According to a recent report released by Structure Research, the Toyko colocation data center market is projected to grow 7% in 2018, to $1.7 billion USD; and the Osaka market is expected to grow 6%, to $210 million USD.

Japan represents one of the most expensive markets for data centers in the APAC region, with high-cost real estate, labor, and construction. Additionally, power is expensive, and the potential risk of natural disasters is great.

However, Japan is also a global financial hub, and provides the region with international connectivity through the submarine cables stretching from Japan to the western United States. Recently, Cloudscene named Japan as a global data center powerhouse for five main reasons: strong technology talent and market, unique data center standards, largest market in APAC, home to facilities of major data center providers, and a strong colocation market.

Because of Tokyo’s geographic location, mature technology and financial markets, and international connectivity, it is positioned as the gateway for international firms to access the Japanese market. While traditionally, the Tokyo data center market has been controlled by domestic providers, international providers such as NTT Communications and Equinix are investing heavily in the region. NTT is the market leader in capacity, while Equinix is the colocation market leader in revenue.

Tokyo’s position as a data center colocation leader is further bolstered by the upcoming 2020 Olympic Games, which will be hosted in Tokyo.

Just this week, AirTrunk raised $618 million USD to expand in the APAC region, with Tokyo as one of the top 3 priorities for establishing a data center presence.

Retail is projected to account for 79% of total colocation revenue in Tokyo this year, however, wholesale colocation growth is projected to outpace retail colocation growth by 2023.

Osaka, on the other hand, is positioned to be the leader in offsite disaster recovery solutions, as its location in central Japan offers protection and easily serves Kyoto, Nagoya, and Kobe.

The Osaka metro area currently hosts 29 data center colocation facilities, with the North Osaka area becoming popular sites for hyperscale developments.