TOKYO -- The head of Japan's public-private innovation fund has announced his resignation after a bitter feud with the country's Ministry of Economy, Trade and Industry.
Masaaki Tanaka, president and CEO of the Japan Investment Corp., said it would be "impossible to rebuild a relationship of trust with the government," and therefore would resign along with eight other board members at a news conference on Monday.
The body recently clashed publicly with the ministry over salaries and control of investments. The ministry had previously committed to paying over 100 million yen ($880,000) per year to the fund's top executives, but went back on the figure in the face of public criticism.
Economy Minister Hiroshige Seko last week said he understood that the JIC needed to offer high salaries to secure world-class talent, but that in Japan, "compensation must correspond with what the people find acceptable."
Conflict surrounding government involvement in the fund also played a part in Tanaka's resignation, with the ministry demanding a greater say in decision-making.
In contrast to its predecessor the Innovation Network Corp. of Japan, the JIC is not required to seek input from the economy minister on its investment decisions. This measure was brought in to safeguard the body's independence.
"I have never mentioned how much I want for compensation. This is not about money, but the distrustful behavior of the ministry," said Tanaka, a former vice president of Mitsubishi UFJ Financial Group.
The initial goal of creating a public-private fund implementing best practice from the private sector had "drastically changed to a fund reflecting the intentions of the state," he added, pointing to a change in the government's attitude.
The other eight executives all have a private sector background. They include External Director Masahiro Sakane, a former chairman at construction equipment builder Komatsu, and Deputy President Yasunori Kaneko.
The fallout comes just three months after the JIC was created in an overhaul of the INCJ, which had been criticized for focusing on corporate restructuring and bailouts of ailing businesses, rather than companies in high growth areas like medicine and artificial intelligence.
Tanaka had been resisting pressure to step down ever since the clash over the fund's management.
His departure and those of the other board members will be a considerable setback for the JIC and the Japanese government, which had sought to create an investment arm similar to a sovereign wealth fund to identify and support innovative businesses.
Choosing successors will be a complex task and will likely lead to a temporary suspension of JIC operations.
The government now faces the consequences of going back on its initial promise, but also needs to get operations at the JIC back up and running as quickly and smoothly as possible.
It will also need to establish concrete rules on compensation amid increasing sensitivity surrounding executive pay after the arrest of former Nissan President Carlos Ghosn last month for allegedly underreporting compensation.
"It is important to resolve the confusion soon," said Chief Cabinet Secretary Yoshihide Suga. "As a shareholder, Japan will continue discussions to ensure transparency and appropriate compensation," he added.
Seko apologized for the situation following Tanaka's announcement, stating that the ministry had "handled operating procedures inefficiently."
"It is very unfortunate that we were unable to bridge the gap in how we recognized the issues over compensation and governance," he said.
In order to maintain existing investment operations, the ministry will continue to provide support and set up a communication chamber with the fund to resolve the issue by next spring, Seko added.