"It represents a lot of work over the past 25 years, but I couldn't have done it without the support of many people and my family."
PARO was first produced in 2005 and has been used in 30 countries. Its pioneering design has been included in exhibitions at the Victoria and Albert Museum, the Louvre and the Museum of Modern Art.
Shibata said he set out to create a drug-free alternative which soothed and reassured patients by responding to touch and speech.
"The health challenges faced by older people are enormous and growing but technology is changing just as quickly," he said.
"We've proved that this is possible, and that artificial intelligence has huge potential for the future. We've pioneered a way of working but there is a lot more work to do.''
Shibata's device was in its ninth generation and he said he would use the money to invest in more research.
Past winners of the Ryman prize included Gabi Hollows from the Fred Hollows Foundation,
Professor Henry Brodaty for work in the diagnosis of Alzheimer's and dementia and Professor Peter St George-Hyslop, a geneticist who focused on key genes which caused cells to degenerate in diseases such as early onset Alzheimer's disease.