AR & VR - Japan

Japan

In Japan, revenue in the AR & VR market market is projected to reach US$2,358.0m in 2024.
Revenue is expected to show an annual growth rate (CAGR 2024-2029) of 8.65%, resulting in a projected market volume of US$3,571.0m by 2029.
The largest market within this market in Japan is AR Software, which is anticipated to have a market volume of US$778.7m in 2024.
Although most revenue is generated the United States, the AR & VR market market is gaining traction in Japan.
In this market, the number of users in Japan is expected to amount to 71.3m users by 2029.
User penetration in Japan will be 55.0% in 2024 and is expected to reach 59.8% by 2029.
The average revenue per user (ARPU) in Japan is expected to amount to US$34.9.
Japan's AR & VR market is experiencing significant growth, driven by advancements in gaming technology and increasing adoption in industries like education and healthcare.

Definition:

Augmented reality (AR) and virtual reality (VR) make it possible to combine the real and virtual worlds. AR is generally accessed via mobile phones and primarily relies on lenses. AR effects can be created by using lenses in social media apps, for example. AR is also used for displaying digital 3D objects in our surroundings, e.g., in gaming or eCommerce apps. Meanwhile, VR technology allows users to dive into the virtual world, and, unlike AR technology, it requires a headset device which enables the creation of virtual worlds.

Structure:

The AR & VR market consists of six different markets: AR Advertising, AR Hardware, AR Software, VR Advertising, VR Hardware, and VR Software. AR Advertising covers mobile advertising that is displayed in the most prominent social media apps. AR Hardware comprises AR headsets and glasses. AR Software is divided into three different application types, namely social media, gaming, and eCommerce applications, which can be accessed via the most prominent app stores. VR Advertising covers in-game advertising as well as advertising in VR videos. VR Hardware comprises both tethered head-mounted displays (HMDs) and stand-alone HMD headsets. Lastly, VR Software covers VR games and VR videos, which require headsets.

Additional information:

The market comprises revenues, users, average revenue per user, and penetration rates. Revenues are generated through in-app purchases, advertising spending, and consumer spending on apps, games, and hardware such as headsets or glasses. Sales channel data shows both online and offline revenues, which include VAT. The market only displays B2C revenues and users for the above-mentioned markets and markets; B2B and B2G revenues are not included. Additional definitions for each market can be found on the respective market pages.
Market numbers for VR headsets are also featured in the Consumer Market Insights, namely in the Gaming Equipment market of the Consumer Electronics market. Unlike the VR Hardware market in the Advertising & Media Outlook, the Gaming Equipment market also covers smartphone VR devices.
Key players in the market include companies such as Meta (Oculus VR), Microsoft (HoloLens), Snap Inc. with different lenses, and Nvidia, which offers computing hardware components.
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Analyst Opinion

The AR & VR market in Japan has been experiencing significant growth in recent years, driven by customer preferences for immersive and interactive experiences.

Customer preferences: Japanese customers have shown a strong interest in AR & VR technologies, as they are known for their enthusiasm towards innovative and cutting-edge technologies. The younger generation, in particular, is highly receptive to AR & VR applications, as they seek new and exciting ways to engage with digital content. Additionally, the COVID-19 pandemic has accelerated the adoption of AR & VR technologies in various industries, such as gaming, entertainment, education, and healthcare, as they provide virtual alternatives to physical experiences.

Trends in the market: One of the key trends in the AR & VR market in Japan is the increasing demand for virtual reality gaming. Japanese consumers have a long-standing affinity for gaming, and the immersive nature of VR gaming has captured their interest. This has led to the development of a wide range of VR games and experiences, attracting both domestic and international players in the market. Another trend is the integration of AR & VR technologies in the retail sector. Japanese retailers are leveraging these technologies to enhance the shopping experience, allowing customers to try on virtual clothes, visualize home furnishing options, and even test drive virtual cars. This not only provides convenience and personalization but also helps retailers differentiate themselves in a highly competitive market.

Local special circumstances: Japan has a unique cultural and social context that influences the adoption of AR & VR technologies. The country has a rich history of traditional arts and crafts, and there is a growing trend of using AR & VR to preserve and promote these cultural heritage assets. AR & VR applications are being used to create virtual museum experiences, allowing visitors to explore historical artifacts and artworks in a digital environment. This fusion of tradition and technology appeals to both domestic and international tourists, contributing to the growth of the AR & VR market in Japan.

Underlying macroeconomic factors: Japan's strong technological infrastructure and advanced manufacturing capabilities have played a significant role in the development of the AR & VR market. The country is home to several leading technology companies and has a well-established ecosystem for innovation and research. Additionally, the government has been supportive of the AR & VR industry, providing funding and incentives to promote its growth. These factors have created a favorable environment for the development and adoption of AR & VR technologies in Japan. In conclusion, the AR & VR market in Japan is experiencing rapid growth due to customer preferences for immersive experiences, particularly in gaming and retail. The unique cultural context of Japan and its advanced technological infrastructure further contribute to the market's expansion. With the continued advancement of AR & VR technologies and the increasing demand for innovative digital experiences, the market is expected to continue its upward trajectory in the coming years.

Methodology

Data coverage:

The data encompasses B2C enterprises. Figures are based on the AR & VR market. AR and VR enable consumers to experience a new dimension, using either a headset or installed units, as they combine the real and virtual worlds. Consumer revenue figures refer to revenues relating to AR hardware, AR software, VR hardware, VR software, and spending on AR and VR advertising. Both digital and non-digital revenues are included.

Modeling approach / Market size:

Market sizes are determined through a top-down approach, building on specific predefined factors for each market market. As a basis for evaluating markets, we use annual financial reports of the market-leading companies and industry associations, as well as third-party studies and reports. In addition, we use relevant key market indicators and data from country-specific associations, such as consumer spending, internet penetration, 4G coverage, and historical developments. This data helps us estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the relevant market. For example, the S-curve function and exponential trend smoothing are well suited for forecasting digital products and services due to the non-linear growth of technology adoption. The main drivers are level of digitalization, adoption of technology, GDP per capita, and internet penetration.

Additional notes:

The market is updated twice a year in case market dynamics change. The data is modeled using current exchange rates. The impact of the COVID-19 pandemic and the Russia-Ukraine war are considered at a country-specific level. In some cases, the data is updated on an ad hoc basis (e.g., when new, relevant data has been released or significant changes within the market have an impact on the projected development).