Japan is turning its attention to light-based communication technologies to expand data centers beyond crowded urban hubs. The government plans to offer financial support to develop optical technology, a fast and energy-efficient solution that promises to revolutionize data transmission.
With discussions underway between the Ministry of Internal Affairs and Communications and the Ministry of Economy, Trade, and Industry, the initiative could see subsidies and aid packages in place as early as 2025, according to reports.
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Photonic-Electronic Convergence
Japan’s decentralized data center initiative is rooted in the convergence of photonics and electronics, which enables data to be processed and transmitted as light instead of relying on conventional electrical signals. The appeal of this technology lies in its ability to carry vast amounts of data with minimal power consumption, offering a sustainable alternative to traditional electronics.
The rise of technologies such as generative artificial intelligence (GenAI) and autonomous vehicles (AVs) has highlighted the increasing need for rapid, high-capacity communication networks. These technologies generate massive amounts of data that require a robust, high-speed infrastructure.
In response, Japan is looking to harness the potential of light-based communication systems to meet the surging demand as one of the key advantages of light-based networks is their speed and efficiency.
Telecommunications giant, Nippon Telegraph and Telephone (NTT), is at the forefront of this transformation with its Innovative Optical and Wireless Network (IOWN). This ambitious initiative, expected to be fully operational by 2030, aims to reduce latency to 1/200th of its current level and cut energy consumption by 99%. Such capabilities could transform the way data is processed and transmitted, making it more feasible to decentralize data storage and processing outside of Japan’s highly congested urban areas.
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Additionally, last year, Nokia and OPTAGE successfully trialed symmetrical 25G PON technology for the first time in Japan, a milestone that sets the stage for the ultra-high-speed, low-latency data transmission required for decentralized data centers. Meanwhile, at the end of last year, NEC completed the Asia Direct Cable (ADC), a submarine cable boasting multiple pairs of high-capacity optical fibers capable of handling over 160 Tbps of traffic. Owned by the ADC Consortium, this infrastructure significantly enhances regional connectivity and supports the bandwidth demands of modern data centers. These advancements collectively pave the way for Japan’s transition to cutting-edge, decentralized data ecosystems powered by light-based networks.
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Why Decentralize Data Centers?
Japan's data center market is experiencing rapid growth, with its forecast value expected to climb from USD 23 billion in 2021 to USD 30 billion by 2026, driven by a CAGR of 6.5%. This expansion is largely being fueled by the increasing demand for public cloud services, making decentralization a strategic necessity to support this surge.
The decentralization of data centers is a central element of the Japanese government’s resiliency plan. Urban areas in Japan, particularly cities like Tokyo and Osaka, face significant space constraints, limiting the development of new data hubs. By encouraging the construction of data centers in less populated regions, Japan hopes to reduce pressure on urban infrastructure and spread the benefits of technological development more evenly across the country.
Moreover, decentralizing data centers enhances natural disaster resiliency. Japan is prone to earthquakes, tsunamis, and other natural calamities that can severely disrupt concentrated data hubs. Distributing data centers across the country can mitigate the risk of system failures due to regional disasters, ensuring that critical data remains accessible even in times of crisis.
Decentralizing data centers in Japan offers additional advantages, including improved scalability, enhanced security, and greater energy efficiency. Supporting the shift to decentralized data centers, NTT Global Data Centers Japan (NTT GDCJ) and TEPCO Power Grid are working together to establish advanced data centers that combine cutting-edge infrastructure with sustainable power solutions. Singtel and Hitachi have also partnered to develop next-generation data centers.
Supporting the sustainability vertical, Rakuten, in collaboration with Ampere, is implementing Ampere-based platforms within its data centers, serving as a use case that accurately depicts the potential of Japan’s data center decentralization efforts. Trials since 2023 have already achieved a 36% reduction in energy consumption, showcasing the environmental benefits of decentralized infrastructure.
On the technical side, in 2024, NTT Communications’ Osaka 7 Data Center earned NVIDIA DGX-Ready certification, emphasizing the broader data center sector’s readiness for, and the potential of, AI-intensive, optical-supported workloads.
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Hokkaido: The Ideal Location
A key focal area of the government’s data center decentralization initiative is Hokkaido, Japan’s northernmost island. Known for its abundant renewable energy sources, Hokkaido presents a promising location for energy-intensive data centers. The region's commitment to sustainability is reflected in recent data from Hokkaido Electric Power Network, which showed that renewable energy accounted for 41% of the region’s total electricity generation last year, far exceeding Japan's national average. Hydropower, solar energy, wind, and biomass all play a significant role in the region’s energy mix, making it a prime candidate for powering data centers in an environmentally friendly manner.
The region’s ‘Hokkaido Valley’ initiative, spanning areas such as Ishikari and Tomakomai, aims to attract renewable energy firms to support the growth of data centers and other high-tech industries, including the burgeoning semiconductor sector. This aligns with Japan’s vision to achieve 36–38% renewable energy by 2030. Furthermore, a reference target of 50–60% by 2050 has been set out by the Organization for Cross-Regional Coordination of Transmission Operators (OCCTO).
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Developing at the “Speed of Light”
The Japanese government’s support for light-based communication technologies and the development of decentralized data centers is a forward-thinking strategy that aims to future-proof the country’s technological infrastructure. As global demand for data services soars at a compound annual growth rate (CAGR) of 20% through 2030, Japan is positioning itself to lead the way in high-speed, energy-efficient solutions.
By leveraging its strengths in optical technology and renewable energy, Japan aims to build a more resilient, sustainable, and equitable data infrastructure. The expansion of data centers across the country will not only meet the needs of emerging technologies but also ensure that Japan remains at the forefront of global digital innovation in the years to come.
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