Government weighing fate of troubled Cool Japan Fund
TOKYO — The Cool Japan Fund, a Japanese government-backed investment vehicle aimed at promoting the country’s cultural exports and boosting inbound tourism, is facing criticism for failing to achieve its goals.
The Ministry of Finance on Monday published a proposal to restructure the fund if it failed to improve its performance by the fall.
It was hoped that the Cool Japan Fund, a public-private fund established in 2013, would play a central role in the government’s “Cool Japan Strategy”, which aimed to increase exports of cultural goods and content such as anime and music. food, and create new business opportunities by stimulating foreign demand for Japanese cultural exports.
But the fund has been in the red since its creation. By the end of March, the fund had posted a cumulative loss of 30.9 billion yen ($228 million). At the same time last year, the deficit was 23.1 billion yen. Some members of the Treasury Department’s sub-committee on the Tax System Council said that “by pursuing numerical goals too strongly, the original policy of providing money at risk may not be achieved.”
The fund plans to come up with a plan to improve financial returns by the fall, including strengthening oversight of companies in which the fund has invested. However, if the effort fails, “we will organize a way forward for consolidation,” the subcommittee noted in a report.
The Cool Japan Fund has focused on making overseas and domestic investments that help create inbound tourism, but this effort has been hampered by the COVID-19 pandemic.
In 2018, even before the pandemic, the Ministry of Finance had identified ways to improve the operations of the fund. He recommended that the fund focus on large-scale projects and strengthen governance by having the responsible person report weekly to fund managers on projects.
The fund focused on several themes, including media and content, food and services, and fashion and lifestyle. Indonesian superapps developer Gojek and Taiwanese online travel startup KKday are two of the listed companies in the fund’s portfolio.
But many of his investments did not generate profits. One example is Isetan The Japan Store, which Cool Japan Fund opened in Kuala Lumpur in October 2016 with Japanese department store operator Isetan Mitsukoshi Holdings.
It was hoped that the store would help promote Japanese culture. But the concept of the store was not clear: in the food department, for example, makgeolli, Korean rice wine, was sold alongside Japanese sake, while Western books were stocked in the bookstore. The store had had poor sales since opening and there was no way to revamp it, prompting the Cool Japan Fund to pull out in June 2018 through a stock sale.
“Political objectives tend to be prioritized and investment criteria and profitability are inevitably not well assessed” with government-led investment vehicles, said Sayuri Kawamura, chief economist at the Japan Research Institute. With the government providing about 90% of Cool Japan Fund’s liquidity, “it is also believed that too much government involvement can distort the market, and it is necessary to find ways to prevent excessive government involvement, such as it’s the case. in Europe,” Kawamura said.