Japan has a geography problem. Its data centres sit almost entirely around its two biggest cities, while its large renewable projects and nuclear plants are concentrated hundreds of kilometres away. A joint council of the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications has set out a plan to bring the two together, and the approach it chose says a good deal about how countries with tight grids will handle the AI build.
The council calls its work "watt-bit collaboration", meaning coordinated planning of electricity and telecommunications infrastructure so that data centres can be built where power is available and connected by fibre to where users are. Its first report, published on 12 June after three meetings, lays out a timeline that runs to the late 2030s.
The mismatch
According to the government's 2025 energy white paper, roughly 90 per cent of Japan's data centres are clustered in the regions around Tokyo and Osaka, Energy Tracker Asia reported on 13 August. Most large-scale renewable energy facilities and nuclear plants, by contrast, are in Hokkaido and Kyushu.
"Currently, data centres are being built in the Tokyo-Osaka area," said Naoki Nishikado, head of research at the Mitsubishi Research Institute's Centre for Policy and the Economy. "This means that there will be a significant mismatch between areas that wish to build data centres and areas where renewable energy is supplied."
Demand for new capacity is rising quickly. Japan had 219 data centres as of March 2024, the tenth-largest number in the world, and its generative AI market is expected to grow 15-fold by 2030, according to the same report. It also cited a June 2023 study by Access Partnership and GLOCOM estimating that generative AI could unlock JPY 148.7 trillion, about USD 1.1 trillion, of productive capacity in Japan.
How the council came together
The ministries explain the logic in their joint release. Growing use of AI and rising communications traffic are driving a rapid increase in demand for data centres, METI said, making their development a key policy issue for Japan. Because data centres need so much electricity, their swift development requires power, telecommunications and data centre operators to work together, the ministries said, citing the government's GX2040 Vision for decarbonisation and growth.
In February 2025, Prime Minister Shigeru Ishiba's cabinet directed the two ministries to build a public-private framework for data centre development. They convened the advisory council, made up of academics and representatives of the power and technology industries, in March. Over three meetings it produced the proposals released in June.
The timeline
The plan works in stages. In the near term, to around 2030, data centre demand will be met largely on the basis of existing power infrastructure, according to an MIC summary of next steps. Alongside that, the government will continue to promote regional dispersal of data centres and support landing undersea cables outside the main cities.
The medium-term goal is the most consequential. Toward the early 2030s, government and industry, working with prefectures and municipalities, will select regions in order to build several gigawatt-scale data centre clusters. Energy Tracker Asia reported that the selection criteria include electricity infrastructure, land availability and resilience to earthquakes, and that large new data centres and power projects are to be co-located.
By the latter half of the 2030s, the council envisions data centres distributed widely away from the urban centres, easing the burden on Japan's grids. The plan also includes developing undersea cables so that data centres in Japan can serve international customers.
Moving the work, not just the buildings
A distinctive part of the Japanese approach is the use of networks to shift computing to where power is. The MIC summary describes trials of small distributed data centres connected by an All-Photonics Network, the high-capacity optical network being developed in Japan, to test workload shifting between sites. One demonstration is aimed at using distributed data centres to make effective use of surplus electricity.
The idea is that some AI work, such as training runs or batch processing, does not need to happen next to users. If regional data centres can absorb output from solar and wind farms that would otherwise be curtailed, the grid gains a flexible customer and the data centre gains cheap power. For the 2030s, the ministries also plan to promote development of data centre operating technology, including more advanced workload shifting, and to keep subsidising regional data centres. The summary describes the overall effort as building new digital infrastructure through the combination of watt-bit collaboration, AI and APN.
The open question
Critics of the plan focus on what counts as clean. In the council's proposals, the sources to be co-located with data centres are described as "decarbonised electricity sources", Energy Tracker Asia noted. That is the same term used in Japan's Long-Term Decarbonisation Power Source Auction, which began in 2023 and supports large generation projects, including some LNG and coal-fired plants that adopt measures to cut their emissions. If the definition is not limited to renewables such as solar and wind, the article argued, the data centre clusters could end up paired with gas or coal.
Supporters see an opportunity. The same analysis noted that utilities are already shortening timelines for grid expansion projects to smooth data centre connections, which could also benefit large renewable developers in the regions.
What to watch
The first concrete test is the selection of regions for gigawatt-scale clusters. Hokkaido and Kyushu are the obvious candidates given their supply, but both need transmission and fibre investment to host loads of that size. The second is whether hyperscalers, which have so far favoured Tokyo and Osaka for latency and customer access, are willing to build hundreds of kilometres away.
For other countries facing similar mismatches, Japan's plan offers a model that treats data centre siting as part of grid planning rather than leaving it to developers. Whether it delivers depends on how quickly the regions can be chosen and wired, and on whether the power that reaches the new clusters is as clean as the policy's name implies.