Microsoft will spend $2.9 billion building out data center capacity in Japan over the next year, the company’s president has said.

Brad Smith said the planned investment is in response to the Japanese government's moves to increase the nation’s compute power in the wake of the AI boom.

The funding is likely to be officially announced later today, to coincide with Japanese Prime Minister Fumio Kishida’s visit to the US.

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Brad Smith – Microsoft

Smith spilled the beans on Microsoft’s plans for Japan in an interview with Asia Nikkei. He said it would be installing servers kitted out with AI chips at its two cloud data centers in Japan, known as Azure Japan East and West, so that they can offer more AI-enabled services.

Microsoft Research is also setting up a new lab in Tokyo which will pursue R&D projects around AI and robotics, while the company is also launching an AI reskilling program in Japan.

In his interview with Asia Nikkei, Smith said AI and compute power had become "a critical national priority for governments around the world."

He added that "the competitiveness of every part of the Japanese economy” will “depend on the adoption of AI,” and went on to say that AI is essential to "sustain productivity growth, even when a country has a declining population."

Details of what exactly Microsoft is spending its money on have not been revealed, but it is likely to be buying hardware from chipmaker Nvidia, which offers GPUs used to train and run AI systems.

Last month Microsoft said its Azure cloud platform would be one of the first to offer its clients access to Nvidia’s new GPU design, Blackwell, though the company’s two biggest rivals in the public cloud market, Amazon’s AWS and Google Cloud, have made similar promises to their users.

The company is also developing its own AI chip, the Maia 100, which will be available to Azure customers alongside hardware from vendors such as Nvidia.

Microsoft opened its Japanese data centers in 2014. Japan East is located in the Saitama Prefecture near Tokyo, while Japan West is in the Osaka Prefecture.

Like many countries around the world, Japan has been seeking to boost its AI capabilities since interest in the technology exploded 18 months ago with the launch of OpenAI’s ChatGPT. Digital infrastructure is seen as a key part of this, and earlier this year AWS announced it was spending $15 billion to expand its cloud computing infrastructure in Japan over the next three years.