How Japan can remain a star player in the space sector

The space economy is expected to grow to $1.8 trillion by 2035, from using satellite data for resource management, manufacturing pharmaceuticals and material in microgravity on space stations to mining resources and building infrastructure on the moon. This will create unprecedented opportunities for innovation and value creation in every sector and industry.

Currently, Japan’s space industry is valued at JPY 4 trillion (around $26 billion) and the plan of the government is to expand to JPY 8 trillion (~$52 billion) by the early 2030s. In 2024, Japan has achieved significant milestones including becoming the fifth country to land a spacecraft on the moon.

Astroscale, a company headquartered in Japan, succeeded in the world’s first attempt to safely approach and observe space debris encouraging commercial space debris removal. Perhaps the most impactful of them all, the government’s Space Strategy Fund launched and will pump JPY 1 trillion (around $6.6 billion) into the market through Japan’s space agency, JAXA, in the next 10 years.

Despite this growing momentum, it is necessary to make space applications, data and services more practical and useful to terrestrial businesses to reach government targets.

Nearly 40% percent of the targets set under the UN Sustainable Development Goals (SDGs) take advantage of space technology, in particular Earth observation (EO) and global navigation satellite systems. However, the full capabilities of these technologies are yet to be adopted. There is a lack of awareness and use cases to show other sectors how they can scale their business by using space technology.

In November, as part of activities under the Centre for the Fourth Industrial Revolution, Japanese government and business leaders met to discuss how to expedite the growth of the Japanese space sector and the adoption of space to terrestrial businesses. They raised the need to highlight the benefits of space as an enabler for governments to advance societal issues, such as the green transformation.

Converging space with other technologies such as artificial intelligence (AI) and digital twins was also stressed as a way to advance the adoption of space technologies. Partnerships, in particular with the financial sector but also between business and academia to create new applications of the tech, were emphasized.

Both Masao Masuda, managing executive director from the Development Bank of Japan, and Seiichiro Akita, senior managing corporate executive head of MUFG Bank Group said: “It is important to raise and sustain the bankability of space activities to promote investments and supply finance in the long term.”

“The other crucial partnership is between business and academia to create new applications using the latest scientific insights," highlights Hiroaki Miyoshi, fellow of NEC.

The biggest customer for space companies’ services still tends to be the government. Participants at the November event agreed that the government has a significant role in setting the direction and anchor tenancy until the industry is sustainable on its own. Nevertheless, from using satellite data for resource management, manufacturing pharmaceuticals and material in microgravity on space stations to mining resources and building infrastructure on the moon, the sector needs to find customers and investors from other sectors to stimulate business.

In the fields of space exploration and space sustainability and in terms of hardware and robotics, Japan possesses a vital trinity of strengths. Firstly, regulations and funding are set by the government. The industry knows what will be regulated and what will not be, which helps them plan and invest in their activities. Having funding support from the government shows that the sector is a priority and that there is national interest.

Secondly, research and development of the technology core to space exploration and sustainability is conducted by the national space agency, academia and industry. Finally, there is a growing ecosystem including industry players from terrestrial sectors that produce commercial services.

“The key for Japan to sustain and grow its leadership and position in the global space economy is to leverage these existing regulations and systems as soft power,” says Jun Kazeki, the Director General of the National Space Policy Secretariat.

Since the 1950s, Japan has accumulated an abundant amount of data and information through its space activities. This data can be combined and used to tackle societal issues that impact many. Japanese leaders recommend finding new areas where Japan can differentiate from others and create unique value. Future lunar activities proposed by ispace could be an avenue, as Takeshi Hakamada, CEO of ispace underscores: “Japan's position is unique, both geopolitically and in terms of the trust that Japan has built. We want to lead in an inclusive way to build a prosperous cislunar [the space between the Earth and the moon] economy that will benefit all.”

Japan is still a small part of the whole pie when it comes to the global space economy. For the Japanese space sector to truly thrive, expansion into the global market is a no-brainer. The US market is dominant and would be the ideal area for business, but it has hurdles for market entry.

One step already being taken by companies for expediting global business is regional cooperation in the Asia-Pacific region. The region faces the same issue, none of the countries have a big enough pie domestically to support their space industry ecosystem and have difficulty jumping into competitive markets. According to the CEO of SPACTIDE Masayasu Ishida: “The common challenges in APAC for business is talent and workforce development, awareness of space to other sectors, and demand creation.”

This is not something that countries in the APAC region can tackle on their own and requires collaboration. The APAC region’s potential is high with expectations for it to capture $315 billion, the largest share of EO value between 2023-2030 by hastening adoption and with population growth and rapid digital transformation pushing the wave forward.

Japan’s role is to facilitate co-creation to support the region’s aims to elevate space on national agendas, become a hub for information exchange and create platforms to accelerate use cases for regional cooperation to tackle various demands through space. The World Economic Forum plans on regional activities to support and amplify this effort in 2025.