Power-hungry data centres – warehouse-like facilities that power AI tools from chatbots to image generators – are springing up worldwide, and the sector is growing particularly fast in Asia.

Microsoft president Brad Smith met Japanese prime minister Sanae Takaichi at her office today to announce the investment.

Smith said in a statement that it was a “response to Japan’s growing need for cloud and AI services”.

Businesses in Japan, the world’s fourth-largest economy, are keen to get ahead in the fast-moving AI field.

However, data centre expansion there is constrained by limited space and relatively expensive electricity.

“The US tech giant will collaborate with Japan’s SoftBank Group and Sakura Internet to expand domestic tech infrastructure,” it said in a press release.

It follows a US$2.9 billion two-year investment Microsoft announced in 2024 to bolster the country’s push into AI and strengthen its cyber defences.

The investment unveiled today also includes funds to enhance cybersecurity partnerships with Japanese government agencies, and to train one million engineers in cooperation with telecom and tech giants NTT and NEC.

A rush to build data centres in the Asia-Pacific region, especially in India and Southeast Asia, has sparked concerns over the facilities’ environmental impact.

That includes increased demand on electricity grids that are often reliant on fossil fuels, and on local water supplies used to cool the hot servers inside.

Microsoft says it has pledged to become carbon negative, zero-waste and “water positive” by 2030.

On Tuesday, the company announced plans to invest more than US$1 billion in cloud and AI data centre infrastructure and operations in Thailand over the next two years.