Japan Encourages Construction of Data Centers, Eyes Big U.S. Tech Companies

Japan will urge domestic and foreign businesses in the country to set up data centers by offering tax breaks and other forms of assistance. The country hopes to prevent sensitive information from leaking out while speeding up its digital transformation.

Discussions have already begun on Monday headed by the government’s Growth Strategy Council on ways to encourage investments in data centers.

Power costs are being considered in the planning given the amount of electricity consumption needed for the storage of information. Focusing construction in areas that have easy access to renewable sources of energy is one of the ideas to address the issue of electricity costs.

Natural disasters also run the risk of crippling infrastructures currently concentrated in Tokyo and Osaka. More than 80% of the country’s data centers are located in either of the two cities. The government is promoting the creation of data facilities outside of these big cities.

However, building data centers in remote areas might pose delays in data transfer, which could result in serious problems and undermine confidence in the technology. One proposition is to build these facilities near smart cities with reliable 5G infrastructures.

“We will build a reliable supply chain for advanced semiconductors and decentralize the location of data centers,” said Katsunobu Kato, Chief Cabinet Secretary and chair of the council.

Japan perceives the creation of data centers, along with securing leading-edge semiconductors, as vital to propel the nation’s digital transformation. Tokyo is also planning to attract big U.S. tech companies like Amazon and Google, who are reportedly hunting for data centers in Asia.

Central and local governments intend to grant budgetary and tax assistance to businesses to aid in construction plans across the country.

Line, a leading chat provider, recently disclosed that a portion of its data derived in Japan is stored in a center located in South Korea. The company has already outlined stages to transfer the data back to Japan.

Promoting data center construction at home could present wider options for domestic data storage and mitigate the potential national security risks posed by tech companies that turn to overseas centers for cost-saving purposes.

Drafting policies on safeguarding information could also be complicated since a majority of data centers are operated by private-sector actors.

According to Japan’s Ministry of Economy, Trade and Industry, China houses the most data centers in the Asia-Pacific region, which is projected to reach 1.7 million square meters of structures this year. Japan and Australia follow with 44,000 square meters each.

Source: Nikkei Asia