TOKYO — The construction of large data centers is gathering speed in Japan, with Mitsui & Co. leading the private sector, after the government of Prime Minister Yoshihide Suga committed to backing the development of key 5G network infrastructure in hopes of turning the nation into Asia’s hub for such services.
Demand for data centers is soaring, but the supply had been limited by the shortage of appropriate construction sites and high electricity costs. The government is now trying to expand supply by offering financial support and tax incentives, as it views the development of such infrastructure as a national security priority.
Mitsui & Co. is expected to invest a total of 300 billion yen ($2.7 billion) by 2026 in the development of new data centers and the acquisition of existing facilities. The trading house has joined forces with overseas investors to build three large facilities in three locations, including Kyoto and Chiba by 2026. The project is expected to cost 150 billion yen.
Mitsui will also partner with the Canada Pension Plan Investment Board to launch an investment fund focused on data center construction. The fund is expected to manage several hundreds of millions of dollars. A 50-50 joint venture will also be formed between the new fund and Fidelity Investments. The joint venture will be operated by Colt Data Center Services, a Fidelity subsidiary.
New data centers to be built by these funds are expected to have cloud service operators, gaming companies and other internet contents providers as customers.
Separately, Princeton Digital Group, a data center service provider based in Singapore, is planning to spend 110 billion yen for a new facility in Saitama, north of Tokyo.
Japan is underrepresented in terms of data center distribution. Only 6% of the 597 large data centers in the world are located in Japan as of the fourth quarter of 2020, making the country a distant third after the U.S. and China, according to Synergy Research Group. The 597 number represents a doubling from five years ago.
Large data centers play a critical role in promoting the adoption of 5G communication services, including big data analysis. The amount of data moving between the major internet providers in Japan increased more than 50% from a year ago, according to a November 2020 survey conducted by the ministry of internal affairs.
