IDC Japan has released its latest forecast for the domestic IT market, providing updated outlooks by industry, company size, revenue scale, and region.
According to the data, Japan’s IT market is projected to reach 28.1074 trillion yen in 2026, representing a year-on-year increase of 2.3 percent. Over the 2024 to 2029 period, the market is expected to record a compound annual growth rate of 5.9 percent, expanding to 33.3185 trillion yen by 2029.
IDC expects overall growth in 2026 to remain modest at the low two percent range. This slowdown is largely attributed to a sharp decline in the PC market following the end of replacement demand driven by the October 2025 end of support for Windows 10. The smartphone market is also forecast to post negative growth as rising living costs dampen consumer upgrade cycles.
In contrast, IT spending in the enterprise segment remains resilient. Investment in infrastructure as a service, software, and IT services is projected to continue expanding in 2026. Large enterprises and mid-sized companies, in particular, are increasing spending on digital transformation initiatives aimed at improving productivity and revenue growth, as well as on infrastructure modernization projects such as cloud migration and system renewal.
IDC Japan also assessed the impact of US tariff policies announced in April 2025 and partially implemented in August of the same year. The firm notes that while the policies have affected parts of the assembly manufacturing sector, including automotive companies and their supply chains, the overall impact on Japan’s economy and IT market remains limited. Most enterprises are expected to continue their IT investments.
From an industry perspective, IDC forecasts positive growth across all private-sector industries in 2026. The information services industry is expected to see particularly strong growth, driven by demand for IT equipment related to data center construction and increased spending to expand in-house services.
Other industries are also stepping up investments in digitalization, system modernization, data platforms, artificial intelligence, and generative AI. Service and financial sectors are projected to be especially active in IT spending. However, within manufacturing, some automotive-related companies may restrain IT investments due to earnings pressure and supply chain restructuring linked to tariff impacts.
In the public sector, education is forecast to see negative growth in 2026 due to the reactionary decline following PC replacement demand associated with the GIGA School initiative in 2025. Local governments are expected to maintain positive but limited growth as peak demand for municipal cloud migration projects tapers off.
Small businesses continue to face challenges from high resource prices, labor shortages, and the indirect effects of US tariff policies. Combined with the backlash from PC replacement demand in 2025, small enterprises are expected to post significant negative growth in 2026. Overall IT spending among SMBs is projected to grow only slightly. However, larger small businesses and mid-sized enterprises are forecast to increase IT investments as they prioritize productivity improvements, digitalization, and cloud adoption to address labor shortages.
Regionally, IDC Japan predicts flat to negative growth in areas outside major metropolitan regions, including Hokkaido and Tohoku, Hokuriku and Koshinetsu, Chugoku and Shikoku, and Kyushu and Okinawa. This trend reflects the decline in PC replacement demand, the completion of municipal cloud projects, and the pullback following GIGA School-related investments.
In major metropolitan areas such as Tokyo and the Kinki region, IT spending is expected to continue expanding steadily in 2026. However, growth in parts of the Kanto region excluding Tokyo and in the Tokai region is likely to remain modest due to revised IT spending plans at large automotive manufacturers affected by tariff policies.
Looking ahead, IDC Japan expects the domestic IT market to maintain positive growth in 2026 despite the slowdown caused by the PC market correction. Growth is forecast to accelerate again from 2027 onward. While large and mid-sized enterprises continue to drive IT investment, smaller companies and those outside major urban areas are likely to remain cautious due to slower regional economic recovery and challenging business conditions.
Hitoshi Ichimura, Senior Research Manager at IDC Japan Verticals and Cross Technologies, said that even among small enterprises and companies outside major metropolitan areas where IT spending is constrained, the need to improve productivity through digitalization is intensifying due to worsening labor shortages. He noted that IT suppliers should focus on developing easy-to-deploy digital solutions and strengthening collaborative support frameworks with partners to better serve these segments.
RAJANI BABURAJAN
