Japan aims to reduce reliance on major cloud providers

Japan is aiming to reduce its reliance on major cloud service providers by designating cloud services as a priority for economic security.

The country hopes this initiative will help to cultivate domestic providers in a sector led by foreign companies, as reported by Nikkei Asia.

The government is reportedly worried that placing sensitive state information on foreign clouds could threaten national security and that overseas companies won’t respond as fast to cyber attacks that target Japan.

By designating cloud services as a critical product, it would allow companies to access government subsidies and financing with reduced interest rates.

Japan is also set to require that domestic cloud services maintain an engineering team in the country to provide a quick response to any issues.

Members of the Japanese government think it will be challenging for Japanese players to compete with established foreign rivals on public cloud services. The government wants domestic providers to focus on private clouds too, which are used for storing sensitive information.

Signing up for cloud services is usually cheaper than building proprietary data and software infrastructure. The internal affairs ministry said that 68.7% of Japanese companies used cloud services in 2020, while the government is moving more administrative functions to the cloud too.

However, foreign providers currently dominate Japan’s cloud market. Amazon Web Services (AWS), Microsoft, and Google controlled a 60-70% share in 2020, up from 5-10% nine years earlier, said the Japan Fair Trade Commission. The Fuji Chimera Research Institute said that In 2020, foreign operators held a combined market share of 72%, while Japanese players like Fujitsu or NTT have fallen behind.

Despite the government aiming to reduce its reliance on foreign cloud companies, the country’s Digital Agency selected AWS and Google Cloud to run its first nationwide cloud computing project in the country last October. The two providers were chosen as they met around 350 requirements across security legal issues and data management.

The government cloud project is aiming to unify and standardise digital infrastructure across ministries and around 1,700 municipalities, which run their own systems. The budget for government cloud computing until last March was around 2 billion yen (£12.3 million).