Let's Get Physical (AI)

In the U.S., we’re starting to worry more about AI and robots taking our jobs. It is, apparently, the “grimmest” job market in years for college grads, and AI often gets the blame. Whether that’s true is not so clear. Callum Borchers wrote in The Wall Street Journal about “AI washing” – using AI as an excuse for not hiring. “It’s a wonderful way of looking like a genius when job cuts are something you might have to do for other operational reasons,” Peter Bell, the founder of Gather.dev, told him. “It’s great smoke cover if you just need to goose your bottom line.”

Get ready for the robots. Credit: Microsoft Designer

Still, though, it’s not an unwarranted concern. “I don’t think A.I. has hit the labor market yet, and I don’t think it’s radically changed corporate productivity yet, either, but I think it’s coming,” Daniel Rock, a University of Pennsylvania economist, told Ben Casselman of The New York Times.

Mr. Casselman reports on a new working paper from a number of economists on forecasting the economic effects of AI, which reveals there is some divergence among economists about how much AI will improve the growth of the economy or its impact on the labor force. They do think there will be impacts but “experts do not forecast economic outcomes outside the range of historical experience.”

Take your pick about the forecasted AI impact. Credit: Karger, et. al.

The experts might want to look at Japan for a glimpse of the future. In TechCrunch, Kate Park takes a long look at how Japan is prioritizing “Physical AI” not as something to fear but as an economic necessity. Its Ministry of Economy, Trade and Industry announced in March that it wants to bolster Japan’s domestical Physical AI sector, and capture a 30% global share by 2040.

Japan has a big demographic problem. It has never encouraged immigration, its population has been shrinking for 14 straight years, its senior population continues to grow, and its working age population is declining. The demographic bomb is already going off.

“Physical AI is being bought as a continuity tool: how do you keep factories, warehouses, infrastructure, and service operations running with fewer people?” Hogil Doh, Global Brain general partner, told Ms. Park. “From what I’m seeing, labor shortages are the primary driver.”

“The driver has shifted from simple efficiency to industrial survival,” Sho Yamanaka, a principal with Salesforce Ventures, added. “Japan faces a physical supply constraint where essential services cannot be sustained due to a lack of labor. Given the shrinking working-age population, physical AI is a matter of national urgency to maintain industrial standards and social services.”

Justin Brown writes in Silicon Canals: “The framing matters. In the U.S., physical AI is a venture capital thesis. In China, it’s a geopolitical strategy. In Japan, it’s an answer to a structural question about whether the country can keep its industrial base running at all.”

It should be troubling that in the U.S. physical AI is neither a strategy nor a tactic, but just a “venture capital thesis.”

Ms. Parks states that Japan has historically excelled in the physical building blocks of robotics, whereas China and the U.S. have focused on “full stack” systems that include hardware, software, and data. “Japan’s expertise in high-precision components – the critical physical interface between AI and the real world – is a strategic moat,” Sho Yamanaka, a principal with Salesforce Ventures, told her. “Controlling this touchpoint provides a significant competitive advantage in the global supply chain. The current priority is to accelerate system-level optimization by integrating AI models deeply with this hardware.”

Japan’s efforts are attracting attention. Tech Buzz reports:

The shift is attracting serious enterprise money. Salesforce Ventures is betting on Japanese physical AI startups, joined by Woven Capital, Toyota's venture arm, and local heavyweight Global Brain. These aren't speculative moonshot investments-they're backing companies deploying robots into warehouses, manufacturing lines, and service positions today.

As such, Tech Buzz concludes: “This pragmatic necessity is creating a real-world testing ground that Silicon Valley can only simulate. Japanese robotics companies are learning what works when physical AI meets messy human environments-unpredictable warehouse layouts, variable product packaging, and the constant adaptation required in actual operations. The feedback loop is accelerating development faster than any research lab could manage.”

I.e., if you want to see the future of Physical AI, look to Japan.

Mr. Brown offers a very practical example:

In construction, an industry where Japan’s worker shortage is especially severe and the average age of laborers now sits above 50, Shimizu Corporation and Obayashi have deployed autonomous welding robots, concrete-finishing machines, and AI-guided cranes on active building sites. Shimizu’s Robo-Welder system has demonstrated a roughly 70% reduction in required human welding hours on structural steel projects.

Affordable housing, anyone?

It’s not that Japan is investing so much in AI – it has approved a national AI plan with five year funding of “only” US$6.3b – as it is that it is targeting it very effectively. As Franklin Templeton describes it: “The emphasis is not on chasing frontier models, but on embedding AI into sectors that already anchor Japan’s economy…Few countries are as comfortable integrating robotics into daily life and industrial production, and that long familiarity with automation shapes how AI is deployed.”

It should come as no surprise that a group of Japanese robotics developers and major electronics and semiconductor companies are collaborating to produce a humanoid robot, with the aim of mass production by 2027. Elon better get Optimus cranking.

Jensen Huang, founder and CEO of NVIDIA says: “Physical AI has arrived — every industrial company will become a robotics company,” but it’s not that simple. As Mr. Brown warns: “Japan’s regulatory willingness to permit autonomous systems in mixed environments like construction sites, farms, and retail stores is proving as important as the technology itself, and countries that wait until the labor crisis is acute before updating regulatory frameworks will find themselves a decade behind on deployment infrastructure.”

I especially liked Mr. Brown’s conclusion:

Western automation discourse treats robotics as something that happens to workers, a force that displaces and disrupts, and nearly every policy debate in the U.S. and Europe is still structured around that premise. Japan reveals how fundamentally parochial that framing is. When automation becomes a continuity tool rather than an optimization tool, the entire institutional posture shifts: political resistance dissolves, regulatory frameworks accelerate, and the relationship between human labor and machine capability stops being adversarial and starts being architectural. 

The U.S. already has critical shortages of farm or construction workers, we don’t produce enough engineers, and goodness knows we’re driving away our scientists, so if we wait until it’s clear that we need Physical AI, it will probably be too late.