2. Japan’s Delay and Taiwan’s Bottleneck

In 2018, Japan’s Ministry of Economy, Trade and Industry issued its “Digital Cliff of 2025” report, warning that if companies continued to rely on legacy IT systems, they would face soaring maintenance costs, talent shortages, and declining competitiveness. Studies show that large Japanese corporations often require years to implement ERP or cloud projects, with progress much slower than in the West. Leadership changes or internal resistance frequently result in projects being scaled back or abandoned.

Taiwan presents a different picture. During the pandemic, many firms swiftly adopted online collaboration tools and intelligent scheduling systems, demonstrating agility. Yet once conditions stabilized, many lacked follow-up investment, and these systems were gradually sidelined. Surveys indicate that Taiwanese SMEs invest little in data governance, with information scattered across departments and platforms, making it difficult to support advanced AI applications. Japan’s problem is institutional rigidity; Taiwan’s is a lack of sustained investment. Though distinct, both hinder transformation outcomes.

3. Concrete Applications of AI

In manufacturing, AI is used for defect detection through image recognition, significantly reducing defect rates and returns. Industry surveys reveal that Japanese manufacturers face resistance due to outdated production lines and organizational culture, while Taiwanese SMEs, with newer facilities, are sometimes quicker to apply such systems.

In services, AI adoption focuses heavily on consumer data. Japanese retailers integrate membership systems and purchase histories to drive precision marketing. Taiwan’s e-commerce and startups, though smaller in scale, display high flexibility, allowing rapid adoption of AI in advertising and customer analysis.

In finance, differences in systems are even more pronounced. Japan’s large, conservative banking system mainly employs AI in transaction monitoring and anti–money laundering. Taiwanese financial institutions are experimenting with credit analysis, insurance underwriting, and financial advisory services.

ESG has emerged as a major frontier. As international rules demand carbon emissions disclosure, AI is increasingly used to collect, compare, and validate data. For Taiwan and Japan, this represents a new entry point for cooperation: Taiwanese tech firms provide data processing tools, while Japanese manufacturers integrate them into global supply chains.

4. Opportunities and Three Layers of Challenges

Taiwan’s strength lies in technology and systems integration, while Japan offers market depth and industrial scale. If technology and demand can be effectively connected, cross-border models can be developed. Taiwanese startups provide solutions; Japanese manufacturers bring them into international supply chains. Both sides can expand their influence.

However, the path of cooperation is not straightforward, and challenges can be divided into three layers:

1. Regulation：Taiwan and Japan differ in rules on personal data protection and cross-border transfers. Japan’s Act on the Protection of Personal Information requires adequacy recognition or contractual safeguards for transfers, while Taiwan’s regulations are comparatively looser. For Taiwanese AI services entering Japan, additional legal procedures and compliance reviews are often required, raising costs.
   
   Beyond personal data and cross-border transfers, tax regulations are also a critical factor affecting AI collaboration. Since AI tools are often delivered as SaaS platforms or cloud services, they are classified as “electronic services” in cross-border transactions. In Japan, a reverse charge mechanism applies, requiring Japanese companies to self-declare and pay consumption tax. In Taiwan, foreign service providers must register and pay business tax once annual sales exceed a certain threshold, while in B2B transactions the local company is responsible for reporting. These differences may seem technical, but they directly affect contract design, invoice processing, and tax deductions. If not handled properly, they can undermine the financial benefits of collaboration. Therefore, in cross-border AI applications, tax planning should proceed in parallel with technology deployment and regulatory compliance, becoming part of the initial design.
    
2. Culture：Research shows that Japanese managers remain cautious about AI-driven decisions, preferring interpersonal trust and experiential judgment. This culture often slows down adoption, even when solutions are effective. Taiwanese firms, though more open, often lack strong institutional frameworks and consistent investment. This creates mismatched expectations and timelines in collaboration.
    
3. External markets：U.S. cloud platforms and China’s AI applications are rapidly penetrating Asia, establishing a clear market advantage. If Taiwan and Japan cannot find balance in addressing regulatory and cultural challenges internally, they will struggle to secure their position in international competition. Cooperation has potential, but without strategy, they risk being marginalized by larger external competitors.

5. Charting a path under pressure

The AI wave tests both Taiwan and Japan simultaneously. It highlights Taiwan’s lack of sustainable resources and Japan’s institutional rigidity. If the two can turn complementarity into tangible cooperation, they can not only resolve their own issues but also carve out a new role in global competition.

In this process, professional service firms are uniquely positioned to support this shift. Accounting firms can support businesses through compliance reviews and tax planning, and also assist in ESG data disclosure and cross-border partnership structures. When AI adoption involves capital investment, subsidy applications, or internal control adjustments, firms can provide investment analysis, documentation, and governance design, making transformation more credible and feasible. These services are an indispensable backbone for turning AI from a tool into governance capability.

The pressure of AI is undeniable, but it also opens new possibilities. When Taiwan and Japan can find their respective roles, with professional support as reinforcement, the next stage of cross-border collaboration will gradually take shape.