Japan’s third-largest city, Osaka, is set to become a testing ground for AI-driven, extended reality (XR) urban environments. In partnership with Nankai Electric Railway, Meta Osaka, and e-Stadium, tech company Mawari is launching the Digital Entertainment City Namba, an ambitious project integrating AI-powered avatars, spatial computing, and decentralized infrastructure at a city-wide scale.
If successful, this initiative could redefine how cities use AI and digital overlays to enhance tourism, public services, and retail. But large-scale XR projects have struggled with adoption in the past. The real question is whether a blend of AI, gaming, and infrastructure investment can transform Osaka into a model for future smart cities.
An AI-Powered Digital Layer Over Osaka
At the heart of the project is Mawari’s AI-driven 3D avatars, which function as multilingual virtual guides, customer service agents, and interactive digital hosts. Unlike conventional chatbots, these AI avatars can interact in real time, allowing tourists and commuters to ask for directions, get restaurant recommendations, or navigate public transit using voice or gestures.
The Nankai Electric Railway, one of Japan’s oldest private transit operators, plans to deploy these AI avatars throughout train stations, shopping centers, and entertainment districts. Meanwhile, Meta Osaka, a company focused on regional digital transformation, will help build out the ecosystem’s data-sharing infrastructure and local business integrations.
The broader idea is to blur the line between physical and digital spaces. Mawari’s XR streaming technology will allow users to see AI avatars overlaid onto real-world landmarks via AR-enabled glasses or smartphones. This means that a visitor walking through Namba Parks or the Tsutenkaku Tower district could see anime-inspired characters providing historical insights, gaming challenges, or shopping recommendations.
“At Mawari, our mission is to make AI-driven immersive experiences accessible to everyone,” said Luis Oscar Ramirez, CEO of Mawari in an email. “Uniting AI, XR, and DePIN in ‘Digital Entertainment City Namba’ is a landmark moment for the entire industry, demonstrating a clear path to mass adoption with tangible social impact. Our collaboration with Nankai Electric Railway, Meta Osaka and e-stadium transforms urban spaces, creates new work opportunities, and brings decentralized infrastructure into everyday life for diverse communities.”
DePIN: The Decentralized Edge Computing Model
A key component of this initiative is DePIN (Decentralized Physical Infrastructure Network), a new model for distributing computing power across a city instead of relying on centralized data centers. Mawari claims that by placing edge computing nodes at transit hubs, retail centers, and public venues, it can reduce bandwidth costs by up to 80% and deliver low-latency AI and XR experiences.
This infrastructure could be a major enabler for real-time AI avatars, which typically require powerful cloud computing resources. By moving some of that processing closer to the end user, the system can deliver smoother animations, lower data costs, and faster interactions.
A Bet on AI and XR to Address Labor Shortages
Beyond entertainment, one of the project’s stated goals is to combat Japan’s labor shortages. The country is projected to face an 11 million worker shortfall by 2040, particularly in tourism, customer service, and transportation. By deploying AI-powered avatars in these roles, the hope is that businesses can offset staffing gaps while still providing human-like interactions.
Mawari’s vision also includes remote work possibilities, where individuals—including seniors, caregivers, and parents—could work as virtual AI hosts, interacting with customers through 3D avatars without leaving home. Whether consumers will embrace AI-driven customer service in real-world settings remains to be seen.
A Digital Osaka: The First Step or a Future Ghost Town?
The Digital Entertainment City Namba represents one of the most ambitious real-world tests of AI-driven urban environments. If successful, it could provide a roadmap for cities looking to integrate AI into public spaces, tourism, and infrastructure. If it fails, it will serve as another reminder that building the digital city of the future is easier said than done.
For now, Mawari, Nankai, and Meta Osaka are betting that AI, XR, and decentralized computing will reshape how people experience urban life. Whether Osaka embraces this vision will determine whether this experiment becomes a model for future cities—or just another tech novelty that never quite took off.
Charlie Fink is the author of the AR-enabled books “Metaverse,” (2017) and “Convergence” (2019). In the early 90s, Fink was EVP & COO of VR pioneer Virtual World Entertainment. He teaches at Chapman University in Orange, CA.
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