Barely two weeks after Singapore-based Princeton Digital Group (PDG) launched its 110 billion yen (US$1 billion) drive to expand its data centre footprint in Japan, Mitsui & Co. has now also come forward with its own multi-billion Dollar capital investment into the sector.

In total, Mitsui & Co, one of the largest sogo shosha (or general trading companies) in Japan is expected to deploy as much as 300 billion yen ($2.7 billion) by 2026 to build and acquire data centre facilities in the country.

According to Nikkei Asia, the business has already built partnerships with overseas investors in a bid to erect three facilities in three locations, including Kyoto and Chiba. This phase of the investment plan is set to amount to 150 billion yen ($1.35 billion).

Mitsui has also set plans in motion to partner and launch an investment fund dedicated to data centre construction with the Canada Pension Plan Investment Board (CPPIB). Data centre funds are gaining pace across Asia, not only in Japan but other countries such as China, where hosting demand continues to grow.

The Mitsui/CPPIB fund will also enter into a 50-50 joint venture with Fidelity Investments and be operated by Fidelity’s subsidiary Colt Data Center Services. Colt DCS currently have 50MW existing built in Japan, which will almost triple to 140 MW following the joint venture.

Shinsuke Waka, GM of Financial Business Division, from Mitsui & Co, said: “Data centres play a critical role in the digital transformation of businesses across the globe, and the demand for high-quality and environmentally conscious hyperscale data centres is huge.

“Through the management of the Mitsui Fund and our joint venture, Mitsui will utilise its unique financial and industrial capabilities to respond jointly to these needs with its global prestigious partners.”

Niclas Sanfridsson, CEO, Colt DCS, said: “Japan remains a strategic country of focus for our regional expansion, where the demand for large-scale data centre capacity outstrips supply.

“Whilst Colt DCS already has a solid reputation in the market for working with the world’s largest hyperscale cloud providers and multi-national companies, the partnership with Mitsui and its strategic alliances will provide new opportunities for us to further penetrate the domestic enterprise sector and accelerate our land banking strategy.”

Japan has been known for its largescale cash commitments to the development of data centres as far back as 2017, when Digital Realty (NASDAQ: DLR) entered a 50-50 joint venture with Mitsubishi Corporation (TYO: 8058) to invest 200 million yen ($1.8 billion) in the development of facilities under a holding company branded MC Digital Realty.

Other big players in the market include NTT, Fujitsu, Equinix, Colt, IBM, Microsoft, Hitachi, NEC and AWS, with whom the Japanese government has agreed on a deal of more than $273 million till 2026.

According to Mordor Intelligence, the Japan data centre market is expected to register a compound annual growth rate (CAGR) of 3.7% from 2021 to 2026.

The think tank justifies this growth with the booming usage of cloud computing (further fuelled due to COVID-19), increasing high-speed internet penetration, government regulations for local data security, and growing investment by global players.

On the hyperscaler front, Japan was as of the end of 2020, the third-largest market on the planet by number of facilities, accounting to 6% of the 597 largescale sites worldwide just behind China (10%) and the US (39%), according to Synergy Research.

Further market data from Structure Research, shows that Greater Tokyo’s hyperscale colocation market is expected to reach $1.6 billion by 2025, growing at a CAGR of 25.1% between 2021 and 2025.

The capital Tokyo is also one of the world’s five largest metros together with London, New York, Shanghai and Washington, which in aggregate account for 26% of the worldwide market.