Japan’s largest public-private fund, Japan Investment Corp., once had an ambitious mandate to aggressively pursue investments in next-generation businesses.

Now it is inactive after all nine of its private-sector board members resigned last month in a revolt against the government. It has even been accused of being reduced to an organization designed to save “zombie companies.”

The JIC has been stuck in a leadership void since. President and CEO Masaaki Tanaka bolted with the eight directors in December amid a dispute over the government’s role in the fund, leaving less than three months after it was established.

Initially, there were high hopes for JIC. Founded last September, the public-private fund was to invest its ¥2 trillion in capital in next-generation businesses like artificial intelligence, robotics and new drugs, making use of partnerships with investment funds at home and abroad. The government provided more than 90 percent of the capital.

In early July, Hiroshige Seko, minister of economy, trade and industry, described Tanaka and the other board candidates as “world-class people.”

“I am sure they will contribute to the creation of next-generation businesses through global-standard management as financial and investment experts,” he said.

Tanaka, formerly deputy president of Mitsubishi UFJ Financial Group Inc., intended to set JIC apart from previous public-private funds often criticized for saving zombie companies — struggling firms that would fail without government bailouts. These included Japan Airlines and Renesas Electronics Corp..

“We have no intention of rescuing zombie companies,” Tanaka said in September.

Those aspirations seem to have fizzled since the executive exodus.

The once-warm relationship between JIC’s top brass and METI turned sour in November after the media reported on the board members’ compensation.

Initially, METI planned to pay them more than ¥100 million each — with a basic annual pay of ¥15 million and bonuses for successful investments. But with the Prime Minister’s Office and the Finance Ministry alarmed by the high compensation, METI unilaterally reneged on its promise.

The ministry also retracted its policy of allowing JIC to aggressively provide money to overseas investment funds expected to produce high returns, and decided to put the fund on a tighter leash.

Unlike its predecessor, Innovation Network Corp. of Japan, JIC aimed to generate profit through partnerships with foreign government-affiliated investment funds and private investment firms. Its investment decisions were supposed to be made after thorough examination by external directors.

But METI changed its tune and made it mandatory for JIC to submit its investment plans to strict government screenings.

“The compensation cut wasn’t a big issue, but we couldn’t accept an increase in the government’s involvement in investment decisions,” a former JIC executive said.

Following the resignations of the nine board members, however, Seko suggested it was essential to scrutinize the investment targets. “We didn’t give them a blank check,” he said.

The policy reversal highlighted the differences between the ministry and private-sector professionals seasoned by the intense competitive pressure of the financial world.

Although METI hopes to form a new management team for JIC by this spring, selecting the candidates is expected to be difficult.

Stanford University professor Takeo Hoshi, one of the nine who quit JIC’s board, said the fund “is becoming an organ to save zombie companies.”

The government may well convert JIC’s structure into one better “suited” to rescuing zombie firms, Tanaka told reporters.

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