A Japanese public-private investment fund under the jurisdiction of the Economy, Trade and Industry Ministry has suffered almost total losses in a government-backed "Cool Japan" cultural promotion project in which the fund had invested more than 2 billion yen, it has been learned.
The fund, the Innovation Network Corporation of Japan (INCJ), has also apparently lost over 100 million yen in some of the related projects. The INCJ has already sold its stock in five of the six Cool Japan projects to which it had invested a total of about 11.6 billion yen.
The responsibility for the losses has been left unaccounted for, as the INCJ is considered a private company and does not disclose its profits and losses for each specific project.
Tokyo-based All Nippon Entertainment Works (ANEW) was established in October 2011 to help Japanese comics and films achieve goals including entering Hollywood. The INCJ got involved in ANEW from the time of the firm's establishment, invested a total of 2.22 billion yen and dispatched one of its staff members as an outside board member.
Aiming to promote Japanese cultural products such as comics, anime and fashion to foreign markets, the Cool Japan initiative is one of the pillars of Prime Minister Shinzo Abe's signature Abenomics economic policy package. A minister in charge of Cool Japan strategy was established for the first time in 2012 when the second Abe Cabinet was launched.
No movie released
ANEW hired as a director an American producer who was engaged in production at one of the world's top movie companies, and paid remuneration of tens of millions yen per year.
The Tokyo-based firm announced its plan to produce seven Hollywood movies from 2012 to 2015, but failed to release any of them. In and after the second year from its establishment, it continued to lose money in the range of hundreds of millions yen. The INCJ sold all of its ANEW stock to a Kyoto-based investment company in June 2017.
According to a securities report of the investment company, ANEW was sold for 34 million yen -- only 1.5 percent of the INCJ's investment. "The American producer was key to movie production, but did not function," a source with ties to ANEW at that time lamented.
The INCJ has been directly assisting start-up companies doing Cool Japan-related businesses even before the Abenomics policy package was implemented. In May 2012, it established the internet service company Gloczus, Inc. jointly with a major internet service provider. The INCJ invested about 600 million yen in the new company.
Failure in Indonesia
Gloczus was involved in a business of selling ring tones and games for cell phone users in Indonesia. However, the company was liquidated in January last year. "The fee service did not catch on in the country and we eventually withdrew from the business after switching countries for the service one after another," a former executive of the company said.
According to the executive, the INCJ collected only about 100 million yen from the investment.
"We anticipated a bright prospect for the growing Asian market when we made investments, but making investments was a foregone conclusion in a sense, on which we should reflect," a senior INCJ official said, referring to Cool Japan-related businesses.
The INCJ was established in July 2009 with the government having a more than 90 percent stake in it. As of the end of February, it decided to invest a total of 1.0483 trillion yen in 127 projects in such fields as information technology and advanced medical treatment. The related companies included major semiconductor maker Renesas Electronics Corp. and major liquid-crystal panel maker Japan Display Inc.
As of the end of August last year, the INCJ collected 658.9 billion yen from sources such as the sale of its stake in companies for which it ended its assistance. This exceeds its actual investment of 290.4 billion yen, yielding 368.5 billion yen in profit.
Within that total, however, its investments in start-up companies and new business fields, including Cool Japan-related businesses, did not fare well. The INCJ collected only 37.9 billion yen out of its investments of 56.3 billion yen, incurring a loss of as much as 18.4 billion yen.
Shielded from probe
Public-private funds, including the INCJ, do not disclose, in principle, their profit and loss from investments in specific projects for such reasons as confidentiality obligations and the absence of consent from companies they invest in.
Public-private investment funds are organizations to make investments, which the public and private sectors jointly finance to nurture businesses in areas where expected risks are too large only for private firms.
The reality is that no one outside those funds can check whether investments they made are appropriate despite the fact that a large amount of public money was poured into such investments.
Since 2015, the INCJ made no new investments in Cool Japan-related businesses. Cool Japan Fund Inc., a public-private fund established in 2013, is taking over the role of the INCJ.
"There must have been projects for which the INCJ's preinvestment screening was lax because those the INCJ invested in were based on the government's policy of promoting Cool Japan as a foregone conclusion," Meiji University Prof. Hideaki Tanaka, who specializes in fiscal policy, said.
"The INCJ should disclose its documents, including minutes of its board member meetings regarding investments that turned out to be conspicuous failures, when its assistance ends, so that a third party can examine the causes of the failures."
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