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Politics

Japan to let state-backed R&D agencies invest in private sector

End of ban aims to energize sluggish startup funding, foster innovation

TOKYO -- Japan will lift a ban on investment in startups by state-backed research institutions in a bid to encourage partnerships and technologies that lead to new businesses.

Only one of the country's 27 national research and development agencies -- the Japan Science and Technology Agency -- is allowed to invest directly in private-sector businesses. The government plans to open up investment to other institutions, aiming to submit the necessary legislation during next year's ordinary session of parliament. The policy will be finalized at a meeting Friday of the Council for Science, Technology and Innovation, chaired by Prime Minister Shinzo Abe.

The plan envisions institutions funding promising startups established by researchers who struck out on their own or businesses with strong R&D capabilities but little money. The agencies could also team with these companies on R&D, providing access to basic research and promoting the creation of new products and services. Big institutions such as Riken and the National Institute of Advanced Industrial Science and Technology generate income totaling several billion yen a year.

For startups, such arrangements would have the advantage of providing stable shareholders at an early stage, when money can be hard to come by. Receiving funding from national R&D agencies could burnish a young business's reputation, making banks more willing to offer financing.

The government will also set up a similar framework to let national universities invest in the private sector. It plans to eliminate taxes on gifts of land or stock to these institutions to make it easier for them to secure assets. The education and finance ministries and the ruling party's tax research commission will discuss this measure.

Venture capital investment in Japan is low by international standards. Such spending totaled just 0.02% of gross domestic product in 2015, a survey by the Organization for Economic Cooperation and Development shows. Japan lagged well behind the U.S. and South Korea and ranked second from the bottom among the Group of Seven developed nations, beating only Italy. Topping the global list was Israel at 0.38% of GDP.

(Nikkei)

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