Japanese businesses ‘well placed’ to capture Southeast Asia data centre growth

Nicholas Hanna of Pinsent Masons said the region offers significant opportunities for Japanese businesses seeking to expand their digital infrastructure footprint.

“Southeast Asia presents a genuinely compelling opportunity for Japanese companies looking to grow their data centre presence in the region,” Hanna said.

“The market is maturing quickly, deal structures are becoming more sophisticated, and there is strong appetite from local partners and investors to work with Japanese businesses bringing capital, technology, and operational expertise.”

It comes as the demand for data centre capacity in Japan continues to surge. According to global research group Wood Mackenzie, electricity consumption by Japan’s data centre sector is expected to more than triple, rising from 19 terawatt hours (TWh) in 2024 to between 57 TWh and 66 TWh in 2034. Data centres are forecast to account for around 60% of the country’s total power demand growth over that period.

The increase is being driven by substantial investment from hyperscale technology companies. Wood Mackenzie reports that US$28 billion of hyperscaler investment is flowing into Japan following the government's selection of Oracle, Google and Microsoft as official cloud providers. However, infrastructure constraints are delaying some projects, with major data centre and semiconductor developments not expected to come online until 2029 in some cases.

Against this backdrop, Japanese companies are increasingly pursuing opportunities elsewhere in the Asia-Pacific region.

One example is NTT Data, which has committed more than US$10 billion to expanding its global data centre business by 2027. As part of that strategy, the company has announced plans for a 290 megawatt (MW) data centre campus in Johor, Malaysia, one of Southeast Asia's fastest-growing data centre markets. The company has also acquired land across seven global markets to support almost 1 gigawatt (GW) of future capacity.

SoftBank is also expanding its regional ambitions. Earlier this month, its Singapore-based subsidiary SB Telecom Singapore signed a memorandum of understanding with SC Capital Partners' data centre platform SC Zeus and Malaysian IT consultancy Robust HPC to develop data centres across Southeast Asia. The partnership will initially focus on Malaysia, Thailand, Indonesia and Vietnam.

Hanna said that while the commercial opportunities are considerable, success depends on understanding the legal and regulatory requirements that differ significantly across jurisdictions.

"For Japanese businesses looking at this space, understanding how to structure entry into each market, and how to navigate the distinct approval, land acquisition, and energy procurement requirements that apply, is where getting the right advice early makes a material difference,” he said.

Governments across other parts of the region are now introducing new requirements for data centre developments. For example, Australia is proposing a new national framework governing data centre location, energy and water use. Under the plans, developers would be required to minimise water consumption, maximise energy efficiency and fund their own power supply infrastructure. Operators could also be required to contribute to new electricity generation capacity and grid upgrades.

The proposed reforms come as Australia’s data centre sector is expected to attract between A$85 billion (US$60 billion) and A$135 billion (US$95 billion) of investment over the next decade.

Mayumi Soh of Pinsent Masons said: "Investors need to consider a range of issues when evaluating opportunities across the region. This includes planning and environmental approvals, energy procurement arrangements, project financing structures, land acquisition strategies, joint ventures and compliance with data sovereignty and cross-border data transfer rules. Japanese businesses that move early, with the right legal and commercial foundations in place across joint ventures, acquisitions, and partnership structures, are well positioned to capture the most attractive opportunities as the market develops.”