The Strategic Role of Japan’s Development Finance under the New Dimension of Digital Infrastructure

EXECUTIVE SUMMARY

MAIN ARGUMENT

China is increasing its presence in global digitalization efforts through the Belt and Road Initiative, and in response the United States and like-minded partners in Europe and Asia are developing new digital infrastructure strategies as a countermeasure. Given the strength of Japanese industry in the digital domain, strengthening Japan’s digital infrastructure efforts should be an important factor. In fact, the Japanese government is in the process of developing a new infrastructure strategy, and support for digital infrastructure and the digital transformation (DX) is expected to be one of the pillars. While the Japan Bank for International Cooperation, Japan’s development finance institution, has been expanding its support for the efforts of Japanese companies in the digital area, such as subsea cables and data centers, through cooperation with the U.S., Australia, South Korea, and other like-minded countries, more work must be done to continuously and strategically enhance ongoing projects. In recent years, as the expansion of digital demand, including for artificial intelligence (AI), has caused power consumption to rapidly increase, the integration of DX and green transformation (GX) has been progressing, adding another critical set of policy considerations to digital infrastructure financing.

POLICY IMPLICATIONS

• Like-minded countries should utilize development finance institutions strategically to strengthen their support for the development of digital infrastructure, with cooperation between actors in the private and public sectors.
• Taking into account the huge increase of power demand stemming from the development of AI, support for digital infrastructure should be further developed by integrating DX and GX.
• Global standards for quality infrastructure should be updated promptly, especially considering the rapid expansion of generative AI.

Hiroyuki Suzuki is Deputy Director General of the Corporate Planning Department and a Startup Investment Committee Member at the Japan Bank for International Cooperation (JBIC).