TITLE:
AI Adoption and Its Challenges in the Japanese Labor Market
AUTHORS:
Chikashi Tsuji
KEYWORDS:
Artificial Intelligence, AI Adoption, Japanese Labor Market, Labor Shortages, Automation, Human-AI Collaboration, Reskilling, Productivity
JOURNAL NAME:
Modern Economy,
Vol.17 No.9,
September
7,
2026
ABSTRACT: Given Japan’s rapidly aging population, declining birth rate, and shrinking population, this paper examines the current state and challenges of artificial intelligence (AI) adoption in the Japanese labor market and considers its implications for employment and the nature of work based on the existing literature. The literature suggests that AI should not be understood simply as a technology that replaces human workers. Rather, AI may automate certain tasks while complementing human capabilities, transforming the content of work, and creating opportunities for new forms of value creation. In Japan, AI adoption has expanded across a wide range of industries; nevertheless, several challenges remain, including shortages of digitally skilled workers, disparities in AI adoption across firms, and ethical and institutional concerns associated with AI use. Effective AI adoption requires more than technological investment. Firms need to provide opportunities for reskilling, establish an appropriate division of tasks between humans and AI, and develop effective governance frameworks for AI use. At the individual level, workers need to continuously develop AI literacy, domain expertise, creativity, problem-solving skills, and other capabilities that enable effective human-AI collaboration. The paper argues that, for AI to contribute to sustainable growth in the Japanese labor market, it should be viewed not merely as a substitute for human labor but as a technology that augments human capabilities and facilitates collaboration between humans and machines. Coordinated efforts by firms, governments, educational institutions, and individuals to create an environment conducive to human–AI collaboration could contribute to higher productivity and the development of a more sustainable labor market.