential role in national development. Valued at approximately USD 602.86 billion in 2023, the market is set for steady annual growth of 3.0%, reaching an estimated USD 778.46b by 2032.
However, the stark contrast between the GDP contribution (circa USD 220b) and market size reveals deeper insights into the industry’s economic dynamics.
GDP contribution measures the value added by the sector—focusing on labor, services, and profits—while excluding costs like raw materials. This approach highlights the industry’s direct impact on Japan’s economic output. Meanwhile, market size, which includes total revenues such as spending on materials, subcontractor services, and operational costs, reflects the broader scope of economic activity the sector generates.
This dual perspective illustrates not just the construction industry’s scale, but also its complexity. It underscores the intricate balance between value creation and the substantial investment required to fuel the sector. As Japan’s construction market continues to grow, these metrics provide a nuanced understanding of its role in shaping economic progress and responding to evolving infrastructure demands.
Behind this growth are major infrastructure initiatives like the Chuo Shinkansen maglev line and Osaka World Expo 2025, coupled with increased investments in digital transformation to drive efficiency and resilience across the industry.
Japan’s ageing population has led to a shortage of skilled labor, pushing up labor costs and leading to potential project delays. Rising material costs, impacted by global economic shifts, have also affected profitability. For example, JFE Holdings recently lowered its profit forecast due to reduced demand and competition from Chinese exports.
‘By accelerating pathways for younger talent to contribute meaningfully, Japan can harness its full workforce potential in an evolving digital landscape.’
The “Society 5.0” initiative is Japan’s response to these challenges, advocating for the integration of digital tools across industries to create more efficient and adaptive practices. As Japan pushes forward, these digital solutions are becoming essential to keep up with demand and mitigate the industry’s workforce gaps.
The aging population has had a ripple effect on construction, creating a shortage in skilled labor. This shortage has driven companies to look at automation and AI as solutions to bridge the gap. For Japan, AI can really help bridge the gap, improving communication, and making visa application processes even more efficient than today.
As Japan embraces AI for efficiencies, automation tools could also improve construction timelines and help alleviate workforce constraints. Take Shimizu Corporation, which has developed robots that can perform tasks like welding and ceiling installations, minimizing reliance on human labor and addressing worker shortages.
These robots are crucial in a landscape where manual labor is increasingly hard to come by, ensuring that projects remain on schedule and costs are kept in check despite workforce challenges.
Digital tools like AI are streamlining workflows, enhancing project efficiency. Obayashi Corporation, in partnership with Autodesk Research, leverages AI to optimize construction design and layout, speeding up planning processes. Similarly, Komatsu’s “Smart Construction” initiative uses AI to improve the allocation of on-site resources, helping companies complete projects on time and on budget.
Additionally, while Japanese companies may be willing technology adopters, a risk-averse culture can sometimes slow that process. The other side of the coin is that it underscores a commitment to ensuring that each tool meets Japan’s high standards.
Construction companies are connecting autonomous robots with Building Information Modeling (BIM) to improve safety standards. Shimizu’s “Smart Site” project, for example, uses AI-driven robots to assess on-site conditions in real-time, which not only makes projects more efficient but also safer for workers by reducing their exposure to high-risk tasks.
These systems allow for predictive maintenance by identifying potential hazards before they arise, creating a proactive approach to safety management on construction sites.
The culture around adopting foreign innovations offers some perspective on this hesitancy. It wants to ‘take what is foreign… then make it better’—it’s part of why their products are some of the highest quality in the world.
This approach has led to a reputation for producing exceptional quality but has also contributed to slower adoption rates, as foreign methods are reimagined to fit Japanese standards.
The digital transformation has exposed a skills gap, particularly among older workers less familiar with modern tools. Bridging this divide is critical.
As Sekisui House’s “Women’s College” initiative illustrates, companies are starting to focus on upskilling programs that prepare employees for the digital world, including specialized training and leadership programs aimed at increasing diversity.
It is important that people making decisions for their company understand the importance of future digital solutions. Upskilling the workforce is essential, but the hierarchical nature of Japanese companies often limits the influence of younger, tech-savvy employees.
The government has introduced programs, such as the Digital Agency and My Number ID system, to promote digital literacy across the workforce, equipping older employees with the tools they need to adapt to a tech-driven environment.
Typically it takes years for a young person to build the credibility to make decisions in a company, but in today’s digital age, that’s slowing down progress. The industry needs to help young people progress up that ladder quicker and in a way that reflects the digital tools at their disposal.
By accelerating pathways for younger talent to contribute meaningfully, Japan can harness its full workforce potential in an evolving digital landscape.
‘Japan’s culture wants to ‘take what is foreign… then make it better’—it’s part of why their products are some of the highest quality in the world.’
Japan’s ambition to lead in the global digital economy includes a strong focus on advancing its semiconductor industry. Through initiatives led by entities like Rapidus Corporation, Japan is aiming to produce cutting-edge chips by 2027, ensuring a steady supply of essential tech for both construction and other sectors.
The construction sector in Japan is navigating a delicate balance—adopting new technologies quickly enough to stay competitive while preserving the high standards and meticulous practices the industry is known for.
This balance of innovation and tradition, positions Japan as a model of progress in the Asia-Pacific region.
The government’s AI Strategy 2022 reinforces its commitment to responsible AI use and international collaboration, part of its broader Society 5.0 initiative. These projects are foundational in positioning Japan as a resilient, tech-driven economy with the potential to lead innovation across the Asia-Pacific,
With a shortage of local talent, especially in tech-driven roles, Japan is actively recruiting foreign professionals. The recent J-Skip and J-Find visas offer streamlined paths for skilled foreigners to work in Japan. Programs like the Specified Skilled Worker (SSW) initiative enable foreign workers to fill essential roles in construction and other high-demand sectors.
Japan can really leverage its position as one of the safest countries to attract foreign talent for its construction and digital transformation sectors. This approach not only fills critical roles but also brings fresh perspectives into the industry.
The construction sector has traditionally been male-dominated, with women comprising 17.7% of the workforce in 2022. To address this, initiatives like Kensetsu Komachi are promoting inclusive environments by creating facilities that cater specifically to female employees, fostering a more diverse workforce.
Large companies such as Shimizu and Takenaka are also implementing flexible work policies and on-site childcare, supporting not only women but all employees in balancing work and family life. Efforts like Sekisui House’s “Women’s College” are preparing women for leadership roles, making the construction industry more welcoming to everyone.
‘Large companies such as Shimizu and Takenaka are also implementing flexible work policies and on-site childcare, supporting not only women but all employees in balancing work and family life.’
In summary, as Japan’s construction industry navigates a shifting landscape of opportunities and challenges, AI, automation, foreign talent, and inclusive policies are paving the way for a more resilient, adaptive sector.
To stay relevant globally, Japan’s construction industry needs to embrace speed—but without losing the quality that has defined its reputation for decades.
With a strong leadership role in digital adoption and a proactive approach to upskilling its workforce, Japan is setting an example for the broader Asia-Pacific region. By bridging cultural and technological divides, Japan has the potential not only to maintain its competitiveness but also to redefine what’s possible in the construction industry across APJ.
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