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The value of the software market in Japan amounted to about **** trillion Japanese yen in fiscal year 2023. The market encompasses application development and deployment, applications, and system infrastructure software. It was expected to reach a size of **** trillion yen by 2028.

The Japanese software industry

Despite its size, the Japanese software industry has been perceived as lacking in competitiveness compared to its counterparts in other countries. Partly due to the high prestige of the domestic hardware and manufacturing industries, Japanese companies were comparatively slow to recognize the potential of software with regard to value-creation. Tasks related to software were often outsourced to other companies or handled by subsidiaries, which encouraged customization and hampered the development of widely applicable software products. At the same time, the Japanese software industry is highly regarded when it comes to embedded software, which is used, for instance, in vehicles and consumer electronics. One additional area of strength is gaming software, which is also related to hardware and manufacturing insofar as Japan is home to Nintendo and Sony, two of the world’s leading gaming console manufacturers. Both console gaming and mobile gaming are very popular pastimes in Japan and Japanese companies have repeatedly acted as innovators in the global video game industry.

IT-related government policies

The software industry is closely connected to the IT industry, which in addition to software also covers hardware and services. Japan’s IT industry has come into increasing focus in the past decade, as the government has emphasized the importance of technological innovations for economic growth as well as for coping with various challenges currently faced by Japanese society, such as demographic ageing and rural depopulation. In 2013, the position of Chief Information Officer (CIO) was newly created in order to control and improve the cabinet’s policies with regard to the IT industry. During the same year, the Strategic Headquarters for the Promotion of an Advanced Information and Telecommunications Network Society published the “Declaration to be the World’s Most Advanced IT Nation,” which set an ambitious plan that explicitly acknowledges IT and data as being key factors for global success. In 2016, the Council for Science, Technology and Innovation (CSTI), which consists of the prime minister, cabinet members, and various experts, introduced the concept of “Society 5.0,” which describes the vision of an increasingly interconnected society. All these developments point toward the growing importance of the IT industry, which is also reflected by the private investment volume in the IT market in Japan.