Memos

Surging food and utility costs continue to squeeze margins for his izakaya Japanese-style pub, and profits have not recovered as quickly as customer traffic has since the COVID-19 pandemic.

Its signature dish is straw-seared bonito sourced from Tokyo’s Toyosu wholesale market. The fish is grilled and served with ginger and green onions. Nearly every customer orders it, Matsubara says.

But the wholesale price of bonito has risen three to four times over the past two to three years. “If we raise prices much further, people will stop ordering it,” he said.

According to Tokyo Shoko Research (TSR), 118 izakaya operators went bankrupt during the first half of 2026, the highest January-June total since comparable records began in 1989. More than 90% of the failed businesses employed fewer than 10 people. It also forecasts the total number of izakaya bankruptcies in 2026 could reach a record high.

Changing drinking habits are adding to the pressure. Kuranosuke’s Matsubara feels that corporate drinking parties have largely returned since the pandemic, but second and third rounds of drinks – once a staple of Japan’s after-work culture – are far less common, meaning less revenue during late-night hours.

According to Japanese research firm Fuji Keizai group, the market size of izakaya-style and robatayaki charcoal-grilled foods is expected to be 1.1 trillion yen in 2035, down 31% from 2019.

as inflation squeezes household budgets, diners are becoming more particular about where they spend their money.

For years, customers were drawn by low prices, locations near train stations and all-you-can-drink plans. Today, many seek something more distinctive: signature dishes, local sake, memorable service and unique atmospheres.

The cramped setting leaves little room for anonymity. Customers find themselves drawn into conversations with the owner and often with strangers seated nearby.

The common perception is that they are cheap and that even the best persistently lag behind America’s. In fact, the two countries’ AI models are converging. Innovative Chinese models are getting bigger and cleverer.

Although Chinese models are cheaper, American models are often better value. Artificial Analysis, an American firm, finds that for most trade-offs between cost and intelligence, an American model outperforms Chinese ones.

China’s open-weight models can run on anyone’s servers, meaning that compute is less of a problem than the headline numbers suggest.

China also has almost three times as much installed electricity-generating capacity as America, and its lead is growing.

as with other broad technologies such as electricity, adoption brings greater rewards than discovery.

China’s working-age population is due to shrink by 25% by 2050; for machines to replace people requires diffusion

So far, the use of AI has yet to show up in the economic statistics of either America or China. But change in some industries has already been sweeping. AI-assisted lorries will need 30% fewer drivers, going by one large firm’s experience, as crews slim from two drivers to one and from four to three. AI was used to generate 95% of the 128,000 wildly popular one- or two-minute-long microdramas released in the first quarter of 2026, replacing many actors and film crews.

China is also rapidly increasing the use of robots. In June leaders told local governments and state-owned enterprises to have 10,000 humanoid robots doing real work by the end of 2026. Morgan Stanley, a bank, expects humanoid sales in China to reach 446,000 by 2030, nine times this year’s total. Workers are being paid to train robots in huge warehouses by repeatedly folding clothes and sorting and stacking objects.

Although Chinese firms want to roll out AI fast, the government will be desperate to avoid instability.