The Japanese Association of Computer Entertainment Suppliers (CESA) shared a preview of its annual report on the video game industry during the Tokyo Game Show 2026. According to the report, 85.8 percent of Japanese game developers are now using generative AI in their work. Of these, 63 percent use AI daily, and 22.8 percent use it occasionally. The primary benefits cited by developers include improved efficiency and productivity, shorter development times, and reduced costs. This is a notable jump from the 2024 CESA report, which found AI use at 51 percent among industry members and developers. The 2025 report highlighted that the most common use of AI was in generating visual elements and images, followed by creating scenarios and text, and then assisting with programming. Additionally, 32 percent of video game companies have used AI to develop their own game engines internally. CESA executive director Tsutomu Masuda mentioned that generative AI is being widely and consistently integrated into development processes. However, he also raised concerns about copyright issues linked to AI-generated content and emphasized the importance of maintaining high-quality, human-centered game development while leveraging new technologies and protecting intellectual property. The video game industry, which generated nearly $200 billion in revenue in 2024, was undergoing significant changes, including major layoffs. In 2023, around 10,500 jobs were lost, with an additional 11,000 job losses in 2024. A survey suggested that AI played a role in these changes. In November 2024, Decart AI, an Israeli startup, launched Oasis, an open-world game generated in real-time by AI. While the project attracted funding from investors like Sequoia Capital, it faced both technical and legal challenges. By early 2026, the video game industry had become more open to using generative AI, with major companies like Microsoft and Electronic Arts investing heavily in AI tools. However, this shift also brought resistance from players, who worried that AI might replace human creativity. As a result, some companies reduced their AI usage or committed to limiting its role in game development, seeking a balance between innovation and preserving the human element in creative work.