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The IT market in Japan is forecast to move to a stronger growth trajectory in 2025 and over the medium term, especially in US dollar terms, because of expected yen appreciation against the US dollar. The domestic foundation for this positive outlook is the development momentum in the digital ecosystem because of public and private sector strategies in fields such as semiconductors, data centres, supercomputers, cloud regions, AI and quantum innovation. The domestic availability of leading-edge components and computational infrastructure will support the broader innovation ecosystem in Japan, and advances in generative AI capabilities could also accelerate digital transformation and boost economic productivity by increasing capacity and lowering costs for digital projects. The risk profile remains tilted to the downside because of the Russia-Ukraine and Israel-Hamas wars and ongoing monetary tightening cycles. However, strategic IT investments are expected to be relatively resilient to economic headwinds.