Japan to extend innovation fund's mandate until 2034
Move may raise new questions about judgment of what some call a bailout vehicle
TOKYO -- Japanese policymakers seek to give a state-backed innovation fund whose holdings include chipmaker Renesas Electronics and Japan Display -- and whose name repeatedly came up in Toshiba's memory business sale -- an extra nine years to continue a role critics say takes a back seat to protecting favored industries.
Created in 2009 to boost the nation's industrial competitiveness through consolidation, the public-private Innovation Network Corp. of Japan had been slated to wrap up operations in March 2025. Legislation to be proposed next year will seek to extend this to 2034.
The $2.7 billion fund counts the government as its biggest investor, with 26 corporate shareholders including Toyota Motor and the nation's top three banks.
The aim of the extension is to provide risk capital in strategic areas, such as materials and biotech, that the private sector alone may be unwilling to support. But the government also appears to want to retain this tool for maintaining Japan's industrial base and domestic jobs.
To prevent the extension from looking like a mere rubber-stamping of the status quo, an overhaul will be proposed to strengthen governance and improve transparency. The INCJ would become a holding company for separate management and investment divisions. The fund falls under the purview of the Ministry of Economy, Trade and Industry.
Consolidation with the ministry's Cool Japan Fund, which promotes the government's soft-power initiative abroad, is also a possibility. Established in November 2013, the fund had invested just 35.4 billion yen ($312 million) from its nearly 100 billion yen of firepower as of September. With investment targets often falling short of their own goals, the organization has struggled to generate adequate returns.
The INCJ has committed to a total of 120 investments thus far. But many targets fail or incur losses for the fund, leading some to question its judgment.
At an expert meeting organized by the Ministry of Finance last month, some suggested consolidating multiple public-private funds overseen by a single ministry to curb their high management costs.