Microsoft said on Friday it plans to invest $10 billion in Japan over the next four years, focusing on artificial intelligence data centres and supporting infrastructure.

The announcement followed a meeting between Microsoft President Brad Smith and Japanese Prime Minister Sanae Takaichi in Tokyo. Smith described the move as a “response to Japan’s growing need for cloud and AI services.”

Companies across Japan, the world’s fourth-largest economy, are accelerating efforts to strengthen their position in the evolving AI sector. However, expansion of data centres in the country has been slowed by land constraints and relatively high electricity costs.

Microsoft said it will work with SoftBank Group and Sakura Internet to scale domestic digital infrastructure. The new commitment follows a $2.9 billion investment announced in 2024 aimed at boosting Japan’s AI capabilities and reinforcing cyber defences.

Alongside infrastructure, the latest plan allocates funding to deepen cybersecurity cooperation with government agencies and to train one million engineers. The initiative will be carried out with major telecom and technology firms, including NTT and NEC.

The surge in data centre construction across the Asia-Pacific region, particularly in India and Southeast Asia, has also raised environmental concerns. These facilities place growing pressure on electricity grids — many still dependent on fossil fuels — and require significant water resources to cool high-performance servers.

Microsoft rolls out multimodal AI models as competition intensifies

In a parallel development, Microsoft’s AI division unveiled three new foundational models capable of generating text, voice, and images, signalling a continued push to expand its in-house capabilities.

The models are now available through Microsoft Foundry, with some also accessible via the MAI Playground testing environment. Pricing has been positioned as a competitive advantage, with Microsoft stating the tools are cheaper than comparable offerings from Google and OpenAI.

The rollout underscores Microsoft’s dual-track strategy: building its own AI systems while maintaining its long-standing partnership with OpenAI.

The company has invested more than $13 billion into the collaboration and continues to integrate OpenAI’s models across its products, even as it develops alternatives internally.