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Education

Japan bets on $90bn fund as universities lose ground to West

Lackluster global rankings push government to help institutions regain edge

Keio University, one of Japan's top universities, has less than 2% of the endowment of Harvard University.   © Reuters

TOKYO -- As Japanese universities fall further in global rankings, the government is launching a new 10 trillion yen ($91 billion) endowment fund designed to help them better compete with top institutions around the world.

Just two Japanese universities made the top 200 in the World University Rankings 2021 compiled by British magazine Times Higher Education last year: the University of Tokyo at 36th and Kyoto University at 54th. China's Tsinghua University was the top-ranked Asian institution at 20th.

"The University of Tokyo and Kyoto University have hit a wall in their rankings, while Tohoku University, the Tokyo Institute of Technology and Osaka University have fallen significantly," opposition lawmaker Takae Ito said at a meeting of the upper house education committee in May.

Japan also ranked 11th in the world in the number of top 10% most-cited scientific papers between 2016 and 2018, down from fourth between 1996 and 1998.

Universities say reduced government grants for operating expenses, which cover such items as staffing and research costs, bear a portion of the blame. The government has allocated 1.08 trillion yen in operational grants to national universities for fiscal 2021, down from the 1.24 trillion yen of fiscal 2004.

Japanese universities also have much smaller endowments than top American and European institutions. Keio University has around 73 billion yen, while the University of Tokyo has 15 billion yen, according to the education ministry -- a fraction of Harvard University's $41.9 billion, or roughly 4.6 trillion yen.

But with little room to spare in the government budget, Japan is looking to plug the shortfall instead through a new endowment fund under the education ministry's Japan Science and Technology Agency. The government is allocating 4.5 trillion yen to this new fund to start, including through its Fiscal Investment and Loan Program, and aims to expand the fund to 10 trillion yen as soon as possible.

There has been some concern over the risks that come with this approach, which will involve investing public funds in equities. But the ruling Liberal Democratic Party prevailed over the opposition, arguing that this was the way to go.

An expert panel on Tuesday decided on an investment strategy for the fund, with 65% to go to Japanese and overseas stocks and 35% to bonds. A portion of the fund's returns will pay for research and other items.

"This will provide innovative support that could be a game-changer in Japanese research," said Shinji Inoue, minister of state for science and technology policy.

The panel is also urging the universities themselves to achieve greater independence in their management and to secure outside funding sources. "I hope this paves the way for a transformation that allows our universities to compete with top institutions like Harvard and Oxford," said Takatoshi Ito, a Columbia University professor of international and public affairs who spearheaded the panel's decisions.

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